The report is indicative of a growing recognition from boards and investors that culture matters. Companies investing in culture are outperforming competitors, investors are demanding more proof that an organisation’s culture is fit for growth and CEOs are realising that the strength of their culture can make or break their business plan.
So, why aren’t we all busy working on our cultures?
Most culture change programmes are hindered by scepticism over whether conventional employee engagement approaches can actually make a commercial difference. Some never get past the planning stage because it can be difficult to know where to start, how to secure buy-in from “the boss” or how to measure its effectiveness.
Quite often, there is a cynic in the boardroom who isn’t interested in talking about culture and can de-rail your efforts before you get started. But here are three ways to secure buy-in from board directors and peers to build a shared understanding and appreciation of how culture development can benefit your organisation.
(1) Opportunity over risk
A key argument in the FRC report and in most research of this nature, is that culture can mitigate risk and stimulate growth. Unfortunately there is often far more emphasis on the former than the latter – value protection over value creation. It’s true that developing a strong culture will mitigate most risks that could negatively impact shareholder value. However thinking like this misses the bigger opportunity.
Smart, targeted culture development can go far beyond creating “happy staff and good behaviour” and can enhance the value of the business. Intangible assets, such as intellectual property, customer base and brand, can now account for over 80 per cent of company valuations. Culture is a valuable intangible asset.
Aligning your culture to your business strategy means you can enhance the effectiveness of your people and transform performance. Some of the most successful companies in the world are famous for their culture, and very few developed it merely to minimise risk.
Read more on company culture:
- Driving cultural change is of increasing priority to finance firms
- Business lessons learned from Star Wars: How to become a Jedi company
- Meet the five businesses you should never copy when it comes to company culture
(2) Link to customer outcomes
The connection between culture and performance is customers. These days, if your culture stinks, your customers will know about it. If your people aren’t happy or effective, your customers will feel it and tell you about it. This couldn’t be truer than of the retail industry, where good customer experience is imperative. Unfortunately, it’s also where we’ve had the most recent and prolific stories of poor workplace practices.
BHS and Sports Direct have both been publicly held to account by the Business, Innovation and Skills (BIS) Committee – Sir Philip Green as the previous owner of BHS for its eventual collapse and £571m pension deficit, Sports Direct for its “appalling” workplace conditions. While it remains to be seen whether this will impact sales, Sports Direct mustn’t underestimate the catalyst effect that the woeful stories will have on staff morale and the business’ reputation.
The question boards need to answer is whether the firm’s culture is fit for their customers. Today, organisations are more transparent, work is more complex and media is more immediate. Progressive leaders are reassessing the connections between their people and their customers, and the role culture development needs to play to fuel customer growth. So if your culture creates high performing, effective teams your customers will thank you for it. And the right culture will quickly improve customer satisfaction, retention and sales.
(3) Get to grips with the intangibles
The main difficulty with culture change is understanding, shaping and measuring intangibles. Fast growing, ambitious brands should aim to demystify culture. Make it all less ‘fluffy’ and more objective. Less academic and more tangible. A lever they can pull to affect business results. Something as predictable as increasing advertising spend or cutting overheads.
There is no reason why the culture plan shouldn’t be as straightforward as the advertising plan, or why employee data can’t be as useful as customer data.However, boards need to go beyond the annual employee engagement survey to more sophisticated diagnostic approaches, that identify the employee engagement factors in their organisation that most drive the customer and business outcomes they need. How much is building your ideal culture worth to your business in revenue growth? By analysing employee engagement data in relation to customer and financial performance data, you can answer this question and size the prize before you get started.
Culture can be understood, shaped and measured to drive major performance improvements in areas that matter. By giving time and thought to defining what culture your organisation needs, the business case becomes a no brainer.
Rich Webley is managing director of Dragonfish.
Maintaining a founding company culture within startups isn’t easy, especially when they begin to grow. So how can entrepreneurs ensure that their staff retain that entrepreneurial drive and innovative thinking that first set the company on the road to success?
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