Managing your company culture will increase your profitability

Awareness of company culture is, by now, a given in most companies. It is not so easy, however, to get a precise view on the underlying values of your culture, what threats and opportunities there are, and what consequences these have on the company’s profitability. Building a business case based on objective data on your company’s culture will bring you a long way toward effectively managing your culture – and your profits.

If you don’t manage culture, it manages you”

Edgar Schein

This quote comes from Edgar Schein, expert on organizational development and renowned for his groundbreaking work on the Model for Organizational Culture. When Schein was starting his research on organizational culture in the eighties, there was a lot of evangelizing to be done on the importance of culture within a company.

Today, however, there aren’t many managers who still need convincing. It is on the agenda of many management boards and quotes like ‘culture eats strategy for breakfast’ can regularly be heard on top floors or seen on corner office walls.

At the heart of your company culture are your values

When talking about organizational culture, and even more so when managing it, it’s important to have a precise grasp on what exactly you’re referring to when you say ‘company culture’. Are you talking about perks like ‘take your dog to work day’ or extra parental leave? About the way people dress or handle themselves in meetings? The mission on your website and the meeting room wall? Probably all of it. Underlying all this (referred to by Schein as ‘artifacts’) are the shared values of your company, both explicit and implicit.

These values are what you should be addressing first. They are the very basis of people’s day-to-day decisions, actions, and behaviour. If these underlying values are unclear and if they’re not shared by the employees, your organization will have to deal with the consequences sooner or later. A poor fit value fit between a company and its employees is proven to lead to increased turnover, more sick days or vacation without pay, less room for innovation and ultimately… more cost.

How vampires and zombies consume your company culture

But first let’s get a clear view on how this happens, exactly. How does a bad culture fit result in these costly consequences? In an article in HBR, Eric Sinoway illustrates the process with metaphors sure to get our Netflix-infused brains spinning: of zombies, vampires and stars.

Sinoway distinguishes 4 kinds of employees in a company. Firstly, there is the star: these employees are highly competent and completely in line with company culture. They do the job, and they do it the right way. These are the people that have highest productivity and are most innovative. They shine a light in your organization.

This is especially important for the high potentials, our second group. These employees have the right values and attitude, but their skill set is not quite on point – yet. With proper training and proper support, they, too, will become stars. Unlike zombies, the third kind of employee. Zombies do not perform well, nor do they display the desired organizational culture. They have lower productivity and higher absenteeism and thus are a costly employee for your organization. But, as Sinoway puts it, ‘their ability to inflict harm is mitigated by their lack of credibility’. They are, in other words, in no position to influence other employees.

This is where they differ from the fourth kind of employee, and the real threat to your culture: the vampire. Vampires do what they need to do – they are strong performers, and as such, acquire influence and leverage. But the way they do it is at odds with the company culture. They just don’t fit with the values.

Here’s where things get tricky. Because of their strong performance and influence, vampires can create subcultures within your company, gathering zombies around them. If these subcultures expand, they actually end up demotivating or even pushing stars and high potentials towards the exit. And here we are: if you don’t manage culture, it manages you.

These bad value fits are costing you money

More productivity from stars, more absenteeism with zombies, increased turnover because of vampires: seems plausible. But just a logical explanation does not get you applause in a board room. In most cases, what you need to tackle a culture problem in your company is a business case. And even though culture might seem like a ‘fluffy’ subject, a hard business case can actually be made – based on objective data. Let’s focus on the operational cost first.

According to Gallup’s 2020 Analysis of employee engagement (10th edition), disengaged employees are substantially eating away at your profit margins. They show 23% less profitability, 14 to 18% less productivity, and a whopping 81% more absenteeism. The cost of this accounts for 34% of an employee’s yearly salary. 34% of the average salary in your company multiplied by the number of employees: that is what you lose to disengagement each year. Forbes did the numbers (however, based on an older Gallup analysis).

Turnover will cost you even more. On average, the cost of turnover of employees at entry level is 50% of an annual salary. The cost increases with the employee’s experience. Mid-level employees who leave your company will cost you 125% of their annual salary and replacing a senior executive will cost your organization no less than 200% of the annual salary. If you want to do the numbers yourself, LinkedIn provided a handy tool to calculate the cost of turnover.

On the bright side: there is also a lot to win. An engaged employee displays increased productivity on many fronts. Gallup reports 66% increase in well-being for highly engaged employees, and 10% increase in customer loyalty.  A 2005 analysis shows employees with a good value fit have better task performance (the tasks in the narrow sense) and a substantial increase in contextual performance (going the extra mile). These are your stars at work: shining their light in the organization – and making more money, too.

Building your case with objective data

So maybe you see certain problems in your organization, like sales which are down, or increasing turnover, and you think the underlying problem is the culture. Maybe you want to address your company’s and your employees’ values. You see a business case. You want to tackle this issue. Where do you start?

To work with your company’s culture, you need to know exactly what it is. The first thing you need to do is get past gut feeling. You need to have a precise and objective view on which values are held where in your organization. You need unambiguous data which you can analyze to further build your case and get to work.

This is where Twegos can support you. Twegos has the right tools to help you get this 360 view of the values held throughout your company – and to nurture the values your company aims for. With a culture scan, your employees complete a 15 minute survey, which gives you a clear view and detailed insights on your company’s culture throughout every branch or team.

Now that you can identify potential cultural threats or ‘hotspots’ of your desired company culture, you can adjust your recruitment or talent management strategy. New recruits can complete a ValueFit assessment to make sure they fit their new team and the company’s values. You can screen potential managers’ values for their match with the team. Cultural vampires can either be asked to leave, moved internally, or coached.

This way, you’re managing your culture – and it’s not managing you.

Twegos CultureScan and Twegos ValueFit are based on solid academic research and patented technology. If you want to learn more about what Twegos can do for you to support you in actively managing your culture, limiting your cost and increasing your productivity, don’t hesitate to contact us.