Is improving corporate culture all about reaping benefits or is there truly a cost to lousy culture? Can one get by with an average culture or is culture the next competitive advantage? Is it just possible that the competitive advantage is not just an advantage to employee attraction and retention, but rather a new way to take meaningful costs out of our businesses?
How many of us are worn down by year after year of cost cutting? Every budget cycle has a mantra of doing more with less. We’ve flattened our organizations, and scaled back to focus on our core competencies. We’ve reduced travel costs by implementing virtual meetings, web meetings and conference calls. Some have gone as far as to cut out employee training or employee recognition events. I remember a time when even coffee and donuts were a no-no at our 7am group technician meetings. We’ve run out of options and are frustrated by the constant demand to find more areas to cut.
Are their costs to your culture?
The first place is to identify the elements of a “bad” culture. There are several models out there that qualify the values that contribute in a negative way to the performance of an organization. Whether they are called limiting or negative values, these company values drag a business down rather than propel it forward. You can build the best race car in the world, have it lined up at the start line, and manned with highly trained drivers. However, if there is sludge in the fuel, the journey is destined for failure. Is the sludge in your corporate fuel causing your organization to travel at a less than desirable pace? When does the amount of sludge cause you to no longer be competitive, not only from a speed perspective but also from a cost to run the race team? How can you make sure that the substances going into your fuel are driving performance and eliminate the substances that are actually combining to create sludge?
We thought we had a pretty good performing division. Then our company took a cultural assessment. When we got our divisional current culture assessment back we found a few limiting values. To our surprise, bureaucratic, finger pointing/blame, and inwardly focussed made the list. In the desired culture we saw opposite values – empowerment, teamwork and customer focussed. We looked at these results as having two impacts. The first impact was on revenues. Clearly if we could focus more on customer service instead of being inwardly focussed we could improve our customer satisfaction and loyalty. This would result in better customer retention and open up the possibility to upsell more customers, improving our average revenue per customer. There would also be some cost savings. We could reduce the number of customer complaints coming into our call centre and we could reduce the number of follow up service calls.
When we dug deeper, we found even more cost impacts. Our employees estimated that they were spending almost 15% of their time doing up paperwork, managing the circulation of documents for approval and writing up daily status reports. In addition, every week they were sitting in four hour meetings recapping the prior week’s activities in excruciating detail. There was a whole level of managers who were collecting reports, reviewing the reports and then just passing them further up the organization. There were checkers checking the checkers in order to make sure that when a Director made his report there was no risk of someone else at the table contradicting the report.
And finally, when we monitored the amount of time that people were spending talking about how others were impacting their work, whining about the problems and barriers that they faced every day, the number of coffee and smoke breaks that took place as people gossiped about who had screwed up lately, another alarming amount of time was being consumed. I remember Fatima coming into my office with the results of the time studies. She had costed out the time spent on these types of activities and the dollar value was more significant than I had even dared to imagine. On the one hand the organization was looking for me to develop cost saving programs and we had been madly looking at process or performance improvements. And on the other hand, Fatima has just presented me with the cost of our limiting company values. The later was a gold mine in comparison! Clearly we’d been digging in the wrong place.
Eliminating the costs of poor culture
It was impossible to ignore such an analysis. This wasn’t fluffy stuff; these were real hard measurable dollars that we were throwing down the drain. And so we put the company values into our strategic planning process. Recognizing that if we did this right and made it sustainable, we could make these cost savings a permanent improvement to our bottom line. As with any meaningful change in an organization we knew we had to move our employees from just being aware of the need to make the shift to being committed in their long term adoption of the change. We incorporated these plans into our three year budgeting process and were able to successfully shift the culture, take costs out of the business AND improve our customer satisfaction results. This was one of our largest win-win initiatives ever!
Don`t Underestimate it…
Too often, we underestimate the impact of limiting values in our organization. When it comes to putting dollars in our budgets for programs that will ultimately result in cost savings, programs that focus on culture improvements are rarely on the radar screen. We see changing culture as something to be done to improve employee satisfaction and reduce employee churn. And yes, there are certainly these benefits to improving culture, however there are many more benefits to be had.
You can put a cost to limiting values. The cost doesn’t need to be accurate down to the last penny. In our case, when we took the 20% of inefficient time on a base of 400 employees at an average hourly rate of $20 – the cost was over $2.5M a year! And while it’s unrealistic to think that one could eliminate all of this inefficient time, imagine if we were able to cut it even by half. That’s still a pretty big lottery prize.
4 Steps to identifying the Costs of Poor Culture
- Complete an assessment of your current corporate culture
- Identify limiting or negative values
- Perform interviews within your organization to find out how these behaviours are translating into lost productivity; turn over, customer churn etc.
- Create a list of all the impacts that you have collected and work through a costing exercise
Do you know if your current culture contains any limiting or negative company values?
How could those limiting values be affecting the performance of your organization, creating sludge in your corporate fuel?
What are your limiting values costing your division or company?