Culture Can Give Businesses a Competitive Advantage, with ROI

Business owners, do you have values on purpose? What about culture on purpose? “If not, or if you don’t know, then now is a perfect time to think about how those two initiatives can add to your top and bottom lines if you are in the private sector, and enhance your service delivery if you are in government,” declares John P. Foster, MBA, Managing Member of Pathfinder Group.

“If they sound fuzzy and warm, they’re not. It has been proven that a values-driven culture can give you a competitive advantage and a stronger balance sheet,” Foster declares.

For instance, he asks, have you ever thought about a values-driven culture in business or government as a recruiting and retention tool? It is. Best places to work generally have very well-defined, positive, collaborative cultures that lure the best candidates and keep productive employees.

SHRM, the Society for Human Resource Management, estimates that it costs $3,500 to replace one $8-per-hour employee when all expenses — recruiting, interviewing, hiring, training, reduced productivity and so on are considered. SHRM’s estimate was the lowest of 17 nationally respected companies who calculate this cost.

Other sources provide these employee replacement costs: 30-50% of the annual salary of entry-level employees, 150% of middle level employees, and up to 400% for specialized, high level employees.

Creating a culture that retains good people, then, is clearly one example of its potential for ROI; there are others. Such calculations establish culture as a business asset, even a revenue center.

During almost 40 years in executive leadership positions, it has been Foster’s experience that beliefs are captured in values, and those values are exhibited in the form of behaviors. The sum of behaviors, then, defines the culture, he says.

So, if we believe being honest is important, it becomes a core value.  Then, if we identify behaviors that are consistent with honesty, such as not lying, not being secretive, being open, transparent, forthcoming, trusting, and so on, we will want to instill those behaviors into the culture. In order to have cultural integrity, we must define values so that we are all in agreement as to their meaning.

Here are some key steps you must take to establish a values-driven culture:

  1. Through team discovery sessions, led by the CEO or department head, establish what you believe in as a culture
  2. Then, identify the values that reflect your organization’s beliefs
  3. Next, understand the relationship between values and behaviors
  4. Agree on what behaviors are consistent and inconsistent with your values; what does that value look like in the office?
  5. Communicate the values and supporting behaviors down through the organization
  6. Finally, over time, office and operational environments change; monitor behaviors regularly (through performance reviews or other measures) to manage value/behavior and potential cultural erosion

A perfect example of a culture that is not working as intended is one we came across recently in which managers proudly stated that their culture valued openness, opinions, positive disagreement and truth-telling. However, on closer examination, we discovered that managers actually lacked what they termed “mercy skills” in organizational interaction. Simply put, that means they shoot the messenger and punish all who speak up or disagree.

Where is your culture today, and where do you want it to be in 2014?


Author: John P. Foster, MBA, Managing Member of Pathfinder Group

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