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Conducting a culture audit is a useful starting point to affect change in your company. Then, once you implement cultural changes, you will want to measure the results of your new culture.
This leads to a common question from HR managers of whether it’s possible to actually measure the ROI of culture.
The answer is yes. The challenge is understanding how to measure culture so that you can reliably determine whether your new culture is positively impacting productivity and employee engagement.
Where Do You Start Measuring Your Company Culture ROI?
Maia Josebachvili, a company culture and employee-recruitment expert, uses a helpful formula to get started on the process of measuring the ROI of your culture. The formula -- known as the ELTV (employee lifetime value) -- includes four stages of the employee life cycle:
Starting point
Full contributor
Decision to leave
Company exit
In the life cycle of an employee’s time with your company, the employee’s contribution actually starts as a negative value because of the time and cost of recruiting, hiring, and training.
Then, as the employee becomes a contributor to your company, their value will reach the break-even point until ideally reaching positive territory as they become more valuable to the company.
Upon their decision to leave your company, their contribution will decline until returning to the break-even range on their last day.
All four stages have critical components that determine your cost of employing the individual and the value your company receives from this employee. Specifically, the quality of your hiring process, training, and development will significantly impact costs and workplace productivity.
The thread that connects each of these elements is your company culture that can make or break whether you generate a positive return from employing the individual.
Company Culture ROI Starts with the Hiring Process
Continuing with the research by Maia Josebachvili, the best place to start with measuring the ROI of your company culture is the hiring process.
“If there's any place where you're going to start investing in y
our culture and your people, it's in the people you bring in the door and how you assess them,” Maia told Entrepreneur.com.
Too many companies set themselves up for disengaged workers, an unproductive work environment, and costly turnover by hiring individuals who do not fit the company culture.
It’s not enough for a candidate to be able to perform the job, be the most qualified, or have the right competencies tied to success for the role. Employees also need to fit your new company culture and the subcultures within your organization.
How do you determine fit? Measuring the culture of your organization will help you establish culture benchmarks that you can use to evaluate candidates that you are considering bringing into the company. When you compare each candidate to the benchmarks, you can assess their fit, strengths and weaknesses, and potential benefits and risks if hired.
Measure the ROI of Company Culture In 4-Steps
After considering your company’s approach to the critical areas of the employee life cycle, ask yourself these crucial questions to measure the ROI of your new company culture:
Have we embedded a consistent process for recruiting, hiring, and training in our entire hiring process?
What is our turnover cost from hiring an employee who does not fit the culture
Are we providing coaching opportunities that address employee blind spots to increase productivity?
What are the KPIs tied to productivity and workplace satisfaction that indicate employee engagement?
The answers to these questions will provide you with the framework to determine the ROI of your culture. Additionally, ZERORISK HR is available to guide you through the process of measuring your culture using our Culture Audit. This tool will provide you with a clear understanding of your overall culture, strengths and weaknesses, and employee blind spots that could be affecting productivity and employee engagement.