Imagine an investor or the chairman of the audit committee asking a chief financial officer, “How are gross margins shaping up this quarter? Are your targeted improvements taking effect?” and hearing the response, “It’s feeling like it will all work out. And also, the balance sheet is healthy.” That CFO’s tenure would be remarkably short-lived. Why? Because leaders and investors view such measures as non-negotiable and fully understand the way specific readings of those numbers in different contexts indicate the relative health or weakness of an organization.
Culture, for many such stakeholders, is a much more amorphous topic. Even as the importance of culture has risen on the agenda of boards, executive teams and in manager trainings, tangible measures of a culture remain a struggle in the minds of many leaders outside of human resources. Given the highly visible risks this presents (think of Volkswagen, Wells Fargo and Theranos to name a few), the desire for tangibility is on the rise. Line supervisors through to directors and, increasingly, investors, look to HR and ask, “How are we doing on culture?” hoping for a measure as clear cut as gross margin.
Measure It to Manage It
This need presents HR with a major opportunity. Just like other performance targets, measuring culture allows leaders—leaders of all stripes, from supervisors to HR to the board room—to manage it. The right leading indicators remove the guesswork in forging a targeted path towards creating a strong and sustainable culture. In clearly measuring the culture’s current and optimal states, leaders can work more effectively to create the one needed to support the organization’s strategy and fulfill its purpose.
In 1997, Barrett Values Centre (BVC) created a methodology and framework to measure culture using three simple questions that reveal a plethora of meaningful perspectives on the culture of an entity. BVC has conducted these assessments for over 6,000 organizations in 94 countries, in 68 languages and across industry types both for-profit and not-for-profit.
In our 23 years of experience, we have observed an overall positive trend that more and more organizations care about their culture. And we also experience that, speaking broadly, the discipline of identifying and discerning its drivers within their unique ecosystem is still evolving in the marketplace. Part of that is confusion over what to measure—culture is not the why, which is the purpose or vision; it is also not the what, which is the strategy, mission and/or goals. In simplest terms, culture is the how.
Four Key Mistakes in Measurement
Since there are various approaches to measuring that how, this article emphasizes four key mistakes we have observed well-meaning organizations make in setting up their measurement disciplines. For each, we have also included counter-balances or tweaks to ensure those common design flaws can be corrected early in the process. We believe these four elements are crucial to get a deeper, more tangible and actionable analysis of your culture.
Mistake #1: Looking only at the current situation.
It is important to understand the current dynamics of an organization’s culture—the good, bad and possibly ugly. There will be positive elements of any culture worth keeping and aspects that may not be serving the organization.
One of the most powerful metrics for diagnosing the current state of the culture is measuring the degree of lost productivity and dysfunction in the system, which we call Cultural Entropy®. Healthy cultures have low Cultural Entropy. In our methodology, this score is based on the number of negative or limiting values/behaviors employees choose from a preexisting list of approximately 80 positive and 20 negative values. Limiting values include words such as blame, bullying and empire building.
A study of more than 160 organizations across multiple industries found that Cultural Entropy had a significant impact on financial performance. The lower the Cultural Entropy, the higher the revenue growth the organization experienced over a three-year period.1
At the same time, meaningful culture measurement is not just about measuring where your culture is now but where it needs to be moving forward. The connection between what employees currently experience within the culture and what they believe would best support the organization in achieving its highest potential gives insight into the future direction needed based on the wisdom of the collective. The measurement of alignment between current and desired cultures highlights how much employees believe the organization is on the right track or not.
While both Cultural Entropy and the degree of alignment between current and desired cultures are both telling metrics on their own, they also have a strong inverse relationship. Organizations with high Cultural Entropy are six times less likely to be viewed by employees as being on track as compared to institutions with low levels. Our research of 3,220 culture assessments2 found that organizations with six or more matching values between current and desired cultures have an average Cultural Entropy score of 13 percent, while those with only zero to one match have average Cultural Entropy of 33 percent. To compare, 33 percent Cultural Entropy is tantamount to a third of staff not showing up to work on a daily basis.
Mistake #2: Missing what motivates employees.
Many culture measurement approaches focus on employees solely in terms of their relation to their work environment. However, employees also have their own values when they walk in the door.
Employee engagement and organizational culture are strongly related but are not the same thing. Employee engagement relays how much personal energy an individual is willing to invest in their work and the degree of commitment felt towards the organization. Culture is a broader, organizational-wide construct based on shared values, beliefs, norms and assumptions that shape behavior throughout the organization.
The values alignment between employees’ personal values to those in the current culture influences the degree to which they are able to bring their full selves to work. The greater this alignment, the more connected they feel to the organization.
The congruence between personal and organizational values has been shown to impact employee commitment, satisfaction, and motivation.3 Understanding the interconnection between what is most important to people in their daily lives and what the organization exhibits is an essential step in building a healthy culture that unleashes the best of what can be, both individually and collectively.
When we compared personal and current values alignment with employee engagement in more than 450 organizations with over 120,000 responses,4 we found the organizations that have high alignment also have high engagement and vice versa. So while engagement is an important metric, by also tapping into what people care about to see what’s underlying their behavior on an individual basis, HR leaders provide their organizations with a substantial opportunity to foster added degrees of employee engagement.
Mistake #3: Assuming the organization’s core values are alive and well.
Core values are the words that describe who the organization is and what it collectively stands for. They connect people energetically to each other and to the organization, providing a sense of pride and purpose.
Core values aren’t just “nice to haves” either. They offer real and tangible business impacts. Research shows that organizations that fully live their stated values have higher productivity and profitability and more easily attract talent than those who do not.5
Despite how important they are, there is often considerable difference between the values on the wall and the values actually experienced by employees. Our research of 631 organizations from 36 industries and 54 countries found not a single espoused core value was recognized by employees in 28 percent of the organizations surveyed, indicating that these organizations are missing out on the positive benefit deeply embedded core values can have on recruitment and the bottom line. Only 3 percent of organizations had their complete set of espoused core values fully present in their current culture.
Mistake #4: Not aligning leadership.
Leaders are de facto culture carriers. Consciously or not, their manner and behaviors transmit a range of cultural markers and set the stage for a healthy or dysfunctional organization. Values alignment for leaders is an essential part of cultural measurement.
In our over 20 years of experience measuring and working with culture, we have identified that often the cause behind Cultural Entropy is leadership. It is expressed through limiting or negative behaviors demonstrated by leaders, such as avoiding conflict, being manipulative or micromanaging.
Employees learn what is acceptable and not acceptable by observing the behaviors of those around them. Your culture can quickly become a reflection of the worst tolerated behaviors—especially when those behaviors are exhibited by the top. When leaders are aware of how people experience them and how that aligns with their own view of themselves, they are better able to accelerate one of the most powerful contributions they can make to their organization’s success.
In a study of 44 organizations with a total of over 10,000 respondents, we found that when Cultural Entropy in an organization is low, leaders’ and employees’ experiences within the culture are similar. However, the greater the degree of dysfunction in the organization, the more disparate their perceptions become, thus leaders are more likely to be out of touch with the rest of the workforce.
One only needs to pick up a newspaper these days to see the damage this kind of mismatch can have in its most extreme. The recent Boeing 737 Max safety crisis exposed decades-long6 contention between leaders’ desire to please shareholders above all else and employees attempts to meet their unrealistic demands. As one Boeing employee said, “I don’t know how to fix these things … It’s systemic. It’s culture. It’s the fact that we have a senior leadership team that understand[s] very little about the business and yet are driving us to certain objectives.”7
Despite overwhelming agreement among leaders that culture is important, many admit they don’t know how to accurately measure their culture or how to make the most of this essential asset to their organization. This is understandable because, even in a time of vast benchmarking and best employer surveys, there is not—and cannot be—a rote template for what a corporate culture should be.
The missing piece of the culture puzzle is measurement, especially when the measurement includes a deeper understanding of what motivates your people, an objective diagnosis of what is and isn’t working, a clear and profitable path forward, and how to support leaders in recognizing their true cultural impact.
Instead of relying on a feeling, leaders will then have tangible data to gain clarity and consensus about what differentiates you from your competitors, what attracts people to your organization and what employees are most proud of that you can then put into action to further accentuate your “secret sauce.”
Hannah Lee is Director of Marketing and Communications at Barrett Values Centre. She can be reached at email@example.com.
1 Hewitt Associates (2009). Engagement and culture: Engaging talent in turbulent times.
2 Cultural Values Assessments conducted between 2010-2019, including 40 industries, 86 countries, and over 2,443,000 responses.
3 Posner, B. Z. (2010). Another look at the importance of personal and organizational values congruency. Journal of Business Ethics, 97, 535-541.
4 Collaborative study between Hewitt Associates and BVC in 2008 of 454 organizations across Asia; please see reference 1, Hewitt Associates (2009).