The Value of Workplace Culture: Attracting Top Talent
While focusing on organizational culture may take a back seat to more urgent priorities, the numbers show that firms can't afford not to pay attention.
Investing in workplace culture can do more than just help you attract top talent — it can also increase productivity and boost revenue. As part of a series on must-read books for business leaders, we are taking a look at the financial implications of key human capital management (HCM) trends. In "The Year Without Pants: WordPress.com and the Future of Work," author Scott Berkun provides readers with insights into his year at tech enterprise Automattic, Inc., which made significant investments in its workplace culture.
Avoiding the Risks of Short-Term Corporate Thinking
Reaping the benefits of investing in a firm's culture depends on planning for a longer-term ROI. As McKinsey & Co. notes, businesses can fall victim to a "corporate short-termism," which trades the need for immediate financial results with longer-term investments such as business culture, developing talent or investing in research and development. However, the results of this research are compelling. Firms that invested in developing their people and other long-term plays grew revenue an average of 47 percent more, and their economic profit grew by an average of 81 percent more.
Investing in Culture Combats the Costs Associated With Negative Environments
Investing in your organizational culture can have an immediate positive financial impact. Disengagement, high health care costs and workplace accidents are all important issues. Harvard Business Review (HBR) reports that many of these issues are caused by, or at least tied to, culture challenges.
Consider the relationship between stress and performance in the workplace. Estimates on the costs of workplace stress to employers start at $300 billion, according to Business Insider, and only increase from there. HBR suggests that 60 to 80 percent of workplace accidents are related to stress, and notes that a stronger culture can reduce health care expenses, as research shows that high-pressure environments spend 50 percent more on annual health care costs.
Poor workplace culture can also impact employee levels of engagement and attrition. HBR notes that disengaged employees have a 37 percent higher absenteeism rate and make 60 percent more errors. And disengagement can quickly turn into a risk for turnover.
According to the ADP Research Institute® report, Evolution of Work 2.0: The Me vs. We Mindset, globally, 66 percent of employees are actively looking or open to a job move, but employers only predict that 58 percent of their workforce is doing so. According to Gallup, the estimates on replacing a worker vary from between 20 percent of their annual salary to a staggering 1.5 times a person's annual take home pay.
How to Invest in Your Workplace Culture
Investing in your firm's culture can help increase retention, cut costs across the board and increase both revenue and profits. Here's how to have an impact on increasing the happiness of existing employees and helping attract top talent:
- Deloitte notes that businesses are better able to meet changing human capital needs and invest in both talent and culture by using the right technology tools — including predictive analytics and cognitive-first applications.
- As Berkun notes, the strongest employees — those who are driven, self-sufficient and more likely to run with a project — thrive in environments where they're given autonomy.
- Evaluate the role of the manager in your culture. As the adage goes, employees leave jobs because of managers, not the business. Berkun's work suggests looking at management as a support function, with managers' primary jobs being to support their teams, remove roadblocks and give employees what they need to succeed.
- Focus on flexibility as it can give workers the autonomy they want.
- Consider building a recruiting process that supports your cultural goals. Berkun suggests skills-based interviewing, or giving candidates a project to complete. While this may lead to a longer or slightly more expensive recruiting process, ultimately it provides better data to make more successful hires.
While focusing on organizational culture may take a back seat to more urgent priorities, the numbers show that firms can't afford not to pay attention. According to ADP, employees and employers believe that talent should be protected and nurtured much like financial performance (84 percent of all employees surveyed and 90 percent of employers), but they differ on how well this is being done within their own organizations. From rethinking the role of managers to incorporating the latest tools into your HCM strategy, a cultural focus can help solve some of your organization's most pressing talent-related challenges.