Before considering how to measure and monitor corporate culture, it’s worth pausing to consider another three-letter word: Why? We know that corporate culture has a significant impact on employee engagement, organizational performance and the bottom line, so let’s begin with recruiting and retaining talent.
The Importance of the Recruiting Process in Company Culture
How many times have organizations lost good people due to corporate culture, while the very same organizations’ committed and well-intended boards of directors carry on unaware of issues that may be simmering, if not threatening to boil over, for employees? As removed as directors often are from the (literal or metaphorical) warehouse floor, it can be challenging to determine how an organization’s corporate culture is impacting attrition rates. A board’s HR committee may receive high-level insights on turnover rates and attributions but, in the absence of unfiltered information, who’s to say that the board is as aware of corporate culture – positive or otherwise – as it might wish?
While not as neatly quantifiable as financial reports assembled for board discussion, corporate culture is critical in that it influences how employees think and behave. Your corporate culture has an impact on the organization’s capacity to develop, retain and inspire good, productive employees. It also affects perceptions of the organization’s brand and reputation. When an organization is perceived as having a good corporate culture, that increases its attractiveness to prospective new hires.
Setting talent management and recruitment matters aside momentarily, think of corporate cultures that have gone beyond troublesome. It would likely take you mere seconds to identify organizations in which, whether unidentified or simply allowed to go unchecked, unacceptable corporate culture and behaviors have escalated into full-blown crises.
How to Drive Measurement of Corporate Culture
A couple of corporate culture nuances, in particular, will drive not only the “why” behind measuring and monitoring corporate culture, but also provide cause to rethink the “how.” One is the digital transformation of societies, businesses and how we function. The other is the emergence of millennials and front-end post-millennials as dominant demographic groups in the workplace.
That’s because, with each new day, another 10,000 baby boomers are turning 65 – and that’s not just this year. These numbers are expected to continue through to 2029.So, as time progresses and more baby boomers retire or become consultants, it’s increasingly going to be the millennials (born between 1981 and 1996) and the post-millennials (aka Gen Z, born between 1997 and the present day) that your organization will be recruiting. In fact, it’s been projected that millennials will constitute 75% of the global workforce just six years from now.
Millennials are already seen to be forging changes in corporate cultures. While generalizations are just that, millennials are seen to bring a greater emphasis on their values to the workplace than did their parents’ and grandparents’ generations. They will also bring greater diversity to workplaces. There is general recognition that millennials are seeking not only a certain quality of life, but that they’re interested in routine performance feedback and in the social good.
Consider a Global Generations study undertaken by EY in 2015, involving 9,700 workers across eight countries. EY asked participants, “What sacrifices or changes have you made, or would you be willing to make, to better manage work and family/personal responsibilities?” A whopping 38% of US millennial respondents cited moving to another country with better parental leave benefits. Forty-four percent cited taking a pay cut in order to have flexibility, and 77% cited a job change. This EY study did not survey Canadian workers, who have the benefit of parental leave benefits that those 38% of US millennials (and others) would greatly appreciate.
A report arising from the 2019 Deloitte Global Millennial Survey tells us that millennials and Gen Zers are “increasingly pessimistic and mistrustful of both their careers and the world around them.” Consider that the eldest among these demographic groups entered the labor force while economies were crashing just over a decade ago and that the youngest spent some of their formative years in a recession.
Deloitte found that 49% of millennials included in this survey (up from 38% in the previous report) would, if given the choice, leave their current jobs within the next two years – and roughly one-quarter of that group reported having done so in the past 24 months. Dissatisfaction with financial compensation topped the list of reasons, and was followed by insufficient opportunities for advancement, lack of learning and development opportunities, feeling unappreciated, lack of flexibility (life-work balance), boredom/lack of challenge and workplace culture. This report reflects surveys of more than 13,000 millennials in 42 countries and territories, and just over 3,000 Gen Z participants in 10 countries.
The Digital Transformations Impact on Corporate Culture
Let’s turn to the ramifications of digital transformation on corporate culture. In its 2018-19 Top Insights for the C-Suite, Gartner highlighted the need to manage cultural tensions in times of change. The report found, “Ninety-six percent of companies are in the midst of an organizational transformation stemming from one or more factors, including M&A, business model change, strategy shifts or digitalization.”
Gartner reported that executives point to culture as the number one barrier to agile transformations. That’s little wonder when you learn that the same study found that, during times of change, more than 80% of employees experience “cultural tensions” or “competing priorities that they don’t know how to balance.” The research also found that, when it comes to planned changes, two out of three fail and result in not only cost pressures and resource waste, but also reputational damage.
Peter Drucker was famously known for his observation that culture eats strategy for breakfast. The pioneer of management thinking also gave us the perspective that, while management is doing things right, leadership is doing the right things.
When employees of all generations are experiencing cultural tensions in workplaces that are undergoing change, and when the soon-to-be dominant generation in the workplace is expressing a lack of preparedness to stay put in workplace cultures that don’t align with their wants and values, then boards and management must do more than monitor and endeavor to measure corporate culture. More than ever, they must lead.
Culture may eat strategy for breakfast, but perhaps that’s because they need one another. Given the leadership roles that boards hold, directors will ideally do the right thing and also engage in culture as well as strategy. This begins with directors and management themselves exemplifying the desired culture. To that end, in Corporate Culture and the Role of Boards, the UK’s Financial Reporting Council (FRC) urges transparency and accountability.
Monitoring Corporate Culture
In monitoring and measuring employee corporate culture, boards should review and discuss employee survey/engagement metrics with management. Exit interviews can be telling, and your board chair may want to conduct such interviews with departing executives. The board should also be familiar with the organization’s strategies for diversity and inclusion – and it should look within to assess whether the board itself reflects such criteria.
However, boards should not approach monitoring or measuring corporate culture solely from the comfort of a portal or the boardroom table. Rather, it behooves directors to also engage with employees who are not typically seated around those board and board committee tables.
This may be accomplished by walking the premises and through site visits, events, town hall-style meetings and more. Directors benefit by experiencing the facilities in which employees and clients work and interact and hearing unfiltered views. Some employees may initially find it daunting to find themselves engaged in conversation with a director, but such visits signal that the board is interested. Board participation in client-focused events can provide further opportunities to observe senior management and other employees – and, therefore, the corporate culture – in action.
This is helpful because, as the FRC reminds us, the board has a responsibility to understand behavior throughout the company. It recommends that a board be prepared to raise a challenge if it sees a lack of alignment with the intended culture, or if reports provide insufficient information.
As stressed by Anthony Habgood, RELX Group Chairman, “People on the board must never accept something that they don’t understand. This applies to established members as much as new members. If something is not clear, the board must ask the question even if it seems a stupid one. They must have the confidence to admit that they don’t understand.” Are there placeholders on your board’s work plan and meeting agendas to ensure that it understands, measures and monitors the corporate culture within your organization?