How to Measure Company Culture: A Quick Guide
Company culture, or organizational culture, is intangible yet very impactful on organizational performance. Culture refers to the consistent organizational behaviors (norms) of employees and leaders. Organizational culture often mirrors the organization’s core values but is a direct reflection of the organization’s leadership. Some of those intangible behaviors are how are decisions made – top-down or bottom-up; employees’ confidence (or not) expressing their opinions; or a collaborative or competitive environment. These examples make it difficult but also necessary to measure, track, and improve organizational culture.
Frederic Kerrest, the COO of Okta, said culture is “the reason employees love or hate their jobs, or customers can feel valued or ignored. Like reputation, it takes years to build a good culture, but only a few missteps to mess it all up.” Therefore, culture needs to be measured to be managed. But how do you measure company culture?
Why should you measure company culture?
First of all, let’s look in more detail at why you should measure company culture.
- Data gives you insight into what to improve. You’ve often heard ‘what gets measured gets managed.’ It’s true! If you don’t know what your culture is like or what type of culture you desire, then any culture can evolve – positive or negative. But culture is not something you want to leave to chance.
- Building and managing a strong organizational culture that helps the company achieve its business goals. A healthy, strong culture can lead to higher productivity, sales, and a competitive market presence. According to Raine Digital, “happy employees are 12% more productive, and highly engaged workplaces see a 10% increase in customer ratings with a 20% increase in sales. These statistics are supported by the fact that companies with more engaged workers grew revenue 2.5 times as much as companies with less involved workers over a period of seven years. 90% of employees within a winning company culture are confident in their company’s leadership team.”
- Improving employee engagement and retention. Once you are aware of the culture you are trying to build, you are better able to attract and retain the top talent.
- Diversity, Equity, Inclusion, and Belonging (DEIB). Many organizations have been focusing on fostering a DEIB culture. Developing DEIB culture also requires some measurement. The results will provide greater clarity on your overall organizational culture and provide you with insight into what you need to work on to foster an inclusive environment at work.
Company culture metrics
It is difficult to determine metrics that would directly help you measure your company culture. However, there are several indirect ways to get a sense of what your culture is like. The following metrics can give you an indication of the quality of your company culture:
- Number of employee referrals – This gives an indication to what extent your employees are promoting your organization and referring others to join. Why they are or are not making referrals will provide some insight into the culture of the organization. If you are tracking this formally or informally, it is a good indicator of your corporate culture. Some organizations track Employee Net Promoter Scores (eNPS). This measures how likely employees are to recommend the organization as a place to work and why.
- Productivity metrics – A great company culture should lead to highly productive employees. Productivity metrics measure projected to actually completed ratios for your employees’ goals and organizational objectives.
- Employee turnover rates – If new hires and high potentials are voluntarily leaving your organization, this may be an indication of toxic culture.
- Communication metrics – Email open rates, read receipts, number of intranet page visits, and length of these visits are also good indicators of the health of your organizational culture. If these rates are low, they may indicate staff are not engaged with the organizations as they should be.
Measuring company culture: The methods
Beyond the indirect company culture metrics, there are several methods of measuring company culture. You can use one or a combination of these methods to understand the state of your company culture from different perspectives. Larger organizations may need to use more than one method to get a better sense of the culture or cultures within their organization.
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Quarterly or pulse surveys usually measure a range of engagement drivers. Some of these drivers may be:
- Sense of accomplishment
- Reward & Recognition
- Freedom of opinion
- Opportunity for growth
To the degree these drivers receive high or low scores, they will paint a picture of what the culture is like or perceived as at the organization. You can design employee surveys and conduct analyses in-house or through a third party.
Third-party culture measurement tools
- Many times, the tools may be more refined and agile than tools designed internally.
- Participants may have greater confidence in the anonymity of their responses when engagement surveys are administered through a 3rd party.
- Large employee populations tend to develop sub-cultures because of different geographic locations, M&A, and the natural effects of passing time. Surveys and other tools through 3rd parties should be able to segment the workforce. Segmentation gives insight into sub-cultures within the organization that need to be realigned to the core culture of the company.
- Invite a cross-section of employees.
- Organize as many focus groups as necessary but keep them to a manageable size.
- Ask for stories and behaviors, not opinions or rumors.
- Practice empathetic listening.
- Let the group know prior that you would be recording (notes or recorder) the conversation.
- Thank each person after they have shared.
- Analyze the data for trends, patterns, disparities and develop action plans to improve your workplace culture.
A well-designed exit survey can reveal a lot about your organizational culture. Conduct a thorough analysis of what employees say as they separate from the organization to better understand the culture as they have experienced it.
However, the disadvantage of using an exit survey is that it is reactionary. When employees or new hires separate from the organization, they will not benefit from any action you may take from the information they provide that may have prevented them from leaving.
Organizational Culture Assessment Instrument (OCAI)
OCAI can be very helpful in determining what your organizational culture is like and how it differs from what you want it to be. The instrument is based on the Competing Values Framework, where the organization distributes 100 points among four ‘competing values’. This assessment was developed by Kim Cameron and Robert Quinn. According to Cameron and Quinn, these four competing values correspond with four types of organizational culture. Every organization has its own mix of these four types of organizational culture. They are:
- Adhocracy Culture – The dynamic, entrepreneurial Create Culture.
- Clan Culture – The people-oriented, friendly Collaborate Culture.
- Hierarchy Culture – The process-oriented, structured Control Culture.
- Market Culture – The results-oriented, competitive Compete Culture.
The competing values are mapped against two organizational dimensions: Internal-External and Stability-Flexibility.
- Internal-External Dimension: Organizations might have an internal orientation, focusing inward on development, collaboration, integration of activities, coordination. Or it might have an external orientation; looking at the market, what’s possible with the latest technology, what competitors are doing, what customers want, and it could diversify activities as a result.
- Stability-Flexibility Dimension: Organizations that prefer to organize for stability value clear structures, planning, budgets, and reliability. They assume that reality can be known and controlled. Organizations that manage with flexibility assume the opposite: you can never predict and control everything. They prefer a flexible attitude and organization to adapt quickly to changing circumstances – focusing more on people and activities than on structure, procedures, and plans.
The OCAI culture profile reveals:
- The current dominant culture
- The discrepancy between the present (purple area) and preferred culture (blue)
- The strength of the current culture
- The strength of the preferred culture
- The proposed change: in what direction?
- People’s current “pain” and any “gain” of change
Business Needs Scorecard (BNS)
Business Needs Scorecard is an expansion of the Balanced Scorecard, which was developed by Kaplan and Norton. It maps out organizations’ current and desired cultures by measuring “Finance, External Stakeholder, Relations, Fitness, Evolution, Culture, and Societal Contribution. The Culture section breaks down into three sub-sets to help give greater clarity around key areas of focus. These areas are Trust/ Engagement, Direction/ Communication, and Supportive Environment. It is a diagnostic tool to identify where the organization is currently focusing its energies (current culture), and where the employees would like the company to focus its energies (desired culture).”
A healthy organizational culture features equally distributed values across the six segments of the scorecard.
Behavioral Observation Scale
A behavioral observation scale is a performance appraisal tool used to measure behaviors that you want the employee to display. The scale portion means it’s not a yes/no situation but rates the employees on a scale. This tool allows you to measure desirable behaviors that represent the organizational values, which, in turn, are the base of your culture. The key to success with this method is to define these desirable behaviors.
Best practices for measuring your company culture
- Make your measurement focused – Pinpoint the key elements you want to focus on when measuring your company culture. That way, you’re making sure that you’re getting relevant insights into what needs improvement most. Based on that, you’re also able to select the most appropriate method to measure your company culture.
- Cultural measurement is an ongoing process – Once you conduct a survey or use a BNS, don’t treat it as done and dusted. You should measure your company culture regularly, gain insights, and act on the findings. Culture changes over time; therefore, you want to keep track of the cultural changes within your organization.
- Measure and observe how the culture and behavior align – You want to not only measure the perception of your culture but also how it manifests itself in your employees’ behavior. Is your culture leading to an increase in innovation or an increase in employee investigations? Both are signs of a healthy or unhealthy culture.
- Leadership styles largely define culture – Consider whether the current leadership styles are creating or fostering the type of culture you are trying to attain. This can be done through 360 degree feedback or personality assessments like the Hogan Assessment. If not, determine what types of executive coaching and leadership development plan you need to change the behaviors at the helm that would subsequently lead to the organizational culture you are trying to develop.
After measuring your culture, you may notice that it is misaligned with your core values, vision, and organizational objectives. This misalignment should signal to leadership that the culture has become or will hinder achieving the organization’s strategic objectives. This is a good moment to start planning your cultural transformation process. This means realigning the culture to the organization’s vision, mission, and core values to achieve its strategic objectives.
Cultural transformation enables you to foster a work environment where your employees are empowered to do their best work.
To sum up
As you see, there are multiple ways to measure your company culture. Understanding who you are aspiring to be as an organization, defining your objectives for what you want to learn, and being prepared to transform your organization will help you select the best method. Organizations will discover not only the state of the culture but also ways to improve it. This investment will benefit your leaders, employees, your business, and customers.