Cultural return on investment — is there such a thing? When rallying for a monetary investment in corporate culture, the issue most HR teams face: presenting a solid business case that proves not only need for investment, but also a return. You know there are areas of concern that need to be addressed, but you need executive team buy-in and approval in order to take action and make an impact.
So how do we assign a reasonable projection to ROI for improvements in culture and employee engagement? First, it’s not a bad idea to put yourself in the mindset of the executive team. The business plans that come across their desks from other business units all demonstrate ROI. The marketing team, for example, might say, “This year we generated 5,000 leads that netted the company $X. By purchasing this automation software, we can generate 10,000 leads next year.” The investment and return are both fairly cut and dried. HR professionals, however, are perhaps more challenged when it comes to projecting ROI.
It’s not an exact science, but demonstrating a causal relationship between employee behavior and business objectives can help you illustrate the return your executive team needs to see in order to back an investment in culture. By investing in cultural initiatives, such as conducting an Employee Engagement and Satisfaction Survey to identify areas of weakness, we can begin to make a real impact on measurable KPIs. We’ve heard from a lot of the employers that we’ve worked with that the cost of a disengaged employee is part of what motivates them to invest in employee engagement.
Identify behaviors that will drive the results you want.
Jerome Parisse-Brassens theorizes in his Inside HR article, that the simplest, most effective way to prove ROI for cultural investments in your business is to first identify the behavioral shifts needed to drive the results you’re looking for. For example, if your sales reps are losing out on deals to competitors who have stronger product offerings, your business objective might be to increase innovation. The goal then would be to invest in developing a culture where creativity and innovation is encouraged and new ideas fostered. You can then project that some of the business lost to more innovative competition will eventually be won.
Another possible scenario: your primary business objective is to increase customer retention. You know your existing customer base represents a significant portion of your revenue, but churn rates are high. The behavioral shift required in this case, might be employees who are customer-centric, active listeners, who are empathic to the needs and desires of your customers. Over time, customer satisfaction and loyalty should increase, while churn decreases.
Connecting the dots between employee behavior and business performance metrics will help make it clear that cultural initiatives result in more than feel-good immeasurable impacts. More than a humanitarian effort, improving culture through measuring employee engagement and then taking action, can have a true impact on the profitability of a business. Designing a culture that is aligned with your strategic initiatives will help you achieve them faster and more efficiently.
Think in terms of Employee Lifetime Value (ELTV).
And what about turnover? Replacing and training new employees is costly. An interesting way to support that concept is by taking a look at your employee lifetime value (ELTV). As defined by Greenhouse’s VP of People & Strategy, Maia Josebachvili, ELTV represents the total net value over time that an employee brings to an organization. An employee’s speed of ramp up (how quickly they are contributing to the company after training and onboarding), output, and longevity are all affected by cultural practices. The approach Greenhouse takes as a “People Team”, is to work toward maximizing the ELTV of every Greenhouse employee.
Focus on a few measurable goals.
What about assigning actual dollar values in your plan along with the behavioral shifts/goal correlations? Parissse–Brassens suggests that you focus on a small number (1 or 2) of behaviors that will impact business metrics and that the full ROI should be calculated over a period of several years. You can then assign a value to say, reducing churn by X% or increasing the percentage of closed-won deals by X% or decreasing turnover and minimizing recruiting and onboarding cost by X%.
Engaged employees thriving in a corporate culture that’s aligned with your vision and strategic goals, can propel your company forward to new growth and success.
It’s powerful to know what your employees think! You can identify problems like poor supervision, communication breakdown, and mounting plans to leave your company before expensive turnover affects your business.
Use this checklist for a quick read on your employee engagement.