The conversation about the cost of an organization’s culture is a tough one to have. After all, if culture is just a nebulous, intangible concept how can we apply a financial analysis to it? Good news! By using some tried and true costing practices, along with new assessment tools, you can measure the ROI of your organization’s culture. (And I speak from experience as I’m also a Certified Management Accountant.)
Step 1 – Costing the Current Culture
How does your current culture shape up? Are your employees highly engaged and productive? Do your processes and polices propel your business forward? If so, then you likely have a financial competitive advantage over your competitors whose culture is not as positive. Where have you set the bar on your culture?
If it’s not as good as it could, or should be, then it probably has a few limiting values or behaviors. Examples of limiting values are: blame, bureaucracy, confusion, empire building, exploitation, information hoarding, internal competition, manipulation, and silo mentality.
Once you’ve completed an assessment of your culture to reveal any potential limiting values, then you can also do an audit on how this is showing up in the organization and what the costs are as a result. For example, if middle managers are blaming their teams every time something goes wrong, then the employees may be taking excessive time to get things done while they double and triple check the work. How much is this inefficiency costing you? Completing a limiting values audit will give you a good sense of the cost to your organization. Click here to get your FREE Limiting Values Audit Worksheet.
Step 2 – Costing the move away from Limiting Values
Once you have identified the limiting values that you want to move away from, then it’s time to develop a blueprint of initiatives to make change. Maybe it’s creating a coaching program for leaders to help them shift their behaviours, or maybe it’s about introducing a new purchasing system to reduce the bureaucratic manual process that exists today. These types of costing exercises are very common in today’s businesses. However, now you have a baseline of costs from Step 1 to measure the ROI of these initiatives.
Step 3 – Costing future initiatives
If your culture is okay today, it’s time to think about the future. Where have you set the bar on your culture? If your competitors are consciously designing their culture and you’re not, you could lose your competitive advantage. It’s not just about attracting, retaining and engaging employees it’s also about how work gets done. Every year, your business plan should include initiatives to improve culture. Many times, the costs are minimal. For example, employee recognition can be vastly improved just by saying thank you more often. I’m not talking about expensive reward programs, just a daily dose of authentic “thank you’s” from an employee’s manager.
Today, as leaders, we have been tasked to run our organization’s even more efficiently than before. It’s time to take a hard look at the costs of your culture. Golden nuggets that you can implement now await you!
