What HR Experts Say about Measuring the ROI of Workplace Culture

CEOs know what to look for in most areas of their business when assessing how costs impact profitability. They scrutinize key performance indicators (KPIs) to determine if expenditures are worth the money or needless drains on the bottom line.

But these leaders are often stumped when they try to measure the return on investment (ROI) for improving their workplace culture. The ratios and formulas to determine net profit don’t work on something so intangible. And yet organizational culture influences everything else in their business—including financial success. So how can they get a read on it?

Leaders who want to gauge how much their company’s culture boosts profit must look more broadly than scientific formulas. For example, they should also examine the human impact of this key performance driver. HR executives on the Forbes Human Resources Council recommend nine things CEOs should consider as they evaluate the consequences of investing in their culture.

1. Real-Time Employee Engagement

Employee engagement is the extent to which staff members feel connected to their employer. It affects how much effort workers exert on the job, their morale, and the quality of their output. High employee engagement reflects a strong culture, which translates to more substantial profits. So business leaders should keep an eye on how vested their employees are in the organization.

Julie Hankins at NNIT tells leaders to quantify the actions of their staff members against business outcomes. Employee surveys can give CEOs a snapshot of employee engagement, but she suggests going beyond these annual yardsticks.

Hankins recommends measuring employee participation across key moments for a more authentic real-time view. She notes, “Leaders who are highly agile, attuned, and plugged in can create a culture that fosters engagement.”

2. Accountability and Demonstration of Cultural Standards

A workplace environment rooted in positive accountability cultivates a high-performing, results-oriented team. And seeing people taking ownership of their work is a healthy barometer for the ROI of culture. But leaders must make accountability part of everything from job candidate interviews to employee reviews if they want it to take hold.

Lisa Feher, Chief People Officer at Secure Code Warrior, says leaders should do more than communicate behavioral expectations and norms. They should also develop processes to hold employees accountable for upholding cultural standards and acknowledge those who demonstrate them consistently. CEOs develop an important ROI assessment strategy by making accountability the basis of their culture.

3. Net Promoter Scores

Net Promoter Score (NPS) is a well-established measure of loyalty. For employees, it’s based on asking respondents, on a scale of 1-10, how likely they’d be to recommend their company as a place to work. Employees who take this survey base their rating on how they feel about their overall experience with their employer, essentially grading the company’s culture.

LHH President John Morgan finds NPS helpful for leaders who want to take the pulse of their organizational culture. And he notes that “high scores correlate with stronger profit and shareholder growth.” But leaders must do more than review NPS results to reap the benefits of this metric. They should also use the score to develop strategies to meaningfully improve and sustain their workplace culture.

4. Multiple Key Performance Indicators

Jacklyn Pagnotta, HR Vice President at Allied Partners, thinks leaders should go beyond using a single calculation to measure the ROI of company culture. She advocates focusing on several KPIs to determine the multifaceted effect workplace culture has on an organization.

Among her suggestions are measuring engagement, tallying unscheduled absenteeism, and tracking retention rates. By watching the flow of employee activity, leaders can see where their culture is helping to boost profitability or detracting from it.

5. A Foundation of Belonging

HRAnswers.org founder Niki Ramirez believes leaders can draw a direct line between the quality of a company’s culture and profitability. She specifies that a culture grounded in belonging, continual improvement, and honesty will fulfill and bring out the best in employees. And a staff operating at its full potential will generate the best results.

In addition, organizations will attract and retain top talent by prioritizing inclusion and transparency and helping people grow and feel purposeful at work. In an era of record-breaking employee turnover, leaders can size up their culture ROI by observing how well their culture supports the qualities that help people thrive in their jobs.

6. An Increase in Productivity, Innovation, and Retention

William Stonehouse, founder and CEO of Crawford Thomas Recruiting, says a vibrant culture inspires people to excel. He writes, “If your employees come to work happy and are looking forward to their day, they may forget they are at work.”

Unencumbered by a negative workplace experience, workers can function at a higher level and are motivated to be more creative problem-solvers. And happy, inspired employees stay put. Like many of the other panel members, Stonehouse believes that a strong culture bolsters retention—a key ROI benefit.

7. A Successful Employee Referral Program

Happy employees are not only committed high performers but also some of their company’s best ambassadors. Kelly Hutchinson of Big Communications notes that the ROI on a company’s culture can be measured by the effectiveness of its employee referral program.

Leaders can credit their company’s culture if numerous job candidates report hearing favorable things about the company from people they know and trust. And employees who are proud of where they work will only steer qualified applicants to apply there. A successful employee referral program helps build a highly competent workforce—a valuable ROI.

8. Customer Retention and Satisfaction

A loyal customer base is a strong indicator of a company’s success. And almost all customers’ opinions and purchasing choices hinge on their interactions with the organization’s staff. For that reason, every business that draws and retains buyers has a service-oriented culture.

McLean & Company President Jennifer Rozon explains that companies with a service focus can use metrics that measure customer retention and satisfaction and correlating revenue to determine their culture ROI.

External Consultant Feedback

Cynamon Voe Scott of DuploCloud Inc. maintains that HR departments should leverage external consultants to mine data analysis. They can use these professionals who are unaffiliated with the company to “ensure unconscious bias mitigation” and produce objective information.

She believes that surveys and other data such as performance and wellness statistics, referral rates, and exit interviews give leaders insight into their current culture ROI. And then, they can use this information to strategize improvements.

The Bottom Line on Culture ROI

The simplest definition of company culture is the amalgam of a workforce’s everyday behaviors. It’s evident in employees’ attitudes about their work, how they treat each other, and their interactions with the public. By investing time and resources to strengthen their culture, CEOs are working to elevate behavioral norms in these crucial areas, which will pay off in numerous ways.

Leaders can calculate some returns on their investment in culture, like lower attrition rates and steadier customer growth. But they can’t rely on metrics to provide the whole picture.

For example, formulas won’t show how an improvement in culture reduces workplace conflict or makes people more comfortable sharing ideas. Yet these unmeasurable benefits create a more tightly-knit and motivated workforce, which is key to profitability. For leaders to realize the scope of their culture ROI, they need to examine the effects at a macro and micro level.