Culture Measurement White Paper Final

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    2012 Critical Metrics, LLC Seattle, WA 98101

    Page 1 of 9

    Culture Measurement in Organizations: A study on the current state of culture measurement and its impact on organizations

    Critical Metrics, LLC www.critical-metrics.com

  • Please contact us for permission to re-print or re-distribute this article. 2012 Critical Metrics, LLC

    Seattle, WA 98101 www.critical-metrics.com

    Page 2 of 9

    CULTURE MEASUREMENT IN ORGANIZATIONS

    Have you ever wondered what companies and leaders think about organizational culture, how different organizations measure their culture, and how frequently they do so? We certainly did, and, to answer these and other critical questions, we conducted a research study. The goals of our Culture Measurement Study were to understand:

    - What does culture mean to leaders and HR executives?

    - How is culture currently being measured in organizations?

    - What is the current state of cultural alignment?

    - What is the impact of measuring culture?

    - What is the impact of cultural alignment?

    About the Survey The study, conducted in the spring of 2012, included responses from 236 management and human resources professionals from U.S. companies with 100 to over 5,000 employees. Participating companies came from a cross-section of industries including healthcare and social assistance, educational services, business consulting, manufacturing, finance and insurance. We used a two-part approach to obtain our sample. First, we piloted the survey using a grass-roots approach, inviting professional contacts through social media platforms to participate. Once we piloted the survey, we made some minor revisions and then gathered data from a wider array of HR professionals and business executives.

  • Please contact us for permission to re-print or re-distribute this article. 2012 Critical Metrics, LLC

    Seattle, WA 98101 www.critical-metrics.com

    Page 3 of 9

    Executive Summary State of Culture Measurement

    Most people think that its important to measure culture, yet fewer actually do in practice. Among those that do measure culture, just over half think that their organization does a good job measuring its culture. Custom-designed surveys are among the most popular methods used to measure culture.

    Measuring Culture Makes a Difference

    Our research showed that merely measuring culture influences important organizational outcomes. Measuring culture leads to greater cultural understanding and alignment among employees. By getting everyone on the same page around culture, this greater cultural understanding and alignment increases employee engagement levels. Higher employee engagement leads to reduced turnover and enhanced organizational performance according to employees.

    State of Culture Alignment

    In terms of viewing culture similarly, about half of all participants believe that employees are aligned with each other and that employees are aligned with senior leadership in their view of their culture. However, employees are twice as likely to report misalignment between employees and leadership than between employees in general. This suggests that the gap between leadership and employees should be a key area of focus when trying to promote cultural alignment.

    Culture Alignment Makes a Difference

    When employees think that their view of culture is aligned with senior leadership as well as with all others in the organization, good things happen - engagement is higher, they are less likely to leave, they understand the culture, and they report that business performance is better.

  • Please contact us for permission to re-print or re-distribute this article. 2012 Critical Metrics, LLC

    Seattle, WA 98101 www.critical-metrics.com

    Page 4 of 9

    Detailed Findings

    On measuring culture: Our research showed us that most people think that measuring culture is important. However, few actually do in practice. Among those that do measure culture, only a bit more than half (57%) thought that their organization does a good job measuring it. As well demonstrate later, if companies were more aware of the positive benefits that result from culture measurement, we believe more would do it. Our results suggest that culture should continue to become more frequently measured.

    We found some differences in various views of culture and culture measurement based on job level. As the figure below illustrates, higher level employees tend to have more positive views of culture and culture measurement. These job level gaps were found across all industries in our study. This suggests that its important to cultivate understanding and alignment all the way down to lower levels of the organization. These lower level employees are often the ones who most frequently interact with customers and clients, making it even more crucial that they understand and are aligned with the culture and values of their organization.

    Regarding company size, we found no differences. Culture was important across all companies regardless of size, and there were no differences in employee understanding of culture and the level of alignment. These findings suggest the universal importance, role, and prevalence of culture across companies. So, it doesnt matter if youre a small start-up or a large, multinational corporation; you can still cultivate understanding of your culture and alignment throughout your organization. Culture is important for everyone.

    In companies that measure their culture, surveys are the most popular method, with custom-designed measures preferred over off-the-shelf instruments (66% vs. 34%). Measuring culture once a year was the most popular

    68%

    55%

    53%

    86%

    82%

    63%

    0% 20% 40% 60% 80% 100%

    Importance of culturemeasurement

    Understanding of culture

    Cultural alignment btw employees

    Higher job levels

    Lower job levels

  • Please contact us for permission to re-print or re-distribute this article. 2012 Critical Metrics, LLC

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    Page 5 of 9

    frequency (46%), followed by once a quarter (37%). Although surveys are the most common method used to measure culture, they have both benefits and downsides. Custom-developed surveys, while very relevant to a particular organization, are highly resource-intensive and costly. Off-the-shelf surveys, while research-based, comprehensive and more cost-effective, are less customizable and may carry less relevance to a particular organization. An additional downside of using surveys to measure culture is that they set up employee expectations for action around all of the issues identified, which is likely improbable given limited resources.

    The top reasons provided for measuring culture are related to improving business performance and employee engagement. The results of our study show that these are both outcomes that are realized by measuring culture.

    A combinati

    on of survey

    AND other methods,

    51% Survey, 31%

    Focus groups and/or

    interviews, 12%

    Other, 7%

    Measure internally

    , 55% Measure

    externally, 29%

    Share work with external vendor,

    16%

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    Page 6 of 9

    Some respondents shared what they liked and disliked about the methods used by their organization to measure culture.

    Among organizations that do not measure culture, one out of three participants (29%) said that their organization was considering measuring its culture in the future. This indicates that theres a potential increased appetite for measuring culture in the future even among those that arent currently doing so. We asked respondents from companies that dont measure culture why they dont measure culture, and interestingly enough, the most common response from over 1 out of 4 respondents was I dont know. Of those that offered reasons for not measuring culture, the top reasons involved not having a need to measure culture, leadership not seeing the value in or prioritizing culture measurement, and the difficulty of measuring culture.

    On understanding the culture: Two-thirds of participants (67%) said that they had a good understanding of their organizational culture. However, 11% claim they dont have a good understanding of their culture, and 22% are unsure.

    Easy to use 24% Useful information 22% Confidentiality/anonymity 20% Personalized for company 10% Involved employees 10%

    Resource-intensive 23% Results not acted on 12% Survey content irrelevant 12% Poor employee participation 9% Confidentiality/anonymity concerns 9%

  • Please contact us for permission to re-print or re-distribute this article. 2012 Critical Metrics, LLC

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    Page 7 of 9

    On cultural alignment: We measured cultural alignment by asking respondents if they thought most people in their company have the same view of culture as well as whether employees and senior leadership have the same view of culture. Only about half of all participants perceived cultural alignment among employees (58%) and with senior leadership (49%). One interesting finding was that employees were twice as likely to report misalignment between employees and leadership (31%) than among employees in general (16%).

    This suggests that the gap between leadership and employees should be a key area of focus when trying to promote cultural alignment.

    Impact of measuring culture:

    Our research showed that merely measuring culture influenced important organizational outcomes. Measuring culture led to greater cultural understanding and alignment among employees. By getting everyone on the same page around culture, this greater cultural understanding and alignment increased employee engagement levels. Higher employee engagement led to reduced turnover and enhanced organizational performance.

  • Please contact us for permission to re-print or re-distribute this article. 2012 Critical Metrics, LLC

    Seattle, WA 98101 www.critical-metrics.com

    Page 8 of 9

    Impact of culture description sentiment: When asked to define the culture of their organization, a majority of the descriptions used were positive (e.g., caring and supportive; 61%), fewer were negative (e.g., stressful; 16%), and some were mixed (i.e., both positive and negative descriptors were used; 23%). When employees use only positive terms to describe the culture of their organization, compared to those who use only negative terms, employees are more satisfied with the organization (87% vs. 13%), commitment to the organization is higher (86% vs. 17%), and they are more likely to recommend the organization as a great place to work (88% vs. 13%). Employees using positive descriptors also report lower turnover intentions when compared to those using only negative descriptions (10% vs. 63%). In addition, employees who positively describe organizational culture tend to see greater cultural alignment with leadership (59%) as compared to employees who use negative descriptions (8%). Additional outcomes of engagement: While our study has demonstrated that measuring culture, understanding culture, and cultural alignment are all related to higher levels of engagement (commitment, satisfaction, likelihood of recommending, intentions to stay), other research by organizations such as Gallup, CareerBuilder, and Towers-Watson, as well as work weve done with other clients, indicates that engagement and its components are related to other important outcomes. For instance, research by the Gallup Organization found that higher engagement relates to higher customer loyalty, higher profitability, higher productivity, lower turnover, better safety outcomes, higher quality, lower absenteeism, and better patient safety outcomes. Similarly, a longitudinal study of 41 global companies by Towers-Watson found that higher engagement was correlated with better financial metrics, such as operating margins. Finally, a 2008 CareerBuilder survey found that when employees are more willing to recommend their organization as a good place to work, this improves the organizations employment brand, which can then impact various recruiting and retention outcomes, such as lower recruiting costs, improved candidate quality, increased employee engagement, and lower turnover.

  • Please contact us for permission to re-print or re-distribute this article. 2012 Critical Metrics, LLC

    Seattle, WA 98101 www.critical-metrics.com

    Page 9 of 9

    Summary and Implications These findings support the value of measuring culture. Despite the top two reasons for not measuring culture (leadership not seeing the value in it and not having a need to do so), the results of this study strongly suggest that culture matters. Those companies that do measure culture reap the benefits of a clear competitive advantage and stronger internal and external brands. If youre interested in learning about how you can use your culture to set you apart from the competition, contact

    us today for a quick demo of our new innovative approach to culture measurement Crowdsourced Culture.

    About Critical Metrics, LLC

    Critical Metrics, LLC, a Seattle-based consulting firm, that helps clients understand what drives employee and

    customer success. We do so by focusing on employee and customer measurement and analytics. For additional

    information, please visit us at www.critical-metrics.com or contact David Youssefnia, Ph.D., President of Critical

    Metrics, LLC via email david@critical-metrics.com or telephone 206 436 3470.