Building your Business Case for Culture Change

Employee Engagement = Productivity = Profits

with the resources you already have

If this appeals, then please do read on. If not, then please ignore - at your peril!

If we have one thing to thank the banking crisis for, it is that culture change is a topic that is regularly discussed in the business context. It is a subject that appears in research and business articles. More recently, it is linked with productivity.

Which comes first, employee engagement or a highly productive culture? The two are intrinsically linked. Successful, culture change can be measured by an increase in employee engagement and productivity. Headline business benefits include an improved customer experience, a reduction in sickness and staff turnover, improved innovation and a positive impact on your bottom line. So how do you convince your Executives of the need for culture change and more importantly, the personal leadership investment that it requires?

Culture can be your Achilles Heel or your competitive advantage. When successful, it is the unique selling point (USP) that attracts and retains highly committed staff and even more importantly, it attracts and retains loyal customers. Loyal customers are so much more profitable than satisfied customers, they tell others about you. They do your global marketing for you on social media.

So what is culture? It is like a jelly. It wobbles often, is hard to describe and difficult to grasp.

Culture describes: “how things are done around here.”

It is about behaviours. These are often rooted in and defined by values that underpin the vision and brand. Culture is created by the behaviours of leaders and those who work for you. Culture is embedded by aligning the processes and technology that you use. When leaders consistently demonstrate the culture, it grows roots and flourishes.

I can identify a highly productive culture when walking into a business. I sense the energy, the buzz and the pride of those who work there. I can see their engagement in everything they do. I connect with the business and its ethos. Their brand is threaded through the employee and customer experience. Staff understand what is expected of them and are empowered to deliver. They have loyal customers who are their advocates and do their marketing for them. Technology and processes are aligned. Leaders lead.

Many businesses focus on “what we do here.” The measures, the conversations, the agendas in fact the majority of the time is focused on tasks. This focus ignores that humans design and deliver the majority of their products and services for other humans to buy and use!

Employee Engagement | Employee Experience | Employee Satisfaction | Net Promotor Score, one of these is likely to be the label applied to the headline result from a survey that is used to measure an employees connection with their work. Many employers are so intent on the number of staff who complete their survey and improving their scores, that they forget about the humans they need to be involving and connecting with to achieve an improvement.

Culture change is not for the faint hearted. Some say it is the “soft, pink and fluffy” aspects of a business. In reality, culture is the hardest aspect to shape and change. It is often ignored and left in the “too difficult box” to fester and manifest its own, often unmanageable, characteristics and unacceptable behaviours. In our experience it is not unusual for a business culture to be toxic.

How many times have you personally made a New Year’s resolution only to find yourself breaking it within the first few days or weeks? If it’s difficult to change our own behaviour, then how can we hope to convince the Executives of the benefits that can be achieved from a business wide behavioural change?

Building the Business Case:

The majority of people will have a preference for either logical decision making (based on rational and objective analysis) or feelings based decision making (that considers personal values and conviction whilst also considering others values and how they are feeling)[1]

So let’s first consider the logical, rational case for culture change:

If your Executives are not already focussing on the value of your business culture, then inevitably it is the rational case that you will need to focus on. They will require the logical reasons for investment. Specifically they will be seeking a return on their investment.

Culture cannot be copied by your competitors! Consider Apple, Pret a Manger, Google, Innocent ……. They differentiate and succeed by recognising that their business culture is their USP (Unique Selling Point). Their culture is their competitive advantage.

What examples can you provide within your own sector?

Achieving an increase in productivity: of the 18 countries in Western Europe, the UK has the 6th lowest level of engagement in Western Europe.[2] The UK has the third lowest productivity in the G7, with Germany, USA and France where productivity is 1/3 higher than UK.[3]

Engage for Success demonstrates there is a firm correlation between employee engagement and high productivity across all sectors.[4] Gallup’s global employee engagement database reports business units in the top quartile are 17% more productive and 21% more profitable than those in the bottom quartile.[2]

So what does your employee survey tell you about your employee engagement?

Gallup Research[2] tells us that:

  • Only 11% of the UK workforce is engaged (down from 17% in 2013). Employees are involved in, enthusiastic about and committed to their work and workplace.

  • 21% are actively disengaged (26% in 2013) Employees aren't just unhappy at work; they're busy acting out their unhappiness. Every day, these workers undermine what their engaged co-workers accomplish.

  • The remaining 68% (56% in 2013) “feel no meaningful attachment to their job and their company."[5]

(By comparison, U.S. employee engagement is more than three times higher at 33%)

Now replace these figures with your own from your employee opinion survey. Then use the following research to calculate the cost and impact on your bottom line.

Disengaged employees have a negative impact on profitability – they cost an organisation approx. £3,400 for every £10,000 annual salary.[5]

Using your staff survey results, you can now calculate the cost of your business culture, simply and effectively.

No staff survey results?

Then use the Gallup research data2 (ie 21% are actively disengaged) to calculate the impact of disengagement on your bottom line:

No employees x total salary bill pa = £ cost of disengaged employees, every year [2]

5 3

For those who need further evidence, here are some more rational calculations that contribute to the head line calculations:

Attracting and retaining talent – UK Unemployment is at 4.1% [6] This is great news for those seeking a career move however it also means that access to the skills and expertise that you need in your business is becoming more and more difficult each day. This means that costs are rising to attract, to recruit and to retain staff (and therefore customers too). As a result, businesses are having to offer higher salaries and have to be the fastest to connect with candidates and integrate new recruits. The impact of Brexit is unclear and is of growing concern to many employers seeking to recruit and retain talent.

What is your recruitment and staff turnover data telling you about the impact that these have on your bottom line? How many times have you failed to recruit the right people? What is this truly costing you in in terms of HR and management hours: writing the JD, advertising, long listing, short listing, interviews, induction, performance management ..?

Disengaged staff rarely take ownership for the customer problem. Sixty-eight percent of customers leave because of poor employee attitude [5], they take their custom elsewhere. A 2% increase in customer retention has the same effect as decreasing costs by 10%.[7]

Consider your customer retention. Review repeat and loyal customer spend. Now consider how much it costs to attract new customers? How much does it cost to lose customers who never return? What are the real costs of your customer complaints handling processes and systems? What decisions are front line staff able to make? What does it cost to escalate decision making up the management chain?

Culture influences recruitment and retention: Next to pay, culture is the 2nd most important factor that influences an employees decision to stay or accept a job offer. 62% are prepared to take a pay cut to work for an organisation that offers a better culture fit.[8]

What are your exit interviews telling you?

Disengaged employees are not productive – they make 100 times the number of errors. [5]

How much does this cost in management time? In managing customer complaints? What does it tell you about your recruitment process, induction, training and development, manager interaction?

Disengaged employees take time off “sick” – engaged employees take an average of 2.69 days sick a year; the disengaged take 6.19 [4]

What are your sickness levels? How much is this costing you? What impact is sickness having on the engagement and productivity of those who are having to pick up the additional work? How much time is spent managing sickness? How much is this costing? What fails as a result of sickness? What do these failures cost you?

Disengaged employees will leave your company – 65% of employees leave because of lack of recognition. [5] In 2017 The Resourcing and Talent Planning report (CIPD in partnership with Hays) calculate the median cost for hiring senior managers/directors is £6,000. The cost for all employees has remained at £2,000. Engaged employees are 87% less likely to leave their organisations than disengaged employees. [9]

Staff comment that a “thank you” is often all they need, how much would this cost you instead?

The emotional case for culture change:

Brand and culture cannot be separated, they are at the core of every successful business.

Before reading the next paragraph, take a few minutes to consider your responses to the following questions:

What is your favourite brand?

List all the factors that describe why it is your favourite?

Describe how these factors impact on your decision making to buy, use and recommend this product/service?

In addition to the rational reasons for using/buying your favourite brand, there are also the emotional connections.

70% of buying experiences are based on how the customer feels they are being treated. [10]

Successful businesses recognise the intrinsic value of their customer experience. It is these, often subconscious connections that drive our buying decisions. And when our own customer experience matches or even exceeds our expectations, then we build an emotional and loyal connection with the brand and business. Highly successful businesses realise that they cannot achieve this without first creating an employee experience that delivers their customer experience. This is achieved through a focus on culture change, one that defines clear expectations of staff, involves them in developing how it is achieved, then upskills and empowers them to achieve it.

Additionally, we buy from people we like. We value a business that values what is important to us. Tesco Clubcard was one of the first loyalty schemes that tapped into our purchasing behaviours. Now it’s rare that a business doesn’t try to capture something about us so that they can connect with us personally and emotionally.

And so emotional connection with the business that employs them is vital for the majority of staff in the workplace. This is referred to as: employee engagement; the psychological contract; employee branding; employee experience; hearts and minds……... Whatever you call it, it is recognising that the business culture “how we do things round here” is fundamental to business success.

Engage for Success highlights: “no wonder that 94% of the world’s most admired

companies believe that their efforts to engage their employees have created a competitive advantage” [4]

Demonstrating a return on investment:

To obtain the Board's approval to embark on culture change, you also need to demonstrate a return on investment. Having undertaken the analysis above, you now have a baseline from which to define the business benefits from culture change and to track progress. Review and report these back to your Executive board, at least quarterly. It can take up to 2 years to fully embed and begin to deliver a tangible return on investment.

This phase involves scoping the activities, developing the plan and budget required to achieve the culture change.

Want to find out more? Then please do contact us: info@valuingyou.co.uk

Our thanks to Sue Petrie for sourcing updated research for this blog.

[1] Myers Briggs Type Indicator: Thinking - Feeling preferences

[2] Gallup – State of Global Workplace, 2017 https://www.gallup.com/workplace/238079/state-global-workplace-2017.aspx

[3] Office for National Statistics 2016: https://www.ons.gov.uk/economy/economicoutputandproductivity/productivitymeasures/datasets/internationalcomparisonsofproductivityfirstestimates

[4] The Evidence, Engage for Success

[5] Achievers, The Cost of Disengagement to your Company

[6] Office for National Statistics, January 2019 https://www.ons.gov.uk/employmentandlabourmarket/peoplenotinwork/unemployment

[7] Leading on the Edge of Chaos: The 10 Critical Elements for Success in Volatile Times, May 1, 2002 Authors: Emmett C. Murphy (Author), Mark A. Murphy (Author)

[8] What Workers Want 2017 – Culture Completes the Full Package https://cloud.email.hays.com/www-dac-2017?_ga=2.223192600.208827133.1547643183-315773419.1547643181

[9] Why Employee Engagement https://www.forbes.com/sites/kevinkruse/2012/09/04/why-employee-engagement/#40a564833aab

[10] The Moment of Truth, McKinsey, 2006

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