Thought Leadership

5 Reasons Why Building Culture is Worth the Investment

Humantelligence helps businesses know their culture

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Although understanding and improving company culture is gaining traction in the Human Resources and Talent/Recruitment spaces, there is still a reluctance among businesses when it’s time to fully invest in the concept. This is due to many factors, most of which we are well-versed in as a Culture Software pioneer and leader in the HR space. From misconceptions surrounding culture to budget allocations, there will always be a perceived reason why corporate culture, simply isn’t a priority. In order to break down antiquated ideals surrounding the true definition of culture, (hint: it’s not snacks or a foosball table) we created this list to remove doubt, encourage transparency, and promote better alignment for your entire organization.

1. Make your business recession-proof.

When unsure economic times approach, every level of the business is going to feel the pressure from above to perform. Luckily, if your business has a strong culture where employees feel valued and understood, they’ll feel much more compelled to ride out the changes that come with any transitional period. But aside from retaining employees, you have to recruit new team members as well, and in an affordable way. Glassdoor, one of the world’s largest job search and recruiting websites, shared their insights on the recruitment process, found by studying their most successful clients. Here is what they reported:  

After investing in its company culture initiatives, Expedia, Inc. lowered its cost-per-hire to $1,700, 50% below than the national CPH average.

TRW Automotive decreased its time-to-hire by 50%, attracting quality candidates in half the time.

Overall, companies named as one of Glassdoor’s “Best Places to Work” largely outperformed those that were unranked. A simple portfolio of each new class of winners exhibits higher returns than the overall market in 5 out of the past 6 years.
  And that’s not all. Since 2009, a portfolio of Fortune’s “Best Companies to Work For” companies outperformed the S&P 500 by a staggering 84.2 percent, while a similar portfolio of Glassdoor’s “Best Places to Work” outperformed the overall market by 115.6 percent. So not only are the companies with happy, engaged employees outperforming their peers, they’re becoming invaluable to their shareholders as well.

2. Save money recruiting. 

In the aforementioned study, it was also found that companies with a good employer brand see an average of 22% in reduced recruitment fees and enjoy 50% cost-per-hire savings. The better the culture, the stronger your employee advocates, which leads to even higher-quality candidates that have seen the physical manifestation of your brand. Candidates will already know and understand your values from the company reviews and glowing testimonials, which will encourage the right, “best-fitting” candidates, and discourage those that don’t appreciate the culture you emphasize. By improving overall culture and engaging employees, you’ll effectively save:
  • Recruitment costs in replacing disengaged employees
  • Costs for sick leave and absenteeism
  • Compensation costs for disengaged employees
Which ties to our next point, improving the caliber of potential employees.

3. Increase candidate quality.

It’s been proven that investing in your company culture increases candidate quality by 2x. The quality candidates you are seeking will have done substantial research on your company’s culture to determine if it’s the right fit. When candidates see that you are putting time, energy, and resources back into your business values, your perceived reputation and overall value to candidates increases as well.

4. Increase engagement, raise productivity level.

Studies show that the more you invest in your employees’ happiness, the better, more productive their work habits will be. A 2013 study of the UK civil service even found that “companies with highly engaged staff have half the levels of sickness absence and lower levels of workplace stress than companies with low levels of engagement.” Deloitte found that companies with engaged employees outperform those without engaged employees by up to 202%.  Additionally, increasing employee engagement investments by 10% can increase profits by $2,400 per employee, per year. So it’s no secret that investing in creating the foundation for engagement will lead to better work, of higher quality, and more reasons for employees to want to be present. You invest in them, they invest in your business, everyone wins.  

5. Increase retention rates.

According to Bloomberg, 11 Billion is lost annually due to turnover. And yet HR Dive tells us that 75% of these retention problems are preventable. It’s obvious that job seekers ultimately choose, and remain to stay, at companies that foster their growth and display transparency through alignment with their individual employees. An in-depth study also revealed that those employees that fit well with their organization had greater job satisfaction, were more likely to remain with their organization, and showed superior job performance. Gone are the days where creating values is “doing enough”; now candidates need to feel tied to those values in some way. And the easiest way to ensure values are shared, cohesive, and enforced, is by choosing candidates based on their potential alignment early in the recruitment process. But this simply isn’t possible without first understanding your current culture, measuring each individual to understand their motivators and contributions, and then recruiting candidates that will either champion the current vision or, if needed, lead the charge on a new, improved culture through values that individual currently possesses and will inspire in others. Does company culture pay off?  
S&P Stock trends compared to culture

Companies rated as “Best Companies to Work” are in Blue, Green, and Dark Green. Those named a Glassdoor “Best Place to Work” enjoyed an approximate 0.75% jump in stock returns.

So what does this tell us? Companies that prioritize company culture perform better overall in the stock market, attract better candidates, and keep those candidates longer than their less culture-centric counterparts. Ultimately, investments into your company culture lead to reduced recruiting costs, time savings, higher quality candidates (culture fit), and increased productivity levels and retention rates. To learn more about how you can start making the shift to an intentional culture, and drive better results company-wide, click here. Or to see how the tool works for yourself, you can take your own free assessment, here.

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