A company’s culture will ultimately determine its success. While it’s certainly a good rule of thumb to start from the platform of company core values a business must also continually monitor successes and failures in the fabric of its culture.

But what does it take to effectively and accurately measure company culture? To take a comprehensive and productive measurement, a business needs to focus on why company culture is important, what company qualities it needs to evaluate, and where to go with the results.

Why It’s Important to Measure Company Culture

The benefits and consequences of a company’s culture are significant for a variety of reasons. But before the importance of company culture can be captured, it must first be defined.

William Craig, the founder and president of WebFX, said company culture is “something that is pre-existing in your company’s genetic code; it’s not something that employees bring with them.” It’s an intangible and collective sentiment about a work environment shared by employees of every level.

Frederic Kerrest, the COO of Okta, said, “It’s the reason employees love or hate their jobs, or customers can feel valued or ignored. Like reputation, it takes years to build a good culture, but only a few missteps to mess it all up.” These different perspectives help capture not only the function of company culture but also the urgency that companies must start to consider their own.

Millennial employees have splintered from other generations in the ways they consider a company’s culture. As a group, they are much more likely to sacrifice higher wages to work for a place with a better environment. As reported by Fidelity Investment’s recent study, millennials would take a pay cut of over $7,000 to work for a company with a better work culture. They value it so much that, compared to other generations in the workplace, they are more willing to leave their companies for places with better culture.

A recent Gallup study found that millennial turnover winds up costing $30.5 billion annually in the U.S. With these pretty alarming statistics, business leaders need to prioritize constructing and sustaining a company culture that will retain their employees.

Company culture ultimately deserves attention because it will help your business:

• Attract new, talented employees.
• Keep your current employees engaged and motivated.
• Produce its best possible work.
• Earn a positive reputation for future employees and prospective clients.

What a Business Should Do to Measure Its Culture

Many factors contribute to gauging company culture precisely and effectively. As Taro Fukuyama, the CEO of Fond, wrote, company culture and morale are different things altogether. While measuring company morale can certainly have its benefits, it is largely distinct from company culture. A company’s morale is — or at least, should be —much more irregular or unpredictable than a company’s culture, because the emotions or feelings of employees can be affected much more from external sources.

For example, it’s likely that a company will experience a higher sense of morale during the holiday months when families are celebrating and more events are taking place than, say, February. Company culture is different, though, because it captures much more of the institutional and systematic choices your business engages in with its employees. Company culture is a long-term concept, which is why monitoring it is so essential.

So, how should companies measure their culture? And what metrics will they rely on to find helpful, accurate results? Some of the best models to sustain a productive conversation on company culture use surveys, casual lunches that link employees with leadership, one-on-one manager check-ins, and town hall forums where administrators field questions from employees. Company culture quantifiers should base their studies on three primary metrics: communication, retention, and performance.

How to Measure Communication

It should be a top priority for leadership from the top-down to construct and cultivate a model of open communication, where issues about the workplace can be openly discussed. While this company culture metric isn’t as easily quantifiable, it’s still necessary to approach from an objective perspective.

Greg Besner, CEO of CultureIQ, wrote that companies should pay close attention to a variety of workplace characteristics to gauge how well a company culture works. Topping his list of important company culture features is communication. He said that “with strong communication, employees are able to communicate their thoughts and suggestions to leadership, while leadership effectively communicates necessary information to employees.” Measuring how likely employees may be to invite clear channels of communication in their workplaces is tricky, though.

To capture the most empirical results possible, it may be a good idea for a business to employ a third-party consulting service to find out what works and what doesn’t from employees directly. This separation from management will give employees the opportunity to express their opinions about communication more honestly and candidly, which will help you decide more earnestly how you should proceed.

While the initial investment in a third-party mediator may be expensive, the benefits will quickly outweigh the initial costs. Companies that don’t provide their employees opportunities to communicate their positions will find their work environments to be tense and toxic. Conversely, businesses that build on a foundation of clear and invited communication develop a culture that fosters trust among employees and management.

How to Measure Retention

Another metric that will speak directly to the state of a company’s culture will be its retention statistics. A recent Forbes article explored the ways employee retention affects culture. It stated, “Hiring employees that don’t mesh well with the existing or desired company culture leads to poor work quality, decreased job satisfaction and a potentially toxic environment.”

Companies have quick access to employee turnover information, and they can apply these retention statistics to their company culture evaluations. More directly, if a company notices that new hires are leaving within the first six months, they have a good opportunity to address why their culture is not catering to newer employees. When companies measure their retention stats, they measure company culture from a holistic perspective.

How to Measure Performance

The last metric that can safely measure company culture is performance. Knowing which tasks employees complete or don’t complete are good examples of KPIs for culture. KPIs are key performance indicators, and they provide a metric of success for management and employees to understand what’s working and what isn’t. Employees completing their work on time or ahead of schedule will be a positive indication that a company’s culture is on track. However, if employees are missing deadlines or avoiding work altogether, a company may have a serious cultural problem on its hands.

Probably the best way to measure company culture in this regard will be to check in with all tiers of a company’s hierarchy, from the most senior leadership all the way to new hires. Management will likely have the most informed insights into this metric of company culture, and they should be some of the first people to meet with in order to learn more about it. After a company has measured its culture based on communication, retention, and performance, it should then look forward to improving the areas in which it both struggles and excels.

How to Improve Company Culture Based on the Results

Now that a company has charted key indicators of organizational culture, it should look toward problem areas for improvement. Best-selling author Chris Dyer explained one tactic that will improve company culture dramatically: listening. He wrote that “more understanding, more respect, more satisfaction. These are the things that feed workplace culture. And a well-fed culture nourishes any business.”

If a company finds that its culture results signify a communication problem internally, leadership should consider adopting Dyer’s model of active listening. This method will improve employees’ experiences drastically, which will have a palpable effect on the overall work culture at the company.

Another remedy to company cultural problems, particularly with retention, could be to implement an overarching team-based model for the sake of inclusivity. Arianna Huffington, the founder of Huffington Post, wrote that team-oriented models “build empathy, foster creativity and strengthen resilience” among employees. Introducing new hires to a dedicated and supportive team will greatly strengthen their chances of staying on.

More importantly, the team-based approach will lower a company’s turnover rate. Keeping employees familiar with each other will improve company culture organically over time, so addressing retention struggles through a team-based approach could be the solution for a company to move forward.

As far as undesirable performance rates go, companies should work toward addressing the problem through cultural solutions. An article in Entrepreneur stated that KPIs will improve and higher quality work will be completed when employees feel like they have ownership over the culture. Company leaders can help facilitate this model by building culture committees, which will give employees the opportunity to voice their concerns and opinions often in a confidential, supportive environment.

Walmart under Sam Walton, for example, applied this measurement of performance to its own culture. According to its website, Walmart was able to bring out exceptional performances from its employees because of its method of promoting employees from within. As much as 75% of senior positions at the company came from inside hires, which dramatically improved the way Walmart employees treated customers and each other. Promoting employees to management and senior positions could shape your company culture in a way that motivates higher performance rates. It’s the responsibility of leadership to find clever ways to inspire a workforce, and incentivizing employees with the opportunity for promotion could be an effective strategy.

Measuring company culture is just one aspect of building a great place to work. Staying informed on relevant company culture practices will equip any entrepreneur with the tools to get to the next level. An online MBA program prepares you for the next step in your career by focusing on fundamental managerial topics, including business communication, research methods, and statistics analysis.

King University’s online courses do not differ from those taught on campus but offer flexibility for the working adult. Find out how to impact company core values and company culture with a strong business education from King University. The case method, a four-step learning process, allows our students to get a complete understanding of the materials covered by reading and analyzing case data based on real world scenarios.