HOW TO MEASURE YOUR CULTURE

There are plenty of metrics available to help you gauge how your people are doing. Here are the four that matter.

BY JOHNNY C. TAYLOR, JR.

Excerpted from Reset: A Leader’s Guide to Work in an Age of Upheaval (Public Affairs, 2021) by Johnny C. Taylor, Jr. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission. BIG DATA HAS BECOME THE CULTURE WHISPERER OF BUSINESS, telling us everything we want to know and much more. Through algorithms, AI and new tools, CEOs have made numbers talk in the same old-fashioned way as picking petals off a daisy. Employees love me, employees love me not.

At what point do we stop listening, though? At what moment do too many voices—a cacophony of data points, a slew of spreadsheets, a field of daisy petals—become overwhelming to the senses?

To even the most deeply resourced companies, a paralysis by analysis can sink the best intentions around data. GE is a good example of a company that decided to stop measuring for the sake of measuring. They went to a model that only measured what they needed to know in terms of their culture.

Selectivity is your sanity. We collect a lot of data designed to give us deeper insights and context. In reality, what ends up happening in a predictive model is you’re trying to forecast behavior X or behavior Y, and you’ve got X-one, X-two and X-three. And X-three is your error term more often than not. Collecting more data is not going to add to the predictability. It’ll add to the error term, which is just noise in the system, right?

Too much data becomes a vast light show when all you send are some signals. The right insights are more important than ever. If we are to learn from upheaval, we have to reassess what matters. In life. In business.

How do you measure the treasure and discard the trash? These four essential areas will help you measure culture, the important underpinning of your organization: net promoter scores, inclusion factors, curiosity indicators and employer brand. These add up to a Culture Score. We need a way

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What I think valuable, and the data formulations are up to the nuance of each company, is to show a correlation between employee satisfaction and revenue growth relative to your competitors.

to put up scaffolding around our guiding principles and do some work on developing a way to quantify the core culture of our organizations, because it is the underpinning of everything we do, from hiring to strategy, from productivity to policy, from vision to mission.

We’ll call it the Culture Score measured by NICE. Each company can devise its own data variants and formulas in weighting the outcome because every organization has different needs. However you get there, let’s build in essential pillars and cut out all the noise with NICE.

If you can assess those four areas, you’ll have all the data to measure culture. First, let’s understand how we arrived at a place where we look at data more than we look at each other for cultural cues. We understand that surveys and questionnaires have shortcomings, because the information is static and unreliable. Are people really telling you what they think or what they think you want to hear? Are they squaring their own ambitions with their abilities?

Seriously, people are unreliable witnesses of themselves. In the 1950s and ’60s, in their questionnaires, companies would equate job involvement with productivity. But a funny thing was later discovered.

A person can be as invested as all getout in a job and actually stay up at night thinking about it, but it doesn’t correlate to actual performance because maybe that employee wasn’t capable of doing the job in the first place.

Just because you enjoy the work doesn’t mean you’re good at it. I know that’s not something everyone wants to hear, but it’s true. Involvement doesn’t equal productivity, but, believe me, that equation was all the rage after World War II.

In the decades since, we’ve sifted through tons of indicators in an effort to link engagement to performance. As we’ve become more advanced with technology, we’ve started to measure digital traces of our company cultures by searching Slack, emails and third-party review sites for hints and evidence—measures—that reflect more accurate readings of behaviors and beliefs.

Now there are ethical issues, right? We’ve written about this at SHRM. Managers and operators have to be relentlessly diligent about maintaining privacy and confidentiality. If you screw this up, you’ll trade all the insights you’ve gained (and money spent) for a wave of employee anger and distrust. Game over.

While we work to gather it responsibly, big data is here to stay. So where do we drill first?

AREA 1: NET PROMOTER SCORE (AKA “YOU LIKE ME, RIGHT NOW, YOU LIKE ME.”)

The Academy Award went to Sally Field in 1985, and you know the rest in what became an iconic acceptance speech with the eternal echoes of “You like me!” She had a point. All the votes from the Academy were in as measures, and the Best Actress win validated her work, productivity and value—the grandest recommendation on the biggest stage.

How do you quantify likability of your company? One of the first movers with the math on business culture was Bain & Company, where Fred Reichheld developed the Net Promoter System (NPS). Basically, its entire foundation rests on one question: How likely would you be to recommend this company to a friend or family member? The answers are graded 0–10 and bucketed into three categories: Promoters (9–10), Passives (7–8), and Detractors (0–6). If you subtract the percentage of Detractors from Promoters, you’ll get the Net Promoter Score. With the score, there is feedback to provide context and next steps to improve or sustain a score.

Many companies license NPS, and the recommendation question can be tweaked and adapted to the needs of an inquiry, but the idea is to use the data to self-correct and discover potential connections by learning from your customers’ perceptions.

But look inside your own company culture. What would your employees say about the workplace? Would they recommend it to others? If you can define success, you can define what that metric should be. There’s no silver bullet in Big Data analytics,

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While we may discuss diversity in terms of gender with more attention placed on women, at the end of the day, we get to the question of race.

but there are indicators that allow us to track the correlations.

And let’s be candid. You can have real insight into your culture if its recommendation score is high. If it’s not, you can go measure why that’s happening, but don’t waste a ton of resources trying to fix something that’s not broken.

What happens with NPS is that you get dissension among the ranks. Do you have outliers bad-mouthing the organization to derail it? That might mean you have a management problem or a talent acquisition problem. Yes, the Net Promoter Score is a widely accepted product and there is value in its usage, but it can end up as another recommendation descriptor on a Wikipedia page: a score for a score’s sake.

What I think valuable, and the data formulations are up to the nuance of each company, is to show a correlation between employee satisfaction and revenue growth relative to your competitors.

Let’s make this the next revolution of Net Promoter Score’s application with a real payoff: limiting waste in acquisition and ensuring retention of the right talent.

You want the four Michelin stars, the highest level of employee satisfaction, so you can leverage that into keeping and attracting the smartest and most culturally aligned for success. Forget calculating inside the weeds of productivity, because all success metrics flow from the hires you can make.

AREA 2: INCLUSION FACTOR—INCLUSIVITY MATTERS MORE THAN A METRIC

You’re hearing a lot about diversity these days, but the real question surrounds inclusion. If you really want to know what’s important to people, it’s whether they feel included at work. To be candid, “diversity” has become a loaded word because the assumption is that it has to do with Black employees. Period, full stop.

While we may discuss diversity in terms of gender with more attention placed on women, at the end of the day, we get to the question of race.

So let’s really look deeper and measure inclusivity as a holistic concept. Do Black, Asian and Latinx workers feel included? Do women? Do LGBTQ employees? In taking this approach, we also ask, do white men feel included? We cannot exclude anyone if we are to understand the true insights of everyone in our organizations. The bottom line: Let’s be inclusive about inclusion.

So how do we measure inclusion? You have to find out if somebody actually feels like they belong, the core of that. It’s not just analyzing whether your company can attract every diverse candidate out there. That’s fine. But inclusion is how well we keep those people feeling like a valued part of our culture. Do we bring in different points of view? Are we open to alternative ideas? And can we do that without allowing the pursuit of a new course to be detrimental to the bottom line? Different can be good, but it’s not always the right path.

How do we marry inclusion variables with outcome measures?

Remember, it’s your job to find the right formula, because there is no one-size-fitsall equation for the contextualized environment of every company. But work with HR, work with your data scientists, work with your People Managers. Do the work to get the key insights on inclusion, because it will pay you back for years to come.

Has anyone gotten this right? To be honest, not really. We know from our research at SHRM that most companies agree that inclusion is important, but almost 80 percent don’t feel they’ve successfully addressed it.

In partnering with the Harvard Business Review, we wrote in 2020 about what can be analyzed and what metrics can be established when measuring inclusion:

In a recent study, we analyzed the language that employees used when describing their organization’s culture (for example, “our culture is collaborative,” “our culture is entrepreneurial,” and so on) in anonymous reviews of nearly 500 publicly traded companies on Glassdoor.

We first measured the level of interpersonal cultural diversity, or disagreement among employees about the norms and beliefs characterizing the organization.

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If you were to do the math, what’s the ratio of healthy and good curious behavior in your organization to curiosity-driven investments on the innovation side?

We then measured the organizations’ level of intrapersonal cultural diversity. Those with high intrapersonal cultural diversity had employees with a large number of cultural ideas and beliefs about how to accomplish tasks within the company (measured as the average number of cultural topics that employees discussed in their Glassdoor reviews) . . . For instance, employees at Netflix conceptualized the work culture in terms of autonomy, responsibility, collaboration, and intense internal competition. We found that organizations with greater intrapersonal cultural diversity had higher market valuations and produced more and higher-quality intellectual property via patenting, evidence that their employees’ diverse ideas about how to do work led them to be more creative and innovative.1 Is understanding every dynamic of inclusion easy? No, but it’s a pillar needed for your future. As we witnessed with the social and political unrest in 2020, this is the time to get it right.

AREA 3: CURIOSITY INDICATOR—CURIOSITY ISN’T A BLUE-LIGHT SPECIAL

Think about what your company needs coming out of the pandemic to meet our unsettled landscape. As we’ve seen, there are paradigm shifts happening every two or three years—today’s Zoom is yesterday’s Skype. We don’t see change in 20-year cycles anymore, so we need a workforce that is curious about what’s next and, most importantly, can act on that innovator’s instinct.

How do you quantify curiosity? We devoted a chapter to talking about the value of curiosity, and how much time is wasted on the incurious worker and the resistance to change, so let’s measure the output of big thinking.

We know what vision adds up to. After Apple delivered the iPod, everyone, including Microsoft, was chasing their own version of a device that magically put thousands of songs in your pocket. Remember Zune, that brown and kind of clunky competitor to the iPod? It was 2006, and Microsoft thought it had an iPod killer.

But Apple was already working on what was next, not now. Within months, it had released a device that would destroy its own iPod—the iPhone. We know those success metrics. So we know how we can calculate curiosity in innovation.

This is not just a tech phenomenon. Burger King was founded in 1954. For decades, it wrestled with how to compete with McDonald’s and tried everything from jalapeno poppers to chicken fries. But its biggest innovations were born from the curiosity of asking, “What if?” What if we lean into the flame-grilled Whopper? What if we offer a meatless Impossible Burger? What if we don’t try to win the coffee wars with a café? So you have three measurable differences over McDonald’s: a grilled burger, a vegetarian option and a focus on product.

Good questions are the bedrock of curiosity. Maybe it’s “what if?” Maybe it’s a different question. But there are outputs and deliverables to asking. In the C-Suite, it’s so important to know if you have the right curiosity quotient for your organization. If you were to do the math, what’s the ratio of healthy and good curious behavior in your organization to curiosity-driven investments on the innovation side?

It’s not just about the people who are time wasters and resource sponges. And it’s not just about creating an environment for curiosity and hiring smart thinkers to seed your next innovation. You need to apply a formula so you’re not an organization addicted solely to innovation and curiosity, and not to results-oriented curiosity. There’s a difference between actionable curiosity and navel gazing on a whiteboard, because you can measure the outcome. Did the idea or process or product go to market? Did it add value to your company? Was there a return on the innovation?

We’ve seen companies such as Johnson & Johnson turn innovation into valuable creations of their own, and also into enterprises that reaped big returns when sold off. Johnson & Johnson funds 68 different partner groups to foster additional innovation in health care and beyond. Its investments have resulted in innovations to medical devices such as pacemakers with Cordis or vaccines with BioNTech. Other such innovations include technologies that have changed

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When I think about employer brand, it’s really about the quality of people management in the organization, how well that workplace defines itself through its culture.

the world, including how we sanitize our electronic devices, like our iPhones.

That’s the result of a couple of key things. First, knowing who you are as a company and defining what success means and, second, using that innovative culture to drive a high curiosity quotient on full-blown steroids.

In the case of Kmart, we saw the opposite. We witnessed a forward-thinking company fail to leverage its curiosity. There was a time when Kmart was the hot, go-to department store—basically Walmart before Walmart got out of bed.

Early on, Kmart was an innovator, repeatedly investing in technologies such as point-of-sale systems and self-checkout, and had a smart focus as a disruptor in retail. It built in-store cafés before it was cool. It had patents and blueprints for the future of big-box stores. The problem was that Kmart kept focusing on what its brand was—was it about the Blue-Light Special or logo changes?—as it watched Walmart move in on its turf. Soon it was obvious. Walmart had certain advantages, including the ability to undercut Kmart on price and beat it on location, location, location.

Did Kmart realize what it had as a technology company? No, because the fear of Walmart blinded them to their own strengths. They didn’t understand what their true north was, so if you applied a curiosity quotient to Kmart, it would reveal a company that failed to activate its innovation by attempting to generate revenue the wrong way—by trying to outWalmart Walmart.

At the end of the day, curiosity-driven productivity matters, especially right now— period. We all have to own that. Anyone who doesn’t is in trouble.

AREA 4: EMPLOYER BRAND ROOTING OUT THE TOXIC

Productivity is not just measured but also felt in your employer brand. When I think about employer brand, it’s really about the quality of people management in the organization, how well that workplace defines itself through its culture, and how that ethos makes it into the brand of the company.

Defining the employer brand is an important part of the employee value proposition and is essentially what the organization communicates as its identity to both potential and current employees. Basically, it’s the embrace of an organization’s mission, its values, culture and personality. It’s the identity you wear as a company.

Imagine how a positive employer brand communicates to everyone that your organization is a good employer and a great place to work. It’s the linchpin to hiring and retaining talent, and it drives your perception in the market.

Think about that last area, the metrics to assess the employer brand. At the heart of this effort, you really want to discover if you have any toxicity in your culture. Are there areas of dissension or discord that could affect outcomes for your organization? Are your People Managers truly effective in communicating the culture? Are they living it and embracing it in its truest form?

In practical terms, toxicity is usually on a pendulum. Measuring how it manifests in your organization is essential so you can catch problems early. An effective People Manager is the great communicator of the culture. If there is a hotspot, they can meet it quickly. Being a caretaker of your identity has everything to do with how well-regarded your brand is. People will find out in a heartbeat if you are not who you project to be. Nothing travels faster on social media than hypocrisy. No one wants to be known as that company with a bait-and-switch culture. You have to deliver on who you are.

Culture: The Make-or-Break Metric After Covid-19

Every factor we’ve named provides a barometer of your culture—the heart, soul, mission and vision of your organization. So how do you calculate your Culture Score? In four easy steps:

1. NPS is a standard assessment that’s arrived at by using the percentage of individuals who are likely to recommend your organization or product to another person. It is plotted on a scale of 0 to 100. The higher the better.

Culture is not evergreen. It needs to be fluid, especially amid the rapid changes around us. We have to adjust quickly to thrive— and survive.

2. SHRM’s Empathy Index is a rating tool used with employees to assess the inclusion quotient of the organization. Each factor is worth 20 points, and they are all added up: The scale ranges from 0 to 100, and higher is better. This is unique in that each factor gives you insight into the five elements that make up the fundamentals of inclusion.

3. “Curiosity Indicator” should be defined as the percentage of capital expenditures spent on any of the following: new product development or ideation, marketing scanning and/or labor costs associated with research and development. Ideally, the percentage should be above 10 percent but not higher than 30 percent.

4. “Employer Brand” is defined by the addition of two percentages: the percentage of employees likely to recommend your organization as an employer to others, and the percentage of months out of the year that your organization’s average ratings on sites such as Glassdoor are above 3.0. All told, this metric is calculated on a scale of 0 to 200.

This means your Culture Score ranges from 0 to 500 in any given year. The higher your score, the more likely you are doing the right things in terms of organizational culture.

Why is it important to know where your culture meter stands? As we discovered throughout 2020, with every challenge that popped up in front of us, sometimes with Whac-a-Mole speed, culture is the glue that holds you together.

But it’s a flexible binding agent. And this is important as we move into a post-pandemic world. Culture is not evergreen. It needs to be fluid, especially amid the rapid changes around us. We have to adjust quickly to thrive—and survive. That’s what the past 20 years have shown us. IBM, once conservative as Big Blue, dominated by starched white shirts and striped ties, was the stalwart, the rock. But it was losing talent to Silicon Valley—all the innovators, all the best engineers, all the young tech stars. IBM was suddenly your father’s Buick of companies.

Meanwhile, Google, Apple and Facebook were cool without even trying. They were the collaborators, with hacker days, group outings and collective cultures. IBM had to change or wither under a brain drain. In 2002, during a talk at the Harvard Business School, Lou Gerstner, IBM’s CEO from 1993 to 2002, told students:

“Transformation of an enterprise begins with a sense of crisis or urgency. No institution will go through fundamental change unless it believes it is in deep trouble and needs to do something different to survive. . . . IBM’s extraordinary success in the ’60s and ’70s was built on one of the most dynamic sales cultures in the world. . . . They were very good, very relentless, very focused. And very individualistic. . . . We needed to integrate as a team inside the company so that we could integrate for the customers on their premises. It flew in the face of what everybody did in their careers before I arrived there.”

IBM pivoted to remain relevant. That’s the power of culture as a change agent. When I think about SHRM, there have been transformational leaders who came before me, and changes in brand and identity that have taken us from 20,000 members to 300,000-plus members.

I’m the guy who doesn’t believe there are good or bad cultures, just the right one for the time and place, for success and survival. Different circumstances call for change. What we’re doing right now at SHRM is implementing a model with our leadership that I believe will deliver relevance for the next five, seven, ten years.

We want to elevate HR. In practice. In perception. But to achieve that goal, we have to find, recruit and attract the smartest, most curious minds possible. To be honest, there was resistance to this shift when I first arrived. Not everyone was comfortable saying we are going after smart talent because, down some hallways, it was received as a put-down of the people we already had in the building.

That’s not it at all. Let’s use one more sports analogy. If I have a chance to get

HR is where we find the heart and soul of an organization, and also its mind. Why wouldn’t you seek the best innovators and brightest thinkers for the lifeline of your organization?

Johnny C. Taylor, Jr. is president and CEO of the SHRM, the Society for Human Resource Management. the best athlete, why wouldn’t I want the fastest athlete?

HR is your people. HR is where we find the heart and soul of an organization, and also its mind. Why wouldn’t you seek the best innovators and brightest thinkers for the lifeline of your organization?

That’s what we’re building. We want a challenge environment. We want to disrupt the old paradigms. We want to break down the internal silos.

I know it sounds like a major excavation, but sometimes it’s the little things, like moving all the executives to the same floor to fuel collaboration. Sometimes it’s a change in the language, like why tell someone with deep expertise or a good idea to stay in their lane? We are no longer saying that. As we have developed our blueprint, we’ve made very conscious decisions around our goal to elevate HR as the place for curious people who innovate. That’s how we problem solve. That’s our grand plan.

But, after that, someone else may come in and say, “Okay, Gen Z is now the dominant group and we’ve got to adjust our culture.”

That’s why measuring culture is so essential, but you only need a few indexes; the NICE Scale has four. There is no need to go overboard. I’ve worked with people who fell down the rabbit hole of overanalyzing and then . . . what? They became frozen or confused because too much data made everything seem right and wrong at the same time.

So measure what matters, and add instinct. Good leaders take in the numbers and then allow data to inform their decisions, not dictate them. The pandemic, so reliant on rapidly changing data, provided an opportunity for leaders to check their own cultures. What did the numbers reflect? Where was change needed? What do your NPS, inclusion, employer brand and curiosity factors say about where you are culturally?

Anticipating the New Un-Normal

We are all entering an uncharted economic and societal landscape, given the unknowns of a never-imagined pandemic. But we have been faced with uncertainty throughout history. We’ve discussed the Great Depression and the 2008 financial crisis, but let’s also recall 9/11, when no one knew what to expect after such an unthinkable terrorist attack on our own soil.

Who was responsible? Was it safe to fly? What was next?

The emotional shock and Ground Zero grief were immeasurable. As a nation, we were in pain on every front. When we looked up, we witnessed a work world convulsion.

Stock markets plunged by more than 7 percent on the first day of trading after 9/11. Businesses were hit with uncertainty, especially the airline and hospitality industries, as well as the insurance and financial sectors.

In business, we reacted with urgency and creativity, with steadfast belief and resolve to recover, and did so quickly. As we move ahead now, we once again must face these challenges as opportunities to conquer the uncertainty with bold action. Hesitancy is a losing proposition.

As McKinsey noted in December of 2020: “The strongest companies are also reinventing themselves through next-normal operating models, capitalizing on this malleable moment and the resulting spread of agile processes, nimbler ways of working, and increased speed and productivity.”

Next normal is actually the un-normal. Because we’re not going to be the same again after 2020. Our workplaces have changed, our workforces view life differently, our volatile politics are still roiling. How are we going to answer the bell to our future? As an opportunity or as an obstacle?

As a CEO, this is the time to be “extra.” This is the time to recognize the extraordinary circumstances we’re living in and seize the un-normal. This is your reset, your moment in history to define yourself and your organization. The culture you establish is not just a number. It’s who you are—the mirror of a leader. And at this inflection point in our lifetime, the word and touch of a CEO means more than ever to employees who are counting on you, the most important metric of all.

CE