The Business Case
for Culture

Most leaders today acknowledge culture is important to their organization.

However, what many leaders and managers don’t realize is just how much their results, outcomes and bottom line are built on culture.

In fact, the business case for culture isn’t only clear—it’s critical to survive in a competitive environment.

But don’t just take our word for it. Let’s look at the data.

What Changing Culture in the Workplace is Worth

Companies with healthy cultures outperform their peers in revenue and market share.

Companies on Forbes’ Best Places to Work earned almost 3x the cumulative stock market return of FTSE Russell 2000 and Russell 1000 over the last quarter century.

In fact, over six years, these organizations outperformed the Standard & Poor’s 500 by 84%. As we point out in Culture Works, one global leadership study concluded that a strong culture can increase 5-year revenue growth by 450%.

That’s no small edge–changing culture in the workplace can be everything for a business trying to thrive in uncertain times.

Why exactly do happier employees drive revenue results? 

One key reason is that employees in strong cultures perform better, with not only 22% more productivity but also more creativity and greater innovation.

They make 26% fewer errors and provide 14% better customer service. They display more motivation and a greater willingness to go beyond their job descriptions.

And this, unsurprisingly, leads to increased customer loyalty and business growth.

read less

Did you know?

It surprises many people to know that paying more does not deliver improved performance.

In fact, again and again studies have found no relationship between pay and results–or even a negative relationship (when paying more delivers worse performance).

It may be surprising to see, but it’s great for the bottom line, since it means you don’t need to increase business costs to improve your team’s performance.

And speaking of saving money .  .  .

Improving culture doesn’t only improve performance–it also decreases costs.

Many people underestimate the cost of turnover on the business, which the Society of Human Resource Management estimates at 6–9 months’ of the employee’s salary.
Columbia University research concludes that strong company culture decreases the likelihood of turnover by nearly 35%, while other research concludes that a one-point increase in an employee’s job satisfaction has been shown to double their probability of remaining at the job. And Gallup’s research concludes that a better culture can reduce turnover costs by as much as 52%.

And culture reduces costs beyond just turnover.

Organizations with weak cultures report health care costs up to 62% higher because employees there have been shown to be more vulnerable to illness, to take longer to recover from illness, and actually have a compromised life expectancy. With the rising costs of healthcare, the savings provided by a strong culture are significant. 
Changing culture in the workplace changes the bottom line. 

What does this mean for you?

It means that there are real costs for culture, whether you realize you’re paying them or not. Use our Culture Calculator below to see exactly what it’s costing you and your team.

Culture Calculator

Here’s how the calculations work 

You can check out the research and data that supports these estimated numbers here.

The calculations in a nutshell

Say you pay Dwight an annual salary of $40k. If Dwight is unhappy, he costs you an additional $38k in lost productivity, poor customer service, turnover, safety incidents, emotional impact on coworkers, and damage to your employment brand.

The bad news is you’re almost paying double to keep unhappy Dwight. Want some good news?

read more

A happy employee not only saves you from paying those penalties–happy employees also contribute more to the bottom line. In this case, Dwight contributes $21k more through fewer absences and mistakes, as well as improved productivity, impact on coworkers, better customer service, and improved employer brand.

The total impact of Dwight’s happiness comes to $59k ($38k + $21k)–1.5x his salary. (And we kept these numbers on the conservative side.)

read less

Even More Good News

Leaders often think changing culture in the workplace is hard or will take a long time–and so they focus on short-term fixes for deep-rooted issues. Yet we know these band-aid fixes do not provide the transformation that leads to these types of improved financial results.

Here at Choose People, we’ve shown over and over again it doesn’t have to be hard or take forever.
Sources: Columbia University, Gallup Consulting, Glassdoor, Harvard Business Review, International Journal of Environmental Research and Public Health, Journal of Applied Psychology, Journal of Economics and Business, Journal of Financial Economics, Journal of Healthcare Management, Journal of Labor Economics, Journal of Management, Journal of Personality and Social Psychology, Personality and Social Psychology Bulletin, Social Behavior and Personality International Journal, Stanford Graduate School of Business
curved shape

Get actionable insights in your inbox.