How Is Organizational Culture Linked To Business Performance And Outcomes?

Full Transcript Below

[ANNOUNCER]: Breaking down everyday workplace issues and diagnosing the hidden sickness not just the obvious symptom, our hosts James and Coby.

[COBY]: Did we lose a patient?

[JAMES]: No that’s just my lunch.

[COBY]: Hey thanks for joining us. I’m Coby, he’s James. Let’s get started with a question. How is organizational culture linked to business performance and outcomes?

[JAMES]: So this question has actually become a really common talking point for us recently, with many of our partners, with clients and actually even with a fellow podcaster recently. So obviously we see a very clear link between organizational organizational culture and common business outcomes, like the ability to grow and expand, and a business’s ability to increase their competitiveness or market share, or the ability to innovate, to collaborate, or to effectively manage change. And the thing is every one of those business outcomes is directly dependent on your people. You can’t grow and expand if you’re struggling with high levels of job dissatisfaction and poor performance. You can’t improve your competitiveness and market share if your people aren’t able to deliver on the increased requirements and demands that come with that. And you’re not going to be able to innovate, collaborate, or manage change effectively if you are constantly fighting against a complacent culture at every step of the way.

[COBY]: Absolutely and I think that this is like, this isn’t just, I think, a common conversation that we’re having. I think this is kind of a bit of the spoken and unspoken conversations that is happening in kind of all organizations. Because I mean, like you know, this kind of comes up when we talk about our… when we do our training programs, and with clients, but I think it’s that’s reflective of what is kind of happening in our workplaces. Because I think there’s this disconnection, there’s this inability to kind of see how the realm of People and Culture, and the realm of business outcomes, how they’re how they kind of work together. Because it’s almost like we see them as two separate distinct, almost like realms. Like we have our people and our culture, and all the stuff we have to do to kind of maintain you know legislative requirements, and kind of keep them, you know, attached and working. And then we have to kind of a grow and we have to expand. And we have to maintain profitability and all this kind of stuff, as if they’re almost two separate things. And that misconnection is kind of, I think, where a lot of the heart of most of the problems that we run into are. Because we don’t see them as being directly linked with a thick line. These are almost like two sides of the same coin, in a sense.

[JAMES]: Well and I think you’re right on a couple points there. And it’s, I think, part of it is because People and Culture, the language around People and Culture, the initiatives around People and Culture, the idea that we need to invest in People and Culture, is still a relatively new concept for many businesses. It’s something that is an add-on, it’s an addition to what our normal day-to-day is. It’s something that has come along that now we have to do these things, rather than being an intentional, right from the beginning, interwoven into how we operate every day, and how it influences every single outcome that our business is trying to accomplish.

[COBY}: Yeah because like I think that the understanding… because part of it too, we talked about this… we have a webinar that we talked about kind of the financial case for strengthening culture and HR practices. And we kind of often say that there’s this misconception that, it’s almost like the business is its equipment, it’s IP, it’s the tangible things it owns like the machines, that’s what the business is. And then the employees are a necessary evil required to make the business work. And I think that’s where… that’s a very old school way of thinking about it, but I think that’s what’s kind of permeating into our workforce today. Is that the machines, and the technology, and the buildings, and the equipment; those are the assets. And employees are the necessary evil, they are the expense. So we have to kind of mitigate that expense to make the business work. When in reality, is kind of the opposite. The employees are really the heart of the business, they’re what run the machines, provide the services, do all that stuff. Any equipment is really supposed to be there to make them more efficient. But and I think that’s the misconnection, because we own the equipment, but we don’t own the people. So we don’t see them as assets, we see them as expenses.

[JAMES]: And yeah that’s a good point. I like that analogy of how we confuse the two. Because I think it does speak to, I do believe that mentality is changing. I think we are progressing along a really good line of starting to recognize that our business is not only our equipment or only our assets. But our business is dependent on the people who use our equipment in our processes. And that is a really encouraging shift to see. And it’s the start of, for businesses that shift in mindset is kind of one of the core fundamental shifts that needs to happen for a business to progress towards really investing, and believing in developing a strong and healthy workplace culture. Because that’s how you’re going to protect that investment, it’s how you’re going to protect your productivity, by actually making sure that your assets, your people, are just as well taken care of, and maintained, and have what they need to be successful.

[COBY]: Yeah and I think that you’re right, that there is a promising shift. And it’s, I think, it’s kind of come, I think it’s kind of been worker lead largely kind of sense the onset of COVID, is where it’s really kind of gathered some steam. And we talk, and I think the businesses that are… that get it and that are actually, you know, being able to acknowledge and start not to implement the changes that need to happen in order for that mindset, they almost like direct the way that they do their business, kind of, is reflective in what we talked about in a few podcasts, a couple different episodes, about the Fragile Grip Principle, where it’s kind of how they treat that fragile relationship with employees. Did they kind of squeeze everything that they can out of them, with a Harsh Grip? Do they kind of let them drop and lay them off at a moment, you know, at any sign of struggle, with the Weak Grip? Or they actually provide them the support that they need to actually provide their best work, and be around for the long term, with the Stable Grip? And I think that the one that the businesses, that are still using the Harsh Grip, of the kind of squeeze and get everything they possibly can out of people, and burn them out, or the ones that are laying them off the first sign of trouble, they’re the ones that aren’t getting it. They’re the ones, I think, they still have a lot of work to do towards shifting the idea that the employees are the are our assets, not just expenses. And we need to invest in them. But the ones that are starting to show that Stable Grip, they’re the ones that have, that they’ve put these pieces together. They get that there’s a direct link between organizational culture and business performance and outcomes. And they’re starting to try, and some of them are doing great jobs in their efforts, but they may not be doing a lot of the right things, but they’re trying their best to find the right things. Because this is kind of new territory for a lot of them. But there’s definitely that shift is happening and it is encouraging, and that’s kind of what in our role with Roman 3 is to try and be part of that solution, to help those that are, that  see it, how do you now make the best out of it.

[JAMES]: And I want to capitalize on something that you said, because you talked about effort, and this is something that we talk about a lot because you can have success with, you can have short-term success with a lot of the initiatives, a lot of the projects, and a lot of the outcomes that we’re talking about by putting in a ton of effort. By pouring more time, energy, and resources into to ensuring that, you know, business outcomes will happen. You can see success, but what we are saying, and the heart of what we talk about in the heart of our Workplace Culture Hierarchy, our systematic approach to building a workplace culture, is that if you want to maximize the outcome you get for your time, energy, and resources, then here’s a very clear and distinct way of doing that. You need to have a strong healthy workplace culture, and when we say strong and healthy workplace culture, we’re talking about using our Hierarchy as your model, as your progression and process for building that. And what we’re talking about today is really the the top tier of that Hierarchy. The top of the hierarchy is what we call Strive. And it’s striving for success, and those five things that I identified earlier, the business outcomes. The success, the ability to change, to innovate, to collaborate, your growth which is your internal growth, and your customer acquisition or your external growth. Those are what we are striving towards. And those are the outcomes that will be improved, that will be, that will benefit from having a solid strong, inclusive, engaging workplace culture.

[COBY]: Yeah because like the way, that again, that the Hierarchy  that we use, in that we train others to use, works is built on kind of historical precedence and psychology. And you know, a lot of it’s kind of, that structured the steps, it’s not just a theory,  it’s steps to kind of work towards those things that you mentioned. So that top of the Hierarchy, so again from Compliance, to Psychological Safety, to Inclusion, to Engagement, to reach Strive. Those are the steps that you need to do in order to get there. But you’re right, you can jump in at Strive, and invest, a whole lot of money, time, and effort to kind of making something work that will probably work for you for the short term, but as soon as all that time, effort, and money is kind of lacked off a bit, it’s going to go back. You’ll see a drop in your success. But if you want that success to be sustainable, like you said in change, or in collaboration, or in growth, or customer acquisition, or an innovation, then you need to build the foundation that’s going to keep it running without the constant influx of money, time, and effort. And that’s something that we see a lot of, and we talked about this, I think… we talked about the Hierarchy in our last episode. We talked about kind of where we kind of came from, when we, before we came to form Roman 3. And we did a lot of work helping, kind of working on economic development, kind of looking at things, like a lot of the Strive concepts, and a lot of the Strive efforts around collaboration, and innovation, and growth for organizations from a regional economic development perspective. And where, and this is something that we just, again historical president, we’ve seen this happen time, and time, and time, and time again. Because it is something that a lot of businesses are trying to do, because we have a pain point. We’re not competitive, we are not as productive as we need to be, or our processes could be improved. So let’s just improve them. That makes sense, from a very superficial, you know, standpoint. That makes perfect sense, and it’s a lot more work to go back to the beginning and build that foundation up. But I mean it’s, you know, do you want to throw good money after bad? Or you actually want to solve the real problem, not just put Band-Aids on stuff.

[JAMES]: And processes and process improvements is something that comes up a lot. Continuous Improvement, LEAN, these process Improvement systems are great. You need to have efficiencies, you need to be constantly looking for efficiencies in your processes, you need to have defined processes. You need to understand how things, how the business operates, and you need to be able to articulate that, you need to be able to replicate that. But you need people who will be able to implement those processes. So we spend a lot of it, it always boggles my mind how much time, energy, and resources are dedicated towards Continuous Improvement initiatives to get the business processes just humming, right? Just operating really effectively and efficiently. But we don’t support the people who are going to be using those processes, right? So we talk about, we use the language of the People Side of Productivity, quite frequently. Because it’s not just… Process Improvement will improve productivity, to a point. If you want to get the most out of it you also need to look at the people side of productivity improvements. And that’s really again this is… All of the conversations that we’re having are focused on how do we not just get our business structure ready to be competitive, ready to change, ready to innovate? How do we get our people ready to innovate, ready to change, right? Because I don’t know how many, if you’ve ever, if you’ve ever tried to implement something new in your workplace, or have ever had to manage change in a workplace with a culture that is complacent, or with employees who are, let’s say disinterested at best. You understand the frustrations, right? It is like banging your head against the wall and the process of change, you know there are some fantastic change management processes out there that will teach you the systematic process of getting the paperwork ready. Of going through all of those administrative pieces, but if the people are not ready to change, or if the people are resistant to change, you are going setting yourself up for failure. It’s why what is it what is the stat 33%, only 33% of change is actually considered successful? That is an atrocious number, especially in an environment, how many changes has your business encountered in the last three or four years, you know since the onset of COVID. Think about the number of things that have changed. And now say that only at best a third of those were considered successful? That’s terrifying.

[COBY]: Yeah and I mean, so we have a training program that is an Organizational Change Management Practitioner (OCMP) certification that we run periodically. And it’s always interesting the conversations that we get into around change management. I think we should actually, wouldn’t hurt for us to do an actual episode on change management. So just maybe a little mental note for yourself, because that’s a good episode, or a good topic to kind of really kind of sick our teeth into as a whole, but not let that derail us from from this talk…

[JAMES]: You know it’s not a mental note if you say it out loud.

[COBY]: I suppose.

[JAMES]: Right, just letting you know.

[COBY]: Click, note to self. No, but because I mean, what’s interesting is some of the stats, kind of that we are referencing, we talk about a lot in that program. Because, you’re right. It’s like 33% of organizational change is considered unsuccessful and it’s something like 98% of businesses go, through have gone through change in the last two years. and I think that stat was interesting, that was that was a pre-COVID stat. So it’s almost like 90% of businesses regularly go through some kind of change, and only 33% of that is considered successful. So there’s a lot of work to be done to improving it, because you’re right, it’s about most change management strategies are about the process, the paperwork, the building, getting the the procedures in place, and then expecting the people to just magically adopt them, and be successful with them. But I think a good example of how that people need to be ready for the successes of Strive is you know the manufacturing example, with like  Continuous Improvement and LEAN, that kind of stuff is a good example. But probably a more, you know, easier to understand one is kind of… because we did a lot of work in tourism, and so we do a lot of stuff around trying to promote, help tourism businesses kind of expand their reach and in their pull, and kind of bringing more destinations. So increasing tourism numbers and customer numbers. But the problem was all the effort was done to bring higher tourism revenue and visitors to businesses that still suffer with massive customer service issues. Because the staff felt poorly treated, felt, you know, were disengaged, disconnected, hated their jobs, and then so you had all this business kind of come into an area where none of the customer service people on the ground had any interest in going above and beyond, or or adopting all these new these new customer service, of the 6B of being nice to customers. That wasn’t the problem, well the problem was they were dissatisfied in their jobs, had no psychological safety, were not included, and were disengaged. And so the idea was, like you know bring all these all these tours, all these tourists to a business that’s not any better prepared to handle it because the staff, again, the culture does not allow the staff to be successful.

[JAMES]: And employees who are dissatisfied will provide dissatisfactory service.

[COBY]: Yeah that’s it right there. And this is the whole piece, is that you know the the idea of the concepts around, again, we call them the five types of organizational success at Strive. You know change, Innovation, collaboration, growth, the customer acquisition. Those things that we try to get every day, that are often the topic at the boardroom table, or you know that the C-Suite are referencing on a regular basis, are completely dependent on success, on a successful organizational culture. If you want to move beyond the short term, highly expensive success that will not be sustainable. So again, we’re kind of really trying to put that piece back to the conversation that we had in our last episode about the Hierarchy. You have to build that foundation and not just jump in at the top, because, again, you’re going to be limited in your ability to find success in the growth, in the expansion, and collaboration without people really… without your staff, the assets that are your staff, being as on board, and prepared as maybe the processes or the the paperwork is.

[JAMES]: And in that Hierarchy talk we reference the question over and over again. About as we were kind of developing the Hierarchy, and as we’re working through it with clients, we always ask the question of “what needs to exist first before this is going to be successful?” And it’s a really important question to ask yourself as you’re working through the Hierarchy, but also when you’re at the Strive stage as well. When you are talking, when we’re looking at those successes, what needs to be in… What needs, what do we need to have in place first before we can be successful with innovation. Before we can, we before we can be successful with a new collaborative effort, before we can be successful in implementing something new and managing the change that comes with that. And it’s not just the processes, because you can get the processes right, and as we’ve said there are some great tools and resources and programs and lots of information on process improvements, but also consider what needs to exist first from the people perspective for this to be successful.

[COBY]: Yeah and one thing that kind of comes up a lot when we talk about especially around change management. I’m going to go back to that in our OCMP certification program. Is when we’re dealing with businesses that, and we’ve had this come up of a few times with clients, that are looking at… they have an acquisition model. Where they’re buying companies and absorbing them and that sort of stuff, the mergers and acquisitions kind of piece. To which is, you know, quite a lot of business really rely on that. But the fact that they don’t see the connection between organizational culture and it’s linked to business performance and outcomes can be scary. Because I mean if you haven’t secured your culture… So you’re the business that’s absorbing this new one, or merging with it, and you are adding it in, and you’re not supporting the culture to the level that it should be, and then you’re potentially bring in another culture which is, you know, either unknown or even potentially weak or whatever. Then you’re kind of mixing these cultures together. And all the processes and trying to go through all this massive change, organizational restructuring with these unknown or unsupported cultures. You’re just dumping gasoline on a fire.

[JAMES]: Yeah and what’s funny is you tend… like with an acquisition model. I remember the conversations with this one client that we had in  some of our training and it wasn’t only that bringing in an unknown culture or a weak culture, into an already weak culture. They were acquiring companies that had strong.. that they looked at as being… They acquired them because they had strengths and some of those strengths were the people that were involved in it, right? They recognized this externally when they were doing the acquisitions. But then they would bring them into… They would take them from a strong company culture and bring them into a weak company culture and then wonder why that highly performing entity that they had just spent a buttload of money to acquire was not performing at the same rate, right? So this is… Culture is incredibly crucial to everything that you do.

[COBY]: Absolutely and I mean the… Yeah, because the idea, the whole idea, with acquiring talent whether that’s through the mergers and acquisitions piece or as recruitment, whatever. It is like if you spend time, effort, and money bringing in high performers, then your culture shackles their legs and hands down, and then you’re like “why are they not reaching the heights that we expected them to?”, right? It’s something that can be very obvious… again the historical context that we see as workforce specialists and all the work that we do, it’s very obvious to us. But it’s very hard to see it when it’s happening to you and internally, because it’s happening a little bits every day. So it’s not surprising that it gets overlooked and gets missed. But this is why we have to reflect on how does our business understand the link between culture and organization performance and outcomes. Because if you’re not already thinking about that now, you really need to be. Because these are these are expensive, fundamental problems that put companies at risk. And can be often the catalyst for the company’s downfall. And we have to really be knowing how do we make this shift towards the better practice? how do we… What can we do to actually  make these concepts, and this stuff tangible? To both make it relevant to the C-Suites and to the higher ups, but also easier to articulate. And I think that the best way to do that is something that we talk about a bit in some of our other videos and in a lot of our training. We talk about this through the concept of Productivity Insulation. And the reference that we use for that, and the analogy we use for that, is to say; think of your business like a home. If your productivity is like the heat, if you’re not insulating your home or your business then your money is seeping out, your efforts are seeping out through the cracks in the doors, and the windows, and the foundation. But if we invest in the insulation, and we commit to making the best decisions possible, we can protect ourselves from these major fundamental problems that can eventually bring a company down from the inside. Or sometimes if it’s pervasive, enough can be rotting the company from the inside.

[JAMES]: And what I love about the insulation analogy is that when you have poor insulation in your home, your power bill is going to be higher. Your expenses are going to be higher, but you’re not going to have a line item saying that you’ve lost this much because your insulation was poor. The same is true with your business, with Productivity Installation. If you are not protecting your productivity, if you are not insulating your productivity with a strong workplace culture, then the problems that exist are not line item problems. They’re not easily identifiable on a balance sheet or on an income expense report that says ‘we have lost this many dollars to disengagement this year’ or ‘the dissatisfaction that comes from our poor workplace practices has cost us X’. You don’t see that. And that’s why this installation analogy is fantastic because it really helps to drive that point home quite nicely.

[COBY]: Yeah because like the… a lot of the talks that we do in trying to say to business leaders, managers, HR professionals about how do you make this stuff real and tangible to to tackle it. Because again, when you have high expenses that are line items, the finance department is  the one that’s waving the flag and sounding the alarm. These are things you have to address now. But James is right, this stuff is not stuff showing as line items, so there is no one responsible to actually be the one to bring this to the table. So part of the approach you have to take is to become the one to bring this up the table. So the way that we try and talk about this, we have some other resources that we’re always happy to share with people about how to make this stuff real. But just kind of quickly, so these are things like opportunity costs; so the idea like you know missing out on opportunities, being able to you know like have have stuff come to you that you can’t act on because you don’t have the internal infrastructure, or the people, or the resources to make it happen. This is customer loss; this is people that have been turned away by dissatisfied customer… dissatisfaction in your customer service team creates dissatisfactory customer service. People walk away which causes brand damage; damage to your brand in the Labor Market and to the Consumer Market, and people not…  and that reputation can follow you for a long time. This is slow and expensive change management processes; where everything just has to be solved by dump truckloads of money, additional time to make things kind of work the way that they’re supposed to. Because again only 33% of change management is considered successful. It’s not that doesn’t happen with change management. Its that it happens way over budget and it takes way longer. That’s why it’s not considered successful. All the change often does take off or at least the majority of it, probably the vast majority. It happens, the company changes, but why it’s not successful is because it’s extremely over budget and it’s extremely slow. And then the last thing that we talk about too is we talk about the idea of Labor Value Loss; which is when you tie a dollar figure to problems like disengagement, like employee burnout, like absenteeism, like turnover. For example, turnover. is…  there are stats that say the turnover costs 20% of an employee’s salary when they leave. So that’s loss of productivity, that’s recruitment costs, and you know corporate knowledge loss,

[JAMES]: Onboarding of the next person, the time that it takes for them to get back up to productivity standards…

[COBY]: Right. So when you replace that person then you’re basically losing 20% of what their salary was, and that’s coming in at the low end. Higher skilled positions, there’s probably a lot more. But then on the other side, disengagement. Like a disengaged employee can cost 34% of an employee’s salary, stats from Gallup say that. So what’s interesting about the contrast between turnover Labor Value Loss and disengagement Labor Value Loss is, a turnover it’s kind of once. That person, they leave you lose 20% when that person goes. For disengagement, you’re paying that 34% of their salary is being lost, again through low productivity, you know a customer attrition, all the other all the other kind of stuff.

[JAMES]: Complacency

[COBY]: Yeah exactly. You know, errors and mistakes, that sort of stuff. You lose that every year that person is disengaged with you. So that could be… So these can add up to being tens of, if not hundreds of thousands of dollars of direct, you know, things that are not showing up as line items. Because like poor insulation, it’s seeping out through the cracks in the windows. So these are the concepts that we try and bring, and try and educate people to use. For; ‘how do I articulate how organizational culture is linked to business performance and outcomes?’ Well the fact that Labor Value Loss, opportunity cost, customer loss, brand damage, and slow and expensive change management, are what you’re probably dealing with right now. And Productivity Installation is the actions of improving your workplace culture to insulate yourself against those previously mentioned problems that’s an excellent way to try and make this stuff real.

[JAMES]: I think Labor Value Loss and Productivity Insulation, if we can really get people to understand how crucial it is to make sure that you have the proper insulation in place, and what that means, and how you do that. That is the key takeaway that we really want for a lot of our conversations; is you need to protect your business. If you want to protect your business, you also need to protect your productivity, your people, and that is at the heart of what we’re talking about. And if you need a process for doing that, the Workplace Culture Hierarchy, it’s not theoretical, it is a systematic approach for how you can go from having high levels of job dissatisfaction to addressing that and working through dissatisfaction, and providing for psychological safety, creating inclusive environments. Where people actually feel like they can belong for who they are, and the perspectives that they bring with them. And creating engaged employees. These are, this is the process that will help you to insulate your productivity.

[COBY]: So I think that this has been a good conversation. I think I’ll kind of tie it all up, but I definitely think we should do another talk about change management. Because again, that’s something that you could have probably gone into a lot of…

[JAMES]: Yeah well it’s a huge topic and there’s so many aspects of change management that rely on having your people on board that we just it’s so often overlooked. But you’re right, I’m I will be quiet and we’ll wrap this one up and we’ll save all of my ranting for the next time.

[COBY]: Okay! Promises, promises. All right, so again how is organizational culture linked to performance, the business performance and outcomes? Well the answer is it is linked very, very strongly. And in fact. a better question might have been: How is organizational culture the key to success to business performance and outcomes? Because really that is a really important, that is the real question. Because when it comes to organizational success, things like; change management, Innovation, collaboration, growth, and customer acquisition. All those are dependent on the people who work in the organizations every day to provide good work, engaged work, their best work, to make that stuff happen. And when you try to incorporate these things; growth, expansion, acquisitions, Innovations, whatever they are, without people being on board, without the people’s side of productivity. You were going to suffer from bloated costs or you’re going to suffer with failure. Because these problems require you to ask the important question: “What needs to exist first for this to become successful?” Because if you have not secured and supported your organization, and you’re trying to do things like an acquisition, where you’re trying to bring in another organization into your organization. Then you’re potentially dumping gasoline on a fire. We need to start to insulate our productivity against things like Labor Value Loss; adding the dollar figure of problems like turnover and disengagement. Opportunity cost; missing on opportunities and potential new customers and sales. The loss of customers and brand damage; that kind of comes from bad experiences or insufficient work. And the major expenses of slow and unsuccessful change management. Because all this stuff is reliant on your people. Your people are not expenses, your people are assets. And we have to embrace that if we truly want to have the business performance and outcomes that we’re truly striving for. All right anything else to add James?

[JAMES]: No I think that’s a good recap. It’s been a good conversation so we’ll leave it at that.

 [COBY]: All right. So that about does it for us. So for a full archive of our podcasts and access to the video version hosted on our YouTube channel visit our website at Thanks for joining us.

[ANNOUNCER]: For more information on topics like these don’t forget to visit us at Side effects of this podcast may include improved retention, high productivity, increased market share, employees breaking out in spontaneous dance, dry mouth, aversion to the sound of James’s voice, desire to find a better podcast…

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