When directors and investors make decisions about business performance – the first place they look is the Profit & Loss report (P&L) and the Balance Sheet.
These documents provide insights about cash flow, assets and liabilities and ultimately inform a business valuation.
However, absolutely nowhere on either of these key financial statements is there a line for culture.
And no, labour cost is NOT a measure of culture!
Like brand, intellectual property and business goodwill, culture is an intangible asset, and I would argue, the most important and undervalued asset.
Raj Sisodia, co-founder and Chairman of Conscious Capitalism and co-author of Firms of Endearment, said that “like air, culture is invisible but pervasive”. And like air, without it we don’t survive for long.
Without a healthy, inclusive and adaptive culture, a team or business cannot be effective.
One of the best indicators of a healthy culture is engagement. The Gallup Organisation has been measuring engagement and looking at the impact of engagement on results over the past two decades.
Their most recent meta-analysis includes data on 1.8 million employees. Their findings reveal that companies in the top 25% engagement achieve….
…than companies in the bottom 25% engagement.
What does this research tell us?
You may have the world’s greatest product and go-to-market strategy, but if you do not have engaged employees who emphasise constructive, safe and inclusive behaviours, your business will never achieve sustainable high performance.
Culture is an asset. Culture is crucial. And like any asset; we need to measure it and we need to manage it.