Does a Good Employee Culture Matter?
Recently, a wise colleague asked me an interesting question: “Does it matter if you have a good employee culture, and if so, how do I value it?” The fighter in me immediately went into defensive mode. After all, on the surface, I’ve spent much of my professional career investing resources, ideas, and energy into systems, processes, people, and tools designed to support this idea of “good culture.” Still, it’s not the work I was doing. The work I’ve been paid to do — for the twenty-seven years I’ve been in tech — was to help a company build better customer products. So, it goes back to the question, “Does a good employee culture create better business results?”
There’s some great data about companies with lower attrition, good succession planning, workforce diversity, and good brands having better outcomes, and those likely are some of the metrics that reflect better company cultures. For example, McKinsey’s Organizational Health Index (OHI) reveals that healthy organizations deliver three times the total shareholder returns (TSR) compared to unhealthy organizations, regardless of industry.
There’s a lot rolled up in that phrasing — many books have been written by those much more intelligent than myself about “Good to Great,” or “No Assholes Rule,” “High Output Management,” or “Innovator’s Dilemma,” and many focus on these ideas of building great teams, companies, or the systems of alignment of resources.
My challenge here is that the definition of “good employee culture or best places to work” is really in the eye of the beholder. It’s a little like I see overall manager behavior — managers are generally good at figuring out who the top 10% and the bottom 10% are, but there’s a large, murky middle. Companies are likely the same way. There’s likely a group that is exceptional in every measure regarding company leadership, how employees feel valued, efficiency & execution, and connection to mission/customers. Then there’s likely a bottom group that is easily in the opposite camp on all those measures.
Usually, I say to leaders, when discussing the tradeoffs of fixing leadership, communications, or systemic issues in their cultures (generally what’s causing the “culture” issues), is to think about the tradeoffs. You may not care much about attrition if you have a great recruiting team. If you have a profitable flywheel and are willing to pay more to get people in the door and create a bit of a mercenary outlook, maybe it’s OK to have people coming/going. If you have free time to deal with a constant stream of employee complaints or lawsuits versus spending that time on customers & products, that works, too. Like anything, cultural issues are communication & tradeoffs.
I’ve certainly read stories and know companies that may not sound like the “best” (however that’s defined) employee cultures, but they were still amazingly innovative, attracted great talent, and delivered products that customers love.
Years ago, I worked somewhere with a very demanding founder who revolutionized an entire category of the internet — the highest density of impressive talent I’ve ever had a chance to work with and the scariest, most intense five years of my career. At the time, we went from being considered one of the best places to work to the media deeming us one of the worst. It was pretty tough managing that reputation for a few years following that job, having been the head of people at that company. Several people couldn’t get past the headlines to understand the situation. However, many years later, many alumni commented that they’ve never seen a culture that taught them as much or where they had as much fun. Good culture may be easier to gauge in the rearview mirror.
So, to answer my colleague’s question, I think there are a lot of benchmarks that say a good employee culture matters, and there are certainly ways you can value it, but how you define good will make the difference.
