How Culture Becomes Currency

… and how articulating values can hurt your company.

Exec Summary

  1. Recent studies confirm that a positive culture has a direct impact on profitability. In addition, companies which have articulated values which they live up to outperform those that have none, while those that have articulated values which they fail to live up to underperform those that haven’t articulated any. Meaning it’s better not to talk about values if you can’t live up to them.
  2. At my last company, a consultancy / agency which we sold for over $80m (£42M), culture had a direct financial impact through higher employee retention; lower recruitment fees (and better recruits); increased client retention rates; improved delivery quality, which directly translates to increased profit.
  3. Recommendation – perform an audit of how your culture is impacting your profitability. If it’s not the way you’d like, figure out a plan for how to improve it.


It seems that values, culture and mission are rapidly heading towards buzzword BS status in business these days. The lack of thought with which these words are often bandied about risks devaluing the very real difference they can make to an organisation. Remember when we all had to be “passionate” about our work, whether or not we actually were? It’s a shame, as like many buzzwords, there is actually gold behind the fluff.

In organisations with large numbers of customer-facing employees, the sum of the effects of employee turnover, referrals of potential employees by existing ones, productivity, customer loyalty, and referrals of new customers attributable to culture can add up to half of the difference in operating income between organisations in the same industry.

From Professor James Keskett’s “The Culture Cycle

That difference isn’t merely about making somewhere a better place to work. It is about what ‘better’ means. It is also about how being a place to work that is centred on Values and Culture can reinforce and be fed by stronger financial performance. In my experience, although that wasn’t the primary reason for going down that path, the financial benefit exceeded seven digits. Later on in this post, I go into how.

But it’s not only my experience: there are many studies that highlight this mutually beneficial relationship. One of the most rigorous (though admittedly dry) is MIT’s study into the correlation between financial performance and culture. Their paper, “The Value of Corporate Culture“, is heavily laden with statistics. But it’s worth taking the time to read through those stats. They highlight a number of nuances which are important for those who choose to lead with Values and Culture, rather than simply making them a menu item on their corporate website.

At a high level, the broad findings of the paper are that where a firm lives up to its articulated values, it outperforms its control group. So far, so predictable. But interestingly, where a firm articulates values and fails to live up to them, it performs worse than the control group. Meaning you should call out valuesonly if you’re going to live up to them – if you’re not prepared to do that, then better to not call them out at all than to fill some cheap webspace with them, hope that’s going to help, then fail to deliver.

To put it another way, if you’re not likely to live up to a set of values your employees or branding consultants have told you that you need to have, your best strategy is to lead with something other than values, rather than pretending you have them: your business will suffer if your actions don’t support your values.

I won’t dive into that research paper here, though it is well worth a read. Rather, I’m going to share my own experience of the very real reward, both financial and in terms of satisfaction, of being on the board of, and driving a values and culture led work environment. I’ll write in a future post explicitly how we turned those values into the actions and culture that drove these results, and the lessons learned in how to further improve on our experience.

That environment was within Conchango, a very highly regarded consultancy and full services agency that often topped the New Media Age rankings in the UK, and was within the top 4 in Europe according to Forrester.

The values we led with, and the culture that was created and fed by all the company’s employees – consultants and non-consultants alike – reaped rewards for us in many ways. These were some of the key ones.

  1. Retention of key employees. The team I took on after I joined the board had a consultant churn of nearly 40%. Effectively, this meant just to stand still, we would need to recruit the equivalent of the whole team in 30 months. The Values and Culture which we developed were the key factor in driving this down to just over 6%. This was about half the industry norm. It meant that we could focus on recruiting for growth, not for survival. Aside from reducing the significant recruitment costs we were incurring just to keep the business going, we also didn’t have to face the enormous additional cost of losing experience, and having to get new starters trained and ready to get engaged with our clients.
  2. Elimination of agency recruitment fees. The culture and environment we created made us a destination employer. We started to get so many people approaching us directly that we had no need to continue with our agencies. We stopped working with them all, hired Michelle and took recruitment in house. With agency fees ranging between 15% and 25%  of first year salary per recruit in a rapid growth phase, we very quickly ended up saving well over £1 million in agency fees over 3 or 4 years. In addition, it allowed us the third benefit…
  3. Increased calibre of recruit. Whereas agencies were playing keyword-match-bingo in their searches (I exaggerate only a little), by definition the candidates we were now getting independently were people who knew exactly what we did, and approached us accordingly. I interviewed over 90% of the people we hired into my team to ensure a cultural fit, and loved nothing more than asking someone in interview why they wanted to join, and hearing “I want to work with Howard, or Jamie, or … or …”. This demonstrated that we had people coming to our doors who knew precisely  what we did, and wanted to work with stars either because they wanted to contribute at that level, or because they had a very positive attitude to their own development. So not only was the qualification process for applicants significantly better than when we were reliant on agencies, but the quality of candidates went through the roof. Paying less to recruit better people – what’s not to love?
  4. Our client retention rate increased. We improved our proportion of repeat business. Crucially, those would usually be significantly larger and more profitable than new client wins. In one case, after starting with us, one of our clients relocated our entire project team from the corner of an open plan floor to the centre of their department in the hope that we would helpthem drive cultural change. Our culture and ways of working were a significant asset with our clients.
  5. Improved delivery quality. This meant more profitable projects. The open culture we fostered meant that you were better rewarded, and critically,more highly regarded, for sharing information than for hoarding it. So best practices very quickly got round. In addition, people on different clients would very readily help each other’s projects in times of difficulty.
  6. We drank a lot more. Our community days became a legendary attraction for new employees, and for those of use who were already there, a significant contributor to reinforcing our culture and community. The days were spent in (mostly, but certainly not always effective) knowledge share and creation of intellectual capital, and were always followed by an enormous pub session where friendships and bonds were renewed in the most basic ways (and rarely were the bar staff given the time to mix as delicately as in the header image for this post). It allowed us to gel despite the typical consulting environment where our work meant that we were dispersed all over the country in much smaller teams.

I’d be the last to say we had everything right. For some people, it didn’t work. We did have some, ahem, challenging and difficult projects (intentional lack of hyperlink there!). But on balance, not only was the environment one that was highly fulfilling and enjoyable to most of us, but also a more profitable one. By several million pounds.

And several thousand laughs.

Do Good As You Do Well

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