Quantifying Culture: The Next Business Valuation Metric
photo by Images_of_Money
Last week P&G’s culture cost them $16.5 BILLION over the next four years if the price target of the UBS analyst is to be believed. According to the analyst, “Procter & Gamble’s culture has limited the company’s ability to meaningfully change how it does business…”
What’s interesting here isn’t whether P&G has the ‘right’ culture to succeed. Their existing culture has created the 10th to 16th (depending on the day) most valuable company in the world based on market cap, meaning they are doing a lot of things right. This is merely a small bump in their century-long road.
The interesting part is that Wall Street, the epicenter of emotionless objectivity is now extolling that company culture, that pesky, human-driven intangible, makes a significant difference to the bottom line (by approximately 10.4782%).
In 1984, brand valuations started calculating how much a company is worth in the hearts of consumers. And today we’re all starting to wake up to the importance of calculating the value of a brand in the hearts of the employees. Wall Street needs to find ways to identify value before other investors and what is more logical than understanding how aligned the people who actually do the work are to the organization’s goals?
Next up? We will start seeing more and more efforts to crack the value of a culture in pricing and performance beyond the simple feel-good platitudes after a significant merger.
So if you’re running a company or responsible for carrying out the culture values etched on your lobby wall it’s time to start quantifying your company culture as a means to stay ahead of (or catch) your competitors. Wall Street is watching.
Alltop + RoundPegg
RoundPegg is the latest addition to Alltop’s list of HR blogs worth reading. Needless to say, we are now keeping some excellent company.
If you’re in the market for additions to your RSS reader you can’t do much better than Alltop as your starting point, no matter your area of interest.
Finally, if you’ve just discovered RoundPegg via Alltop – welcome. And thank you for spending a few minutes of your time here. Have a poke around, feel free to comment and if you like what you read please consider subscribing via the RSS feed or email in the upper right.
Until Late December…
My wife and I are off on a very belated honeymoon in a few hours, so no posts until late December. But I’ll leave a few of the most popular posts behind in case you missed them.
Enjoy the holidays.
- Yes We Can
- What Business Can Learn From Baseball
- Boomers Are From Mars, Millenials Are From Venus
- Living to Ride Part I …and Part II
- Hiring, The HR Screen and Barak Obama
- Prerequisites To Your Day
The Disincentives To Teach
Do we have so little faith in our abilities that we don’t think we can teach an intelligent individual how to succeed at a job?
By attempting to minimize the time spent in the hiring process we tend to hire the person who has already done the job. Our recruiters are risk-averse and search for resumes with specific keywords (typically job titles) and the questions we ask in the interview attempt to elicit whether the applicant has already mastered the open job.
Unfortunately, resume search bots can’t detect who the person is behind the 8.5″ x 11″ facade. You have to. Don’t ignore experience, but recognize that it is not the Holy Grail. Limiting your hiring search to those with the right job title, in the right area who happen to be looking for a job at the right time is as crazy as it sounds. Yet, it’s what we do.
Unfortunately, there are a several reasons why managers have hired for experience rather than potential.
- Companies reorganize frequently and a mid-level manager is only as good as the last review. Long-term results don’t pay the bills or get ahead.
- Managers get promoted based on individual accomplishments and have no idea how to orchestrate a team. Mentoring their people never crosses their mind.
- Many managers don’t have the self-confidence or selflessness to share the spotlight or train their team to take their job.
- Most damning, is that companies do not provide the incentives for managers to invest in their people. How often do you hear a manager being rewarded for producing a team of people that are ready to be promoted to the manager’s level?
Short of completely changing the mindset behind the performance evaluation, how do we resolve this? Please feel free to comment below.
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Photo Credit: Flickr user RatsJ
