The importance of healthy workplace cultures

‘A healthy culture is a superpower’ say McKinsey & Company in their recent article.

We all know that when a company is being considered for acquisition, there’s a lot of due diligence to be done. Financial, that is.

There is no legal requirement for ‘soft’ due diligence. That term ‘soft’ is of course completely misleading. It’s widely recognised that the high failure rate of M&A transactions is due to cultural mismatches and poor integration.

Here’s some powerful data that shows how important it is to be able to measure your culture, whatever your ambitions:

‘Established companies with healthy workplace cultures—that is, the behaviours, mindsets, and beliefs that shape how people work as well as their daily interactions with one another, significantly outperform their less-healthy peers, as demonstrated through the following metrics:

• TSR. Companies with top-quartile cultures have a TSR three times higher than the bottom quartile, according to McKinsey research.
• EBITDA. Companies that focus on organizational health—that is, how effectively the organization rallies around a common vision and strategy—show an 18 percent increase in EBITDA after only one year.
• ROIC. Cultural health is also a strong causal indicator of long-term financial performance, with healthy companies achieving 2.5 times the ROIC of unhealthy organizations.’

Measurement is a key part of what we do – it’s always vital to build business cases and prove ROI in our work.

Contact George Naylor, our analytics guru, if you’d like to be able to get a grasp on your own measures of culture.