For decades business leaders have been sceptical of the role culture plays in reducing the risks associated with human capital. FORTUNE magazine, however, recently featured the ‘100 best companies to work for’ who have provided a higher return than the S&P 500 over seven years, showing a positive relationship between a strong, affirming culture and performance.
Until now, the biggest challenge has been measurement of human capital management. Unlike revenues and profits, ‘soft’ data is difficult to compile and interpret and few measures are softer than customer and employee mindsets or satisfaction. As a result, many companies have not been willing to invest the time, energy and resources to do it effectively. However, a few business leaders are challenging the status quo with results suggesting nonfinancial measures can be every bit as rigorous and tangible as financial ones. For instance, former CEO of Westpac Dr. David Morgan attributed a great deal of Wesptac’s success to his investment in human capital. The results speak for themselves: Westpac’s staff turnover fell from 17 to 14 percent in five years which translated to a $50 million cut in recruitment costs. Sears Roebuck and Company (with a 4% increase in employee satisfaction) gained an extra $200 million in revenues. Virgin Airlines also contributes the secret to their success to culture in stating: “They can copy our planes, they can copy our fares, but they can’t copy our culture” and, as Brett Godfrey, CEO, says “While business strategy is an important factor, it’s the way our team members deal with dramatic changes on a day-to- day basis that is the determining factor for success or failure. Basically it comes down to our corporate culture.”
