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How Much Should Companies Spend on Developing Company Culture?

How much should companies spend on company culture?

How long is a piece of string? The frustrating truth is that there is no 'one' answer.

The same can be said on how much a company should expect to spend when looking to change their company culture - as much as it takes.

In the past, I've worked on developing and improving company cultures for many different types of organisations (all with very different budgets), and I know it can be tough going - but hang in there.

Below, I've put together some important points to consider when planning how much to invest in developing your company's culture.

Companies should expect to spend way more than they expect to spend

Most companies greatly underestimate the investment of time, money and emotion it's going to take to improve their culture.

As a counter-example: If a company plans to expand into a new market or to develop a new product, it's going to dedicate resources towards this initiative.

It's something the organisation will have several decision-makers in on, meetings to discuss implementation, and it will be present on the Board Agenda. There will be KPIs, clear reporting metrics to measure progress, and resources to manage all possibilities.

Company culture tends to not be treated in this way. It is not something that typically has budgeted time, money, and specific efforts directed towards it. It will differ from new services and products in the fact that company culture will not be thought of in alignment with KPIs, reports and metrics. It rarely appears as a Board Agenda item.

This is a mistake.

When a company decides to undertake improving its culture, it's a goal that needs to be regarded with the same weight and importance as entering into a new market, launching a new product or upgrading infrastructure systems.

Companies need to invest time, money and emotion

There are time, financial and emotional investments concerned when developing company culture. Let's break them into three separate structures.

Time Investment

Too often, companies expect company culture to change without putting any time into it. In the end, you can pour millions in terms of financial investment into a company culture program - but if no one takes the time to implement and practice new behaviours - then nothing will change. In this case, it's not really how much money - it's about time.

It's too easy for companies to think, "oh we'll just run some training courses for managers" and expect that this will change company culture.

It certainly may be a catalyst for change, however it's the amount of time that the people inside the business are willing to invest in implementing their learning that really directs this type of change.

To create change, senior leaders and managers in particular must take the lead and be seen to display the new cultural practices that are being implemented. 'Walk the Talk' may have something of an '80s ring to it - but that doesn't mean it's no longer valid.

Oh, and however long you expect it will take to change your culture from start to finish - you're probably wrong! I find leaders way underestimate this. Cultures don't change in a few months - or even in a couple of years. I'd recommend you consider at least three years of serious effort, and five to seven years wouldn't be unusual.

Financial Investment

Your people will need to change deeply-embedded habits if your organisations' culture is going to change. Changing communication habits is one example here. Many organisations want to create a more open and honest culture, but they don't have the necessary habits built into their day-to-day ways of communicating.

Because it's so hard to spot and resolve ineffective habits from within (hands up everyone who wants to tell the Chief Exec that his or her behaviours are out-of-line with the new culture), it may be necessary to bring in external support. It's often easier for someone from outside to identify ineffective habits, provide training in new behaviours, and set company-wide expectations with employees and leaders alike.

In terms of how much financial investment you can expect to make it's really back to the length of that piece of string. The extent of the support you require, the specific interventions made and the size of your organisation will all form part of making this decision.

Ultimately, I'd recommend that rather than basing your financial investment on the cost of inputs, base it on the potential value of the results you are seeking to achieve. Allocate a percentage of that to your investment in external support. I'd say 10% - 20% over a five year period will provide a meaningful figure.

And don't be afraid to ask for a risk/reward partnership with your external support. Ultimately, this is a great test of a company's confidence in its ability to work meaningfully with you. If they truly believe they can facilitate the changes you need to make, they'll share the risk with you - and enjoy the rewards too.

Emotional Investment

Changing culture is tough. Personally you're going to find that all kinds of habits and beliefs are challenged. You're also going to find a lot of resistance from across your organisation - as human beings, we aren't nearly as keen on change as we like to think we are. And be prepared to feel as if you're going backwards far more often than you're going forwards.

When I'm supporting organisations that are going through culture change, at the outset I always warn the Chief Executive - or other lead sponsor - that they're going to lose heart and want to give up part way through. As Rosabeth Moss Kanter tells us, in the middle, all change looks like failure.

It's easier to manage this emotional investment if you expect to be disappointed, if you expect to really doubt that it's worth the effort, if you expect to feel that you're the punch-bag for a lot of complaining and blaming. That way you'll actually notice the successes more easily!

And it's easier to manage the emotional investment if you invest in some external coaching support to guide you through the tough times and periods of doubt.

Conclusion

Most companies under-invest in programs directed towards changing company culture, because they either undervalue the benefit of company culture or underestimate the amount of time, money and emotion it costs to implement actual change.

Changing company culture is a strategic change and you will not achieve the results you are seeking unless you take this as seriously as other strategic moves such as entering new markets, implementing new IT systems and creating new products.

In this blog, I highlight the primary areas that, from my experience of leading cultural change in organisations, will need serious investment. 

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