Many out-of-touch business leaders are quick to dismiss things like ‘company culture’ as modern-age fluff. But there has been significant work over the last few years that has helped us to more objectively understand, and measure, company culture. 

While there is still a way to go, I believe this work is significant. Not only in its ability to help you enlighten business leaders about the importance of culture, but also in its ability to help you focus your HR strategy in the areas that matter. 

So I’d like to show you what the London School of Economics has discovered about defining and measuring culture. But first, let’s talk a bit about why the definition of culture is so strongly linked to its measurement. 

You cannot measure something that you cannot define

Until you can properly define something, it is pretty much impossible to measure. At least, impossible to measure with any degree of scientific credibility. Therefore, if you’re trying to measure and improve high-level HR concepts like culture or engagement, you’ll find it difficult. Why? Because people define such concepts in hundreds of different ways.

One expert who explains this better than I do is Rob Briner, Professor of Organizational Psychology at the School of Business and Management. In his thought piece collection ‘The Future of Engagement’ (2015), he writes:

“The one thing everyone knows about engagement is that nobody agrees what it is… This mess should profoundly trouble all of us. Without a clear and agreed definition of engagement we literally do not know or understand what we’re talking about or what we’re doing.”

While Professor Briner is talking here about employee engagement, his message applies to any high-level HR concept that is often ill-defined. Experts like Professor Briner are keen to promote a more evidence-based approach to HR. But ill-defined concepts are difficult to measure, thus leading to a lack of evidence. 

And actually, that’s why I was fascinated to read the work carried out by The London School of Economics. Not because they quite provide a textbook definition of culture… but because they certainly go a long way towards offering an approach that could standardise measurement.

Changing how we measure corporate culture

Traditionally, measuring corporate culture is something that varies hugely from company to company. 

For example, Company A might assume culture to be a complex calculation, such as: 

(Staff Happiness + Productivity)
Divided by
(Number of Team-Building Exercises Every Month)

…whereas Company B might simply define culture as “just something we feel in our hearts”.

This in itself is problematic. But the other huge problem with measuring corporate culture, is that it relies so heavily on self-reporting methods. For example, asking employees to rate how the feel on a scale of 1 to 10. 

All of the above can produce wildly inaccurate results. And so, since May 2016, The London School of Economics (LSE) has led an academic research project which aims to measure corporate culture more effectively. 

What makes the LSE research so unique

The research project has been dubbed the “Unobtrusive Corporate Culture Analysis Tool” (UCCAT). And while the name is a bit of a mouthful, it certainly seems to remove a lot of the uncertainty surrounding the way we define and measure corporate culture – and indeed the way we can use these results to improve our organizations.

One big thing that makes the UCCAT so unique, is that instead of using employee interviews and questionnaires, it actually analyses publicly available data. For example: 

• Annual reports
• Financial records
• Press releases
• Databases

According to LSE researchers, these ingredients can indicate a company’s cultural ‘footprint’, by shedding light on observable areas of organizational activity, such as customer engagement, or spending on research. These individual ingredients can then be measured – fairly objectively across different organizations – without falling victim to self-reporting pitfalls, such as social desirability or subjectivity. 

What this new model teaches us about corporate culture

So what does this teach us about company culture? And how can we apply these lessons to our own organizations? Well, the researchers say that there is still more work to be done. But already, there are three key observations that you might find useful.

1. There’s a big difference between the top and bottom performers. The two top-performing companies in the study had 23 more positive than negative cultural indicators. This also worked in reverse – the poorest performing company had 28 more negative than positive indicators.
   
   
2. There is always room for improvement. The study revealed that many companies performing well in one area, seriously failed in another. For example, companies performing well one customer focus, often fell below par on transparency, and vice versa. By assessing culture using these different angles, you can better identify the areas where your business might need to improve.
   
   
3. Cultural indicators tell stories about business performance. While many of the cultural indicators listed in the study may seem disconnected from the idea of ‘culture’, the results revealed that they are actually often connected to a much more tangible business lesson. For example, companies where CEO bonus adjustments are observed, often reveal a culture which lacks governance and rewards failure.

This study makes it quite clear that in order to define and measure culture, you cannot simply pick your favourite area and ignore the rest. That’s how we end up with 50 different definitions of corporate culture – and how two identical companies could each claim to be strong, or weak, depending on which definition they opted to use.

Read more: Nine evidence-based reasons to create a culture of learning

Instead, I believe that we need to accept that the definition of culture should include many elements. And that we should, where possible, measure them all. No matter how ugly they look. After all, you can’t usually fix a problem without looking at it first.

I am happy to see that the London School of Economics will be continuing their research. And over time, I hope to see a bigger sample, which helps to build an even more practical model for organizations to get better at defining, measuring and improving corporate culture.