It’s widely recognised today that even at the entry level a good match means more than someone with the skills to do the job. Given the high cost of employee turnover—25-50% of a typical employee salary even at the entry level, many studies suggest1—finding employees who will stay at the company and happily create value for the long term is a business imperative.
A fit with company culture, and particularly being comfortable with what it’s like to work at a company every day, is typically considered the other half of the hiring equation. Many companies use personality tests or batteries of interviews to try to find that fit, especially for more senior hires. But turnover levels in most countries and industries—just over 16% in the US in late 20152, for example—indicate that success is still elusive. One reason is suggested by a 2015 survey for the job search firm Glassdoor, which found that 67% of employers believe retention rates would be higher if candidates had a clearer picture of what to expect about working at the company before taking the job.
Is that lack of a clear picture HR’s fault? Or, could it be that expectations about companies’ day to day working environments remain unclear because many companies don’t have a clear culture or are constantly trying to change their culture?
A new book, “Strategy That Works3,” by Paul Leinwand and Cesare Mainardi, offers a perspective on how companies can create value in the long term, underscoring the importance of culture. The book highlights companies whose leaders—and employees—see a distinctive, clearly expressed culture as one of their firms’ biggest assets and rely on its consistency. The authors explain that “the cultures of coherent companies”—their term for companies with an interlocking set of capabilities that foster long term success—“are unique and hard to replicate.” They add that people at companies with these distinctive cultures are drawn to them “to be part of something distinctive….They celebrate the bespoke attributes that make them special, and they keep bringing those elements to the forefront.” This cycle, the authors say, helps these companies continuously build on their unique successes.
Among the companies singled out is the Brazilian cosmetics company Natura, for example. It bases all of its operations on “a chain of relationships” that extends from the rain forest villages that are the sources of many Natura ingredients through to the door-to-door saleswomen who keep the products in front of customers. The US scientific-instruments conglomerate Danaher is another, and on the opposite end of the spectrum: it has a culture and set of internal processes focused on “operational effectiveness, ruthless execution, and no-nonsense candor.”
It’s hard to imagine anyone wanting to work at both of these companies. However, it seems clear that hiring managers at either company would find it easy to see who fits—that is, who is drawn to their company’s way of working. So as more and more companies increase hiring, it couldn’t hurt for many to take a step back from job descriptions and personality tests and start by defining, for their own benefit and that of potential employees, what they stand for, how what they stand for should influence the day-to-day work environment and how all that can help create value.
The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of The Economist Intelligence Unit Limited (EIU) or any other member of The Economist Group. The Economist Group (including the EIU) cannot accept any responsibility or liability for reliance by any person on this article or any of the information, opinions or conclusions set out in the article.
1 Among the sources, TLNT: Talent Management and HR, “The High Cost of Employee Turnover,” Karlyn Borysenko, April 22, 2015, and SHRM Foundation, “Retaining Talent,” David G. Allen, 2008.
2 Compdata, “2015 Total Turnover Rates by Region,” October 9, 2015.
3 “Strategy That Works,” by Paul Leinwand and Cesare Mainardi, with Art Kleiner. Harvard Business Review Press, 2016.
