Demystifying Company Culture: Making It Measurable and Manageable – Charlie Sull

[00:00:00] Nena Dimovska: Welcome to People Pulse, the podcast where we explore the dynamic intersection of HR, culture and innovation. I’m Nena Dimovska, your host, and today we’ll dive deep into the world of corporate culture with none other than Charlie Sull. Charlie is a globally established expert in corporate culture and co founder of CultureX. 

[00:00:23] Nena Dimovska: His work, including the Measuring Culture series in MIT Sloan Management Review, reaches millions and helps redefine how companies measure and enhance their culture. In today’s episode, we’ll uncover insights on people and culture intelligence, build positive workplace cultures, use technology for culture measurement, address toxic behavior and much more. 

[00:00:46] Nena Dimovska: Okay. So let’s dive in. So Charlie, you’ve described workplace culture as a company’s operating system, emphasized that improving it requires will and knowledge, especially buying from top management and effectively listening to employees. And you’ve also pointed out that most company don’t really listen well. So what we’d like to hear is how can managers use the right tools or approaches to truly listen and in doing so turn culture into a measurable, actionable asset that really drives business outcomes. 

[00:01:27] Charlie Sull: Yeah, definitely. That’s my whole spiel. You summarized it perfectly. Yeah, I mean, where to start? I mean, so yeah, how, how we think of culture is as an operating system. So, a lot of times in companies, especially in HR departments, culture is, is thought of as purely an employee experience phenomenon. So culture becomes things like, you know, ping pong tables and gift cards to Dunkin Donuts and all these things. 

[00:01:55] Charlie Sull: And, you know, culture is thought of as purely in terms of employee satisfaction. But really, if you’re thinking about culture in that way, you’re missing a large part of why it’s important and especially why it creates financial value. So a different way to think about culture is as this invisible operating system that’s governing literally thousands of important algorithms within a company. 

[00:02:20] Charlie Sull: So anything from you know, you, you’re in a meeting, you’re in a meeting with your boss you’ve just happened on a sensitive issue that could derail the whole project, but it’s a little bit sensitive. So do you raise your hand or do you not raise your hand? That’s a, that’s an algorithm, a cultural algorithm around psychological safety. Or another algorithm is you’re you’re a local manager and you know, I don’t know, Sweden. And you’ve just discovered that there’s this changing market condition in Sweden. 

[00:02:50] Charlie Sull: Well, do you proactively respond to that changing market condition and, and make changes with autonomy? Or do you report back to headquarters and wait for, you know, weeks and weeks until headquarters makes the decision and then tells you what to do? That’s a cultural algorithm around agility and ownership. 

[00:03:09] Charlie Sull: So those are just two examples and culture is governing thousands and thousands of algorithms like these important decisions like these that do affect the employee experience. So they affect things like respect, inclusion… you know, collaboration has some impact on the employee experience. So culture is actually: we found the number one most powerful driver of the employee experience. 

[00:03:30] Charlie Sull: So what we did a study of more than a million Glassdoor reviews using a sophisticated, uh, what we call driver’s analysis called the SHAP methodology – it was cited for Nobel prize. And what we found is if you look at what drives the overall Glassdoor rating for more than a million employees, the number one driver by far is culture. 

[00:03:53] Charlie Sull: Accounting for about 40% of the overall variance in Glassdoor ratings. So that’s more than three times as powerful as compensation. So that’s a little tangent. Culture is also the most powerful driver of the employee experience. But it’s not just the employee experiences. Also, things like agility, innovation, ownership, execution, cross unit collaboration, processes, all these things that don’t necessarily impact the employee experience too much. 

[00:04:20] Charlie Sull: But nevertheless, these are all being governed by culture. So that’s why culture is so important. And then, yeah… My whole spiel is in order to improve culture, you only need two things, you need will and you need knowledge. And by will, I mean, you need top team prioritization. 

[00:04:37] Charlie Sull: You need buy in, preferably from the CEO, him or herself and as many of the top team as you can get. And the reason that level of buy in is so crucial is because improving culture involves pulling on a lot of different levers. So anything from, you know, performance management to work design. To who the distributed leaders are to all these different lovers. Really, only the top team is going to be able to make the decisions that have a big impact. 

[00:05:04] Charlie Sull: And of course, you know, middle managers and frontline employees have a role to play. But really, one thing we’re very clear about is that culture cannot be changed from the bottom. It cannot be changed from the middle. To really change a culture you need a top team buy in. So that’s, that’s why one of the two things you need to to improve a culture is will. 

[00:05:23] Charlie Sull: Top team buy in. And the second thing is knowledge. So one of the big barriers to improving culture, especially up until recently is, you know…. what is culture? It’s it’s so abstract. It can mean a million different things. Everyone has an armchair opinion about what the culture is. Very little of it is actually grounded in evidence. 

[00:05:44] Charlie Sull: So to improve the culture, you need an evidence based kind of scientific data driven, understanding of what the culture actually is. How it varies across the company? What’s driving important outcomes? How the culture is changing over time? How you benchmark versus peers externally? You need really strong data driven, credible, evidence based answers to all these questions if you’re going to make progress on the culture. 

[00:06:12] Charlie Sull: And then you also need to know… Okay, so say I’ve identified, I’ve looked across all these dimensions. I’ve done all this analysis and I see that psychological safety is the key issue that I have to focus on in order to improve the culture. And I know exactly where in the company psychological safety is breaking down. 

[00:06:30] Charlie Sull: So that’s all great. You have a lot of the insight you need to improve the culture. But then the final step is you need to actually know how to improve psychological safety. You can get answers to all of these questions, both what is the culture and what are the highest impact ways to improve the culture by listening to employees. 

[00:06:49] Charlie Sull: You just need an effective listing strategy. But the wrinkle is most companies, I would say, you know, 95% plus of companies are not listening to employees effectively today. And if they are listening to employees at all, I mean, there are a lot of companies that just don’t have any kind of survey or any kind of listening strategy whatsoever. 

[00:07:07] Charlie Sull: So that’s one thing. But most companies do have a listing strategy, but by and large for the lion’s share of them, it depends on this very old timey 1 to 5 point scale survey. So, on a scale 1 to 5, do I agree with this? Do I agree with that? Do I agree with that? And on and on for more than dozens of questions. 

[00:07:28] Charlie Sull: I mean, McKinsey OHI has, I think, 150 questions, you know, it’s crazy. And this survey has a lot of limitations. I mean, it was… this survey design was designed in 1932. It’s pretty old when Herbert Hoover was president. That’s when this, when this survey was designed. And one of the limitations is when faced with all these repetitive questions, employees just completely zone out and they answer almost every question with almost the same answer. So they just go through the survey and pretty much just in a straight line, answer all the different questions with almost the same answer. So it results in very repetitive, low quality data. 

[00:08:11] Charlie Sull: And when you’re trying to capture something as complex and sophisticated and nuanced and rich and multidimensional is culture. You need, you need a smart tool. And if you’re relying on this kind of repetitive, low quality data where the employees arguably aren’t even paying attention, you’re never going to be able to learn very much about culture and all of its complexity. Maybe, maybe you’ll identify a couple of the most obvious things about the culture. If you’re lucky, you’ll get kind of the rough outline. But in order to really understand culture, you need a more sophisticated tool. You need to be able to understand this with human language, because human languages is very smart. 

[00:08:56] Charlie Sull: Human language can capture a lot of complexity, a lot of nuance many dimensions. So that’s basically why we advocate for this new kind of cultural measurement that only came out a few years ago, and we think is going to really revolutionize cultural management and improve a lot of cultures. Which is all based around natural language analysis, which AI for the first time really allows you to actually do very well. So when you have this sophisticated natural language analysis, now you’re not using this, you know, 1932, you know, 100 year old survey, all these repetitive questions. Now you’re using a survey instrument that can understand, okay, in this case, the employee, the employees talking about friendly employees. And in this case, the employees talking about psychological safety. And in this case, the employees talking about flexible operating processes. You know, the AI can understand hundreds of these dimensions with high levels of accuracy and reliability and give you back a really accurate, high definition portrait of what your culture actually is. And also by mining employee context and feedback find highly actionable ways to improve the culture. So basically what, what this AI revolution and cultural management is doing- is giving you the second piece of the puzzle. 

[00:10:14] Charlie Sull: It’s giving you knowledge. Now for the first time, or, well…. I mean, it was possible before, but now it’s a lot, lot easier to do this. You can get really good answers to the two questions. What is our culture? And what are the highest impact ways to improve our culture? But of course that’s only half of the battle. 

[00:10:32] Charlie Sull: The other half of the battle is getting a top team prioritization. And if you don’t have top team prioritization, you can have the best insights in the world. And the culture is still not gonna, gonna improve much. 

[00:10:43] Nena Dimovska: Thank you. You’ve offered like wealth of advice, actionable advice here. I have a few follow up questions for you. First off, one thing that I, I believe that every leader can, can bring back with them is the impact of why you should start investing and improving the culture in the, in the first place. The research that you briefly mentioned… I think it’s very interesting just to emphasize: you said that culture is the first and largest influencer of employee satisfaction or employee experience, right? That that’s what your research found? 

[00:11:20] Charlie Sull: That’s what we found. Yeah. 

[00:11:21] Nena Dimovska: I mean, that is such a game changer because it’s just the pivots, the hierarchy of needs as it was used to known. You know, like back in the days managers and leaders thought that if the compensation and benefits are okay, then, you know, 80% part of the job in employee experience was done. 

[00:11:40] Nena Dimovska: But what you’re saying is that now there’s a lot of research out there that shows that it’s just not enough, and that we have to make this strategic decision and invest into improving and understanding our culture, right? So, like, there’s no longer, you know, room for excuses like, what’s culture? Is it worth investing here? 

[00:12:05] Nena Dimovska: Should it be a priority? So that’s no longer the case. And I think that’s something I would say, a refreshing perspective that should be taken into consideration. 

[00:12:15] Charlie Sull: Yeah, that’s definitely what we’re trying to advocate for. But you know, to be honest, it’s a small movement. There, there aren’t too many people like, like my co founder and I, I mean, there, there are a few, there are people advocating for this message, culture matters. With, you know, and there’s a lot of research to back it up. 

[00:12:32] Charlie Sull: I think that, you know, only a couple of years ago… yeah, when you think about the employee experience, it’s basically a compensation story. And the reason for that is because the compensation is so tangible. It’s so easy to measure. It’s so easy to change that lever. So that’s because it’s such an easy measure. 

[00:12:50] Charlie Sull: It’s such an easy lever to pull. That would be the main lever that most companies would use to adjust the employee experience. And then of course, there’s things like, you know, like Google does, you know, all these sushi chefs and ping pong tables and all that stuff. I mean, maybe that matters a little bit, but we are in the early days now, and I, I hope that this takes off. 

[00:13:09] Charlie Sull: I mean, I’m pushing as hard as I can for it. We’ll see if it actually works. But we, what we want to happen is for leadership to actually take culture seriously and partially… part of what needs to happen in order for that to happen is culture has to be demystified from this, you know, very abstract phenomenon that can be in a million, million of different things to a million of different people. 

[00:13:32] Charlie Sull: And there’s not too much evidence behind any of it. Into something quantifiable and that can be measured and understood with something of a scientific approach. And then if you can do that, then you can just talk about culture the same way as you can talk about any other asset in the company. 

[00:13:49] Charlie Sull: And when you think about culture that way, well, culture is actually a very, very large asset. I mean, there was a, there was a great study done by some researchers at Duke and Wharton. That surveyed I think it was about 1400 CEOs and CFOs. It was, it was quite a unique study because it managed to reach so many CEOs and CFOs of often very large companies. 

[00:14:12] Charlie Sull: And what it found was 54% of CEOs and CFOs thought that culture was a top three driver of financial value creation out of any conceivable drivers. So considering the choice of CEO, the strength of the strategy, the strength of the competition, the strength of the supply chain and so on and so on. The majority of CEOs and CFOs believe that culture is a top three driver of value creation. So there is on, on some level or recognition among senior leaders, that culture is incredibly important already. You know, and in some ways you don’t have to convince them too much of that, but where the breakdown occurs then is, you know, in practice, what actually is culture? You read on LinkedIn, there are all these, you know, random posts about culture that could mean a hundred different things and they don’t seem super credible. You know what I mean? 

[00:15:08] Charlie Sull: So it’s this process of making culture scientific, which is really around making culture measurable that we believe is going to, hopefully transform this truth that CEOs and CFOs already have in their head. That culture really matters into something they can you know, actually manage on a, on a day to day basis. Just like they might manage another asset in a company. 

[00:15:32] Nena Dimovska: Well said. And while we’re on the topic of you know, trying to demystify, as you say, culture and making it data driven dimension where top leadership invests. I would say and you just confirm that when it comes to culture related, let’s say technology ROI is still a concern, right? So maybe you can share from your experience. What metrics would you say are good to be tracked? So management can know that we are on the, on the right path to, you know, measure culture, giving feedback, recognition, or just, you know, being an enabler for our, mid management. What metrics should you, should you follow? 

[00:16:19] Charlie Sull: Yeah, I mean, you should follow any metrics that you have. It’s going to depend on the company, what, what your exact metrics are. I mean, there’s some companies relatively advanced that employ things like ONA analysis. So that, you know, that’s great if you have it. But really in, in my experience most companies do not have super advanced listening strategies, and they don’t have very advanced cultural metrics, and this isn’t just, you know, small companies. 

[00:16:47] Charlie Sull: I work with, you know, many of the largest leading companies in the world, and this, this is very often the case there, too. So I would say, you know, the metrics you’d probably have before you installed a culture AI measurement system will tend to be things like… basically, engagement levels on an engagement survey. 

[00:17:06] Charlie Sull: So that’s not a bad metric to pay attention to. It gives you a sense of the employee experience. And then you always want to be paying attention, especially if you’re a very large company to what’s going on externally. You always want to pay attention to Glassdoor, Indeed, what employees are saying there in the free text. 

[00:17:24] Charlie Sull: If you have the capabilities to measure the free text. And what they’re saying in their in their licorice scale ratings, like the overall rating. So just practically those are normally the, the only two metrics that most companies have. I mean, ideally, you would have more metrics than that. And I know Semos Cloud gives companies a lot of great metrics that they can… that they can utilize. But then if you do install a culture AI measurement system, then you’re set because then you have a lot of metrics. You can understand what employees are speaking about when they speak about hundreds of different topics.  

[00:18:00] Charlie Sull: And for instance, if you know, if say one of your objectives is to improve your culture of agility. 

[00:18:06] Charlie Sull: Right? Before that was, that was pretty difficult because it’s difficult to get a good measure of agility in a company. I mean, how do you actually do it? I mean, you can maybe you can do things like measuring. I’m trying to think of one. I mean, you can do things like trying to measure the speed with which people respond to emails, things like that. 

[00:18:25] Charlie Sull: That might be a metric. You know, there may be a couple of different ways you can do it. But then if you actually install effective cultural measurements, you can just simply see when employees talk about the company. When they, when they talk about the pros and the cons of the company. How often do they mention agility critically? In 2024 say they mentioned a critically 15% of the time and then you can come back in 2025 and see, okay, now they’re mentioning a critically 9% of the time. 

[00:18:55] Charlie Sull: So then you can say that that’s a reliable metric for progress in agility. And effective cultural measurement using text analytics makes it a lot easier to measure this across hundreds of different topics. So you can measure this for agility, but you can also measure it for individual dimensions of bureaucracy, hierarchy, flexible processes and see exactly how employees are speaking about these hundreds of different topics. Now that being said, I don’t recommend just using you know, a platform like that to measure the culture. If you do have other metrics like response times to emails or ONA analysis. I, of course, recommend you know, getting as many good metrics as you can, and then trying to synthesize them all to triangulate you know, the, the truth. 

[00:19:41] Charlie Sull: But the reality for most companies is they don’t have very many of these metrics to begin with. So if you, if you want one, you know, relatively low cost solution that’s going to give you a much, much better understanding of your culture and really just give you everything that you need in order to improve your culture. 

[00:20:00] Charlie Sull: I’d recommend investing in a cultural AI platform, and that will give you, you know, hundreds of these important metrics. 

[00:20:08] Nena Dimovska: Exactly. very, very good point. And I would just like to add here that perhaps it’s not just that the companies don’t have always the right and all the needed KPIs to follow. But they also may lack the skills and capacity of their internal teams to be driving this entire, let’s say change, right? So it will also require for most companies to, to get on this journey, to equip their leaders, HR teams, or who, whoever is driving the process.  

[00:20:41] Nena Dimovska: Thank you for tuning in to People Pulse. Charlie shared some amazing tips on building healthier, more productive companies. If you like what you heard, don’t forget to subscribe and share it with your network. Keep your finger on the pulse of your people, empower them and success will follow. See you in the next episode.