Assessing Organizational Culture: Start With Relationship Churn

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Culture is viewed by some as “soft,” hard to measure, difficult to quantify, but most will begrudgingly acknowledge its importance.

Organization Culture - 7s model

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Culture is not something to be acknowledged, it is EVERYTHING about a business.  

It may not be easy to pinpoint and understand, but it’s there.  Culture will determine what is acceptable/not acceptable behavior better than an employee handbook.

Culture as they say, “Eats strategy for breakfast.”

There are many aspects of a business where you want to assess an organization’s culture.  It is most critical to focus on culture when you are UNFAMILIAR with the organization.  A few scenarios come to mind:

  1. A business acquisition
    • You are looking to assess the culture relative to your objectives, and ultimately shape it over time to become a competitive advantage.
  2. A change of employment
    • You are looking to see if you can adapt and thrive in the culture, you’re not looking to CHANGE the culture
  3. You want to establish a new business relationship (sales or any other form of networking)
    • You want to understand the culture to POSSIBLY adapt; you always need to be aware, but may not need to alter your natural style to conform to their culture.

So the million dollar question is “HOW” to assess the culture?  

Here is a starting point to understand Culture:

The Relationship Churn Rate

A measurement of critical organizational relationship change.  The higher the churn, the more “change” in the number or impact of relationships.

  • What is the “tenure” of people that come into contact with the business?  Do they stay long (greater than 5 years?) or are the relationships more transactional with lots of churn every year?  
  • You need to get a feel for the Churn among the organizational stakeholders as there could be different dynamics within each.  Organizations have both internal and external stakeholders.  
    • External Stakeholders
    • Customers
    • Suppliers
    • Financial institutions:  Creditors & Investors
    • Internal Stakeholders
    • Employees:  Both hourly and salaried employees

If you think about 2 comparable businesses, each with very different churn rates, couldn’t you start to draw some conculusions on culture?

Said differently, if one business has a crew of key employees with an average tenure of 12 years with the business, and a different company is closer to 3, isn’t that worth understanding why the differences exist?

  • Is turnover an issue?  Why?  Is it driven by compensation/benefit rates, environment, or management practices?
  • What about customers?  Are the top 20% of customers a revolving door, or have they been stable over time?  Why?  Are service levels, pricing, new product offerings, sales approach, etc. driving the churn rate to be high or low?  Is there one dominant factor or a combination of all elements driving a churn rate?

Like all analyses, the magic is not knowing a churn metric, it’s understanding the WHY’s behind what drives it to begin with.

Keep in mind:  Low turnover, stable customers, suppliers and stakeholders is on the surface a positive sign, indicator of stable culture.  What you need to do is put that stability up against the business results and asses cause and effect of the low churn rates to the end results of the business.

If your goal is to dynamically CHANGE the end business results, the existing culture needs to be considered as to how best to make that change happen.  Keep in mind; cultures are built over time, not overnight.  Changing a culture is therefore a process, not an event.

Culture matters.  Get to the Churn rates at the stakeholder level.  Then get to the Why’s behind the Churn Rates to paint a picture for the culture.

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  1. Here’s the thing. I absolutely love the idea and the effort to find measurable indicators of culture. But let me offer you a couple of counter examples. Imagine a company where tenure is extremely high. This can be a highly toxic culture, even if it is a strong one. One that is resistant to outside influences. One that is despotic or sinecured, rather. I can think of several companies -Adobe was one – where tenure over 10 years was actually holding it back (thought they acquired their way out of that problem). certain government agencies have similar problems. So – if turnover is a valid marker – and it may be – its measure of positivity is more complex than simple high-low measurement.

    That said – i thin this notion of defining culture and its markers is exceedingly important, and I applaud your effort and will follow with interest.

    • Deb,
      Thank you for your thoughts and agree. Isolating a metric like turn-over and then trying to draw “cause and effect” conclussions to a metric like revenue or profit growth is certainly a challenge. I agree that low turnover can certainly be a warning sign, particularly when markets demand innovation and become ulta competititve. The value in my opinion is certainly in the process and rigor that tries to recognize that culture is the enabler to results, and understanding how to quantify and add structure to that process is certainly achievable (and needed). Look forward to your continued thoughts! Mark

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