Building a Data-Driven Culture Health Index

Corporate culture has long been a concept that is seemingly impossible to appropriately define. It’s the heartbeat of an organization and easy to feel, but harder to quantify. The challenge many organizations face is bringing specificity and measurability to the culture conversation, to not only gauge cultural health, but also to make data-driven decisions about what truly matters.

At Mastercard, we established governance, surveys, systems, programs and metrics to shape and monitor what is a strong and successful culture. We measured culture both quantitatively and qualitatively, but it tended to be one-dimensional, fragmented and a snapshot in time. The challenge was to find a better, more holistic way to provide visibility for management and our board of directors into the elements that can sustain a healthy and vibrant culture, and to ensure the tone at the enterprise level is aligned with our strategy, risk and performance goals. We also needed an intuitive solution that could help us to understand and mitigate risk where there may be misalignment, as well as to spot trends that we may need to address proactively or get back on track.

We took up that challenge several years ago, beginning in 2019, and developed a Culture Health Index that we now share regularly with our board of directors and senior management. The process of developing the index provided many lessons that other companies may benefit from as they wrestle to answer the question: How can we use our data to measure the health of our culture beyond engagement scores and employee surveys?

The Starting Point

The process for understanding and measuring culture initially began for us in 2006, when Mastercard became a public company. We realized that our biggest competitors were not necessarily in the payments space. At the time, cash itself was the competitor, as it accounted for nearly 85% of all transactions globally. As a result, we needed to shift our strategy to operate in this new reality. We set three strategic priorities: growing the core business, diversifying beyond our traditional customers, and building new businesses that complemented the core of our company, in areas such as cybersecurity, loyalty programs, data and information, and new payment platforms. 

To deliver on those strategies, we recognized the need to bring new talent into the company. Traditionally, we would recruit people from financial services; however, to diversify and build credibility in our new markets, we started recruiting people from industries such as consulting, government, technology, retail and health insurance. 

Delivering against this new strategy also meant evolving our culture, which at the time was bureaucratic and slow to make decisions. To shift the dynamic, we focused on three cultural priorities. The first was thoughtful risk-taking; we had to identify opportunities and make decisions with the information that was available rather than waiting for the perfect data or analysis. The second was taking ownership of decisions as, historically, people were reluctant to make decisions unless they had the backing of an entire committee. The final was to act with a sense of urgency. 

Over time, we added another focus area to our culture priorities, which was to create a “culture of decency.” While many of us know about IQ and EQ, our CEO at the time, Ajay Banga, introduced the concept of DQ, or decency quotient. These culture elements culminated in the creation of The Mastercard Way. The board was interested to know how focusing on our core pillars of culture—behavior, conduct, reputation, thought leadership and people—would contribute to building a culture of decency.  

We started growing quickly, both organically and through acquisitions. This expansion raised the question of how to scale the culture of Mastercard to keep up with our rapid growth. That challenge crystallized in 2019, when our board of directors had a conversation about culture led by Tim Ryan, the U.S. Chair of PricewaterhouseCoopers. 

Ryan posed provocative questions, including: How do you ensure that culture is an asset and not a liability? How does the board make sure that it’s in touch with what’s going on in the company? After that conversation, Mastercard’s Chair of the Board, Richard Haythornthwaite, came to me and said, “Michael, can we figure out a way to help the board better understand the culture at Mastercard?” 

To get started, we assembled a team and drafted an initial proposal that looked at culture through a few lenses. These included: behavior and conduct (e.g., compliance and ethics); reputation and thought leadership (e.g., to be leaders in areas like financial inclusion and innovation); and people. We considered measures like employee engagement surveys, retention and our succession pipeline. 

Building a Data-Driven Model for Measuring Culture

Fast-forward to 2020 and we continued to refine our thinking of what really mattered for the company, which ultimately led us to design and build our Culture Health Index. It is comprised of four key components: succession planning, our employer brand index, inclusion index and innovation index. Within each index there are specific metrics that we track quarterly or annually and then the average score of each of the components is used to indicate whether we are tracking at, above or below the target range we have set for each metric and the overall index.

At our company, data drives everything, including our decision-making. The goal was for the Culture Health Index to be an important factor for understanding where we should focus and what needed to be prioritized, as well as for aiding in discussions of allocation of capital and resources. We knew that within each of the components that we identified, there were clear targets and metrics that could be measured either on a quarterly or annual basis—providing tangible insights into the overall health of the culture, creating a sense of measurement and progress, and highlighting gaps that could point to areas where we need to do something differently or better.  

In 2021, we transitioned to a new CEO, Michael Miebach. That year was a trial year for the Culture Health Index. We’ve got our data-gathering functions in place, we’ve input the measurements, and we had conversations with management and the board on the results that we are seeing. Currently, the data and insights are for our internal use only. Before we do any external sharing, we want to ensure that the data is robust and that our controllers can sign off on the accuracy of the measurements. 

Our focus so far has been on getting the frame designed correctly and to make sure we are measuring the right things. I like to compare our current work to the story of someone being told they have six hours to chop down a tree, and they spend four hours sharpening the axe and two hours chopping down the tree. We’ve been investing our time to get the problem statement properly identified, putting the tools in the right place and getting the necessary buy-in before we start using this as a great management tool.

Now that we have our framework in place, the next step will be to use the index to help drive challenging conversations and robust debate about how we focus, prioritize and shift attention to areas that require a deeper look. The ultimate purpose of this index is to have it help change behaviors and mitigate risk. 

Lessons Learned When Embarking on Your Data-Driven Journeys 

Throughout this process, we have learned many lessons and have come away with numerous key insights about taking on an ambitious project like developing a Culture Health Index. 

HR should drive it, but everyone needs to own it. 

HR should take the lead on a project like this, but the most critical stakeholders to bring on board early in the process are the CEO, CFO, controller and leaders of various business units. After all, some of the data may reveal challenges in particular divisions, processes or practices. They will also be crucial partners as you pressure-test the frame and the metrics. 

We set initial target ranges for each of the metrics, but we won’t know whether they’re too generous or too tough until we get through one or two cycles of measuring performance. Having others involved in the process from the beginning is extremely important, as it must be something that’s owned collectively. 

Additionally, the fact that the HR team is compiling this data creates more credibility for the function across the business. We are part of the effort to consider all the elements that are part of delivering on our strategic priorities. To do that, you must have a strong partnership with the business unit leaders and a level of business acumen to have those conversations.

Don’t rush. Get it right to reduce the risk and add meaningful value. 

Another key piece of advice for anyone considering taking on a similar project is to start small but have a clear outcome in mind about why you are starting such an initiative. We are fortunate in that we have directors who are very focused on the culture and health of the company, and they had a clear request for us to develop a framework and tool to give them a better sense of our culture’s health and its evolution. 

We pursued this overarching goal while we developed the framework and engaged our stakeholders, keeping in mind that we didn’t want to rush the process of building the data models and socializing the project. We had to iterate many times to find measurable outcomes that captured the right dimensions that aligned to our culture. Another consideration is the reputational risk of possibly getting something wrong or trying to track something that was difficult to quantify. Finally, you must make certain that any data you publish will have actionable insights to deliver against. 

Determine the metrics that drive impact. 

We see this effort as a tremendous opportunity for Mastercard to continue to drive its business strategy. It enables us to hold ourselves accountable to our shareholders, because they are increasingly looking for clear, key measures about what companies are doing and point of differentiation. 

For example, one of our metrics measures how customers perceive our innovation in terms of technology and payments. If you think about the competitive environment that we’re in, especially with the many newer fintech companies entering the payments space, voice of customer is a critical metric to track to maintain our edge and competitiveness. We’re also monitoring how well we’re listening to our employees by embedding their sentiment into many of the indices, including innovation for our products and services. 

The Culture Health Index has also helped to provide early indicators of risk. If you start to see things trending in the wrong direction, it can help the organization and the board dive deeper into areas that may create a longer-term impact for the company. Ultimately, you want your cultural index to create value for all stakeholders—internal or external, senior management or board—so determining the metrics and components that have the most impact to your company is crucial. 

Closing Thoughts

We believe that tools like the Culture Health Index are going to become a standard part of the toolkit that all HR professionals will need to understand and influence. There are macro forces at work across the corporate landscape—including demands for greater transparency around culture—and we believe these requirements are only going to increase. It isn’t farfetched to imagine a day when regulators will want to see data about your culture in the same way that they scrutinize financial statements. As I shared before, data drives everything that we do and that is why our team will continue to gather insights, work collaboratively across the organization, and continuously improve our index to produce a product that drives decision-making and delivers impact.    

Michael Fraccaro is Chief People Officer at Mastercard.