Why is Company Culture Important?
Culture, as a term, has become ubiquitous, appearing in academic journals, media, and as Merriam Webster’s “Word of the Year” 2014. But as the Bard says: “Words without thoughts never to heaven go.” What does it mean to have company culture, and how does it help an organization? Read on to find the real-world benefits of company culture, a useable definition, ideas and tips to improve your company, and a few key takeaways.
Defining Company Culture
In the dictionary definition, culture means the customs and practices of peoples. But there is an additional, more important layer of meaning added to this: Culture is used to identify and single out systems and ideas.
It is this element of the definition that we take when we talk about company culture. A workplace is not just physical, but also an idea and a message, which should be consistent and open. What drives a company and is it clear and relatable to employees? Does the organization “live” its message and carry it through to the workplace setting?
Environment, mission, and actions work together to create company culture, and define who a company is, what it stands for, and with what, and even if, employees can build a strong connection to their place of work. Actions drive company culture, not just “words without thought” on an inspirational poster.
Concretely stated, a vibrant company culture includes…
… A unified vision of company character and goals — To concentrate employee efforts behind a single direction.
… A strong purpose and identity — To give staff a clear understanding of who the company is.
… Clear communication of core values — To illustrate what an organization believes and how they act upon it.
… A common company narrative — To merge company actions and employee efforts into the same fold.
… Open communication — To keep all team members on the same page.
… Great leaders — To embody the company mission and implement it in the workplace.
… Awesome People — To fit with and drive the team, culture, and mission.
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Benefits of Company Culture
Company culture isn’t just a feel-good tactic, it also shows workplace results. Where the employee handbook leaves off, is where culture comes in. Culture defines how employees react to unexpected challenges, if they communicate problems, and how they work when the boss isn’t in the room Employees work independently most of the time and a healthy company culture allows them to make the right decisions and stay productive without leaders needing to slide into the pitfall of micromanagement.
Icing on the [culture] cake
There are further advantages of a vibrant company culture beyond creating a positive framework, all of which work together and support each other in the biosystem of the office to grow and improve an organization:
- Engaged employees: A healthy company culture with a clear message and supportive structures allows employees to connect to the company mission and feel happier in the office. This, in turn, increases Employee Engagement, which raises profitability up to 21%.
- Improved Retention: Turnover is expensive and costs companies up 400% of an employees yearly salary, as well as team spirit and synergy. Happy and engaged employees are twice as likely to stay at a company than disengaged workers, with company culture being a driving factor for this improvement.
- Increased Productivity: As a result of a great company culture, leaders create a cohesive, stable, and engaged team. With such an engaged workplace, efficiency goes up and productivity rises up to 20%.
In a nutshell
What does this all mean in real numbers? According to John Kotter and James Heskett, in their book “Corporate Culture and Performance,” organizations with shared values and outlooks benefit from a 700% revenue growth over 11 years. Company culture provides the framework, as well as the nuts and bolts that hold the moving parts of an office together. With all the pieces in place, the workplace system functions smoothly, efficiently, productively, and profitably.
4 Types of Company Culture
Companies come in all shapes and sizes, and their corporate cultures do, as well. According to a study by Kim Cameron and Robert Quinn, the different cultures all have their specialties, and can be broken down into 4 types.
1. Hierarchy culture
This model is one of the oldest and involves classic structures of control. Decisions come from above and firm rules and policies shape behavior and the workplace. It’s a hierarchical manager’s job to monitor and organize all the employees and processes under his watch.
- Benefits: This model encourages clear direction, stability, and focus on singular goals.
- Drawbacks: Flexibility, creativity, and adaptability are severely limited by strict structures, and employees may feel less individually motivated.
2. Market culture
Winning, being competitive, and getting the job done are what defines this model. Results are king and leaders are demanding, while market penetration shapes the goals of the workplace.
- Benefits: An intense focus on measurable growth is what defines this model, meaning that the financial status of a company always stays in the driver seat.
- Drawbacks: Employees can become easily and quickly disengaged due to the attention on market factors. This can cause innovation, employee retention, and productivity to suffer in the long run.
3. Clan culture
Based off the many successful Japanese companies of the 80s and 90s, this model places the team at the center. Employees work together, have more agency, and there is less separation between leaders and staff. Managers act more as mentors, while company loyalty and a sense of tradition are prized.
- Benefits: Engagement is a no-brainer in this model, as employees are firmly integrated into the workings of the team and company, leading to more productivity and motivation.
- Drawbacks: The focus on the company as a team can take attention away from external factors such as profits and market share, while too much tradition can promote “in the box” thinking, hindering innovation.
4. Adhocracy culture
Flexibility and adaptability. Adhocracies thrive off of new innovations, individual thinking and doing, and striving to be cutting edge. Leaders here are also mentors and organizers, and the hierarchies are flat, but the workplace itself focuses outward on product and results.
- Benefits: Innovation and engagement thrive in this environment, allowing individual ideas to be harnessed and new challenges to be addressed and overcome.
- Drawbacks: Too many individual ideas can harm the team dynamic, while a hyper-focus on the new can lead to an excess of products that aren’t fully developed or don’t make a profit.
Recognizing a Toxic Company Culture
Regardless of the type of company culture, its imperative that leaders are able to recognize a toxic culture. A corporate culture where employees and management are working against each other, and where productivity, engaged employees, and new ideas are not encouraged, can do a great amount of harm to an organization and its profits.
>> 📖 Recommended reading: The Essential Guide To Culture Fit Hiring <<
Building a Vibrant Company Culture
Improving company culture is an active process and takes effort and attention, but the results pay off. Using such a strategy, Aetna was able to turn a $300 million loss into $1.7 billion profit. Transforming company culture starts with a few simple steps.
- Be Aware. Take time and understand the problem. This can be aided by interviews, surveys, and open communication policies. Being a keen observer of the workplace is also integral. With all this workplace information in hand, you can define the problem and a fitting and functional solution to company culture concerns.
- Give Direction. Once the problem is understood, you can give your team a nudge in the right direction. But it needs to happen as a team. A leader can get the ball rolling, but sustained change needs the support of the whole staff. Show your employees not only the way to go, but the reasons to do it, and the benefits for everyone.
- Execute your plan. Once you have the support and understanding of your staff, it’s time to pull the trigger. This step is crucial to success, and is often the weakest link in company culture improvement efforts. Make sure all managers understand their role and embody the new company culture. Along with this, ensure the effort are fully understood by staff and reinforce it with culture appropriate hiring, coaching, and even firing, if a line has been crossed. For change to be effective, a company needs to practice what they preach.
- Assess and Sustain. Company culture is an ongoing mission. There is no set and forget, but rather it needs constant care and monitoring. Use surveys and KPIs to measure company culture progress from a data and Employee Experience standpoint, and make constant adjustments to hold the right course. Digital feedback tools such as kununu engage can be a great help by automating and anonymizing the feedback process, so you can track your efforts better and quickly adjust the right things.
- Healthy company culture defines how employees work and react, providing a framework for successful independent decisions and increased productivity.
- Company culture has many forms and they can all be used for specific workplace results, but a toxic workplace culture is detrimental to any business.
- Company culture needs a unified, clear message, and leaders who live that message, to ensure that employees respect and understand the mission.
- Every culture is different and the solutions for an unhealthy culture must also be unique and tailored to the situation.
- Improving and maintaining company culture is a sustained and continuous effort.
- Information and data help understand the effectiveness of company culture at all levels, with digital feedback tools providing a great resource for employee involvement, culture monitoring, and effective action.
Turn Data Into Action
Surveys and employee feedback are great ways to assess, track, and transform company culture. With digital feedback tools such as kununu engage, this process becomes much easier. Through automated, weekly surveys, an anonymous platform for discussion, and workplace data reporting, kununu engage allows employees to speak their mind and leaders to transform this feedback into actionable data about company mood, workplace issues, and company culture success.