What is company culture?
Company culture, corporate culture, organizational culture, and workplace culture all refer to the same thing – the essence of the company you work for. Company culture is the heart and soul of your organization. It’s the social operating system that influences how people work and how the organization interacts with its employees, customers, and community.
Company culture is reflected in many areas of your organization: your corporate values, your organization’s purpose, company mission, the work environment, and employee experience. It incorporates the history, story, vision, beliefs, norms, and expectations held by your company. While company culture is often intangible, it’s felt by everyone who interacts with your company: your employees, clients, vendors, stakeholders, and the public.
It’s important to hear from employees on how they describe their company culture. The way employees feel about their work, the company’s values, and the interactions they have with leaders are some of the most important measures of an organization’s culture. In a recent study, we asked employees to describe their current company culture in a word or two and found the most common term to describe their workplace culture is “stress”:
So what is company culture? While culture may not be something you see and touch, it is something that your people feel and affects all parts of their employee experience at work. Obviously, the goal is to create a culture that results in more motivated and happy employees. In the next section, you’ll read more on why happy employees lead to other positive results for the company.
“Our culture is the bedrock on which our brand and our company is built. Our FedEx culture is our ultimate differentiator.” —Raj Subramaniam, President and CEO, FedEx Corp.
What role does company culture play in an organization?
Company culture defines an organization. Think of your culture as the central nervous system of your organization. It connects all the people in your organization and influences the experience of your employees, your customers, and the community in which your organization operates.
Culture can make or break an organization. Companies with great workplace cultures have incredible advantages: they attract and retain talent, mobilize innovation, develop strong leaders, and become the organization’s muscle memory for ongoing success. People want to work for, and do business with, companies that have strong cultures.
Culture is critical in all aspects of an employee’s experience with the organization. Every part of your experience is influenced by your company culture. Things like team building,
consistent communication, and transparency can all lead to better employee engagement and high performance. Employee surveys can help you gauge the state of your current culture. Companies with great workplace cultures have employees who thrive and do amazing things. Companies with poor workplace cultures have employees who struggle, get frustrated and, ultimately, leave. Culture is responsible for inspiring great work and helping companies find business success.
“Culture eats strategy for breakfast.” —Peter Drucker
The term “organizational culture” first showed up in Elliott Jacques’ book The Changing Culture of a Factory back in 1951. Jacques was investigating the culture of factories and how employees could work together and share similar visions and goals. In the 1980’s the term “corporate culture” emerged, with companies telling heroic stories of their founders and logos through the 90’s. Culture became increasingly important with the globalization of organizations, when companies had to figure how to merge or extend workplace culture to various locations.
Good company culture examples are found across the globe. Google, Southwest Airlines, Zappos, Apple, and other companies began dominating the culture conversation with their over-the-top perks, open customer service policies, and extravagant workplace culture stories. Over the years numerous books have been written and research has been conducted on corporate culture, but not much has changed in regard to the most important, fundamental elements of organizational culture.
To see how your workplace culture is stacking up, use our Culture Checklist.
Why is company culture important?
If you want your business to thrive, your employees need to thrive first. Your company culture plays a pivotal role in the employee experience and the success of your organization.
The stats say it all, companies with great workplace cultures are:
• 4X more likely to have highly engaged employees
• 4X more likely to have employees that are promoters on the Net Promoter Scale
• 7X more likely to have employees innovating and performing great work
• 11X less likely to have experienced layoffs in the past year
Research also shows that companies with great cultures outperform companies without great cultures:
• 4 to 1 in revenue growth
• 12 X higher stock price growth
• 755% higher net income growth.
Workplace culture has a huge impact on company success – retention and turnover, innovation and productivity, employee engagement, and the employee experience. All of this translates to a better bottom line.
Culture includes all of an organization’s beliefs and behaviors. It’s defined not only by company vision and written mission statements, but also by other company-wide policies and activities, including whether employees are allowed to work from home, the availability of health and wellness programs, and how team members interact with each other.
Again, why is company culture important? Employee happiness and motivation is built on the countless micro-experiences they encounter day to day. The working environment, communication practices, and manager relationships all affect how employees view their company. When a company’s culture is strong, mental wellbeing is promoted and employees perform at a high level.
However, building a strong corporate culture isn’t as easy as installing ping pong tables and providing pizza every Friday. Building a culture requires planning and commitment.
For more data on the business impact of great workplace cultures, read our Global Culture Report.
How do you build company culture?
Want to improve your company culture? The best place to start is from the ground up with your employees. Employees say there are six essential elements of a great workplace culture that help them thrive at work:
We call them the talent magnets because they attract and connect people to your organization and draw out your people’s inherent desire to do meaningful work. By focusing on these six areas and doing them well, companies can build a company culture where employees thrive.
While culture may have originated with founders of an organization, it’s now the leaders of the company who carry on the culture. Leaders model the behavior and expectations that are important to an organization. They communicate and demonstrate the messages that reflect (and influence) workplace culture.
Here’s something to think about as you consider how to build company culture. Culture is built through the actions, not words, of an organization. It’s shaped by who you hire, promote, and keep. It’s instilled in your people from their first interaction with your organization and extends past the onboarding process. Culture works hand-in-hand with your employee experience. Every conversation, email sent, poster seen, and interaction employees have with your organization reflects, and reinforces, your company culture.
What defines your company’s culture? It’s not just what you write on your website, posters, or strategy map. It’s how you treat employees. How you take care of customers. How you interact with vendors and partners. Whether you encourage transparent communication. It’s the things you do, not say, and it goes beyond your recruitment and marketing materials.
How do you set out to create a culture? You’ll need to start by envisioning the beliefs and feelings you want to create and then work toward making sure every aspect of your employee experience reflects that culture. Consider both on-site and remote workers as you plan how to build company culture. What your people see, feel, and do will then be communicated out to your customers and the community.
See how employee experience is more than just engagement.
How do you hire people who fit your culture?
One of the primary goals of any human resources team is to attract talent that will fit the company culture. You want employees who will excel in your environment and enhance your established culture. But don’t expect new employees to create the company culture for you.
When hiring people, you should communicate and express your company values and beliefs to candidates as part of the interview process and allow them to ask questions. In turn, you should inquire how they feel about the culture you’ve described. Find out why they want to work for your organization. Do their expectations align with your workplace culture? Will they feel like part of the team?
Another important principle is that perks attract employees – they don’t keep them. This means that in the long term, it’s not free lunches and on-site haircuts that will keep employees around. In the article referenced above, we learn that Google offers some of the best perks and benefits in the industry, yet still suffers from high turnover. Why? There is something that can do more for employee retention than perks, and that’s where culture comes into play.
In our 2020 Global Culture Report, 92% of employees describe their employee experience as their everyday experience. Instead of thinking about company-wide perks and benefits, they are thinking of the thousands of interactions they experience: daily conversations, work environment, how easy it is to get resources, how they are treated by leaders, etc. These micro-experiences are what make up your workplace culture and what potential employees want to hear about.
“An organization filled with peak and positive micro-experiences is one that employees will seek to work for, engage with, remain at, and give their heart-and-soul to help succeed.” – 2020 Global Culture Report
To read more about attracting talent, read 4 New Culture Disruptors.
How does appreciation affect company culture?
“The simple act of recognition can transform a culture.” That’s a statement from the Appreciation chapter in our 2019 Global Culture Report.
We’ve already identified appreciation as one of the six essential elements of workplace culture. The fact is, expressing employee appreciation is one of the most powerful tools a company can employ. It connects teams and employees to their leaders and can single-handedly unify cultures during times of disruption and turmoil.
A recent study by the O.C. Tanner Institute reveals that if you want your employees to do great work, money isn’t the best way to motivate them. When employees were asked what does motivate them, only 7% of participants responded by saying “pay me more,” yet 37% responded by saying “recognize me.” When leaders praise good work, employees are motivated.
But employee recognition for good work doesn’t always come from leaders. Peer-to-peer recognition, when enabled by companies as part of an employee recognition program, provides positive benefits as well. Recognition for work anniversaries, also called years of service recognition, helps employees feel valued for their dedication and loyalty.
Consider the benefits of appreciation to a company’s culture over time:
• Consistent performance recognition can add 3.5 years to an employee’s tenure
• Effective career celebrations can extend employment by 2-4 years
• Employees who are regularly acknowledged for good work are 5 times more likely to stay
• A deliberate “thank you” helps employees feel 116% more appreciated
Read about the Victories Employee Recognition Program from O.C. Tanner.
How do you improve or change your company culture?
Many companies struggle with how to improve company culture. Luckily, no culture is static. It morphs, improves, or suffers from inside and outside forces. To improve or change workplace culture, companies must be willing to take active steps to improve it, starting from the CEO to every leader and employee.
Changing company culture is no small task. To improve your company culture, take the following steps:
1) Assess your current culture and identify areas for improvement.
2) Define the culture change—make it measurable.
3) Connect the change to company strategy and purpose.
4) Identify champions to build a grassroots movement around the change.
5) Communicate and train to see the new behaviors and attitudes needed for the change.
6) Measure and improve.
7) Begin today!
Start with assessing your current culture. You can partner with someone to do a full culture assessment. Or you can try and measure culture on your own by looking at the 6 key areas of company culture.
Either way, you’ll get a good baseline of where your culture is and the specific areas where you need to improve.
Once you know what needs to change, you can start looking at how. There are many vendors out there who can help you with improving company culture, but we recommend finding a partner who has proven expertise and solutions to help you in multiple areas. You’ll also need to ensure your executives and leaders are on board, as they will be the catalyst for true culture change. This can’t be an HR initiative; it must be a company strategy.
Changing mindsets and culture will not be easy. Nor will it be quick. It may take years to undo the challenges of a toxic company culture. But even tiny improvements can have great impact. Have tools and resources available, train leaders, communicate, be consistent, and show employees you are dedicated to creating a great company culture. Actions speak louder than words.
Learn how to fix 5 of the most common culture challenges.