What is Company Culture?
Company culture is defined as the collective values, characteristics, behaviors, and attitudes of a specific organization. Alternative names for company culture include-
- Organizational culture
- Workplace culture
- Corporate culture
Company culture is demonstrated through the ways in which team members interact, decision making initiatives, and core values possessed. Foundational components of company culture include-
- Work environment
- Leadership styles
- Within organization objectives
- Core values
- Company mission statements
Strong company culture is one where employees work in accordance with expected behaviors and job responsibilities. While some companies define great company culture as one that is based on team building and making employees feel happy, other companies value a workplace culture that is more formal and traditional.
How Does Company Culture Impact a Business?
94% of executives and 88% of employees believe that company culture is crucial to success. Companies with a strong organizational culture have on average 400% more revenue growth in comparison to businesses with an undefined or poor organizational culture.
Corporate culture directly impacts a wide range of factors including employee engagement and productivity levels. Prominent ways that company cultures impact businesses include-
1. Employee Engagement
In a negative corporate culture, employees feel unengaged often. Contrarily, a great company culture encourages happy employees that are generally engaged.
The first step to establishing a great company culture and increasing employee engagement is to make sure employees feel valued and incentivized. Best practices for accomplishing this include human resources requesting regular employee feedback and granting promotions to high performing employees.
2. Employee Motivation
Company culture greatly influences the way that employees feel about their company as well as their motivation levels. In fact, many job applicants consider company culture as one of the most important influences on whether or not they want to work at a specific organization.
For a corporate culture to positively motivate employees it must contain strong company values and a clearly defined vision of what success looks like.
3. Employee Morale
Employee morale encompasses both employee engagement and employee motivation. Methods to increase employee morale include granting decision making capacity to employees, increasing transparency, and promotion of a healthy work life balance.
Low employee morale is commonplace and has significant consequences for businesses including increased absenteeism, high employee turnover, and an inability for team members to work together efficiently. Low employee morale can result from a toxic workplace culture that fosters ineffective communication and improper management techniques.
4. Employee Productivity
Employee engagement, morale, and motivation all correspond with productivity levels. Increasing employee productivity looks different for every company but team building and efforts to make employees feel valued are generally helpful.
Strong company culture will not only increase employee productivity but also customer service capabilities.
5. Employee Turnover
A strong indication of a poor workplace culture is a high employee turnover rate. When employees feel undervalued or not properly recognized for their hard work, they are less likely to remain long term at a company.
An insufficient corporate culture is one that does not incentivize nor promote employees. Top talent employees do not want to stay at a business that does not actively encourage both professional and personal growth.
Businesses must make sure that human resources provide new hires with the proper training and tools necessary to execute their role successfully. Existing team members should be supplied with a career advancement path and development opportunities to keep them engaged, motivated, and productive.
The Importance of Positive Company Culture
The value of positive company cultures can not be quantified. However, the increased profitability and success that businesses experience as a result of developing a strong company culture is well worth pursuing.
From new hires to long term team members there are ample benefits for businesses to establish and maintain a great company culture. One employee perk of improving company culture is that happy employees are 20% more productive on average in comparison with unsatisfied employees.
In fact, 39% of employees report that they would be more productive at their workplace if they were happier. Increased employee productivity has measurable benefits for sales, with happy employees boasting a 37% increase in confirmed sales in comparison with unhappy employees.
Business professionals should keep in mind that organizational culture is not a one size fits all endeavor. Corporate culture should fit company needs and industry type appropriately.
For example, in a law office setting, a more formal and traditional corporate culture may be more suitable. Alternatively, in more creative industries such as marketing where employees work together consistently, a more collaborative team building environment may be preferable.
60-70% of employee turnover is voluntary, often occurring when workers find a better job opportunity. A great company culture that consists of highly engaged employees has on average 59% lower turnover rates than companies with poor company cultures.
Considering the high costs associated with recruiting new hires and training them, developing and maintaining a strong culture can save businesses a lot of money in the long run. With the money saved on recruiting and training new hires businesses can invest in employee development opportunities.
The Benefits of Good Company Culture
Creating and maintaining a great company culture has significant short and long term benefits. Prominent benefits a strong company culture supplies include-
1. Increased Collaboration
When employees feel their opinion doesn't matter they will likely become disengaged. A great way to avoid this is by involving team members in decision making and encouraging them to ask questions during meetings.
People work best when they feel that they are part of a team that is doing meaningful and important work. Team building exercises and a positive work environment helps employees work together optimally.
2. Less Employee Churn
High employee turnover is not only costly but also incredibly damaging to the overall work environment and company culture. Positive company culture is one that takes time to make sure new hires are a good fit and that existing employees are provided with ample development opportunities.
Instead of having to invest in recruiting new hires and training them, human resources can focus on making existing employees even happier.
3. Competitive Advantage
Employees are a company's greatest investment and most valuable asset. Developing and maintaining a great company culture will attract top talent job applicants and retain them long term.
Instead of losing great employees to the competition, a strong organizational culture will optimize their performance. Happy employees provide better customer service and increase the likelihood of even a small business becoming a well known enterprise.
Many customers pay close attention to the organizational culture of the businesses they patronize. If a customer's ethics and values do not fit company culture depictions, potential sales could be lost.
Unsurprisingly, many well known businesses have an outstanding corporate culture. Without a strong corporate culture, businesses are at risk of substantial financial losses and even business closure.
Examples of Good & Bad Company Culture
While some businesses are well known for their great company culture, others are well known for their bad company culture. Examples of companies with great and poor company culture include-
Great Company Culture Examples
Google is well known for its outstanding company culture. Beyond offering extensive work environment perks, Google employees feel deeply connected to their company mission and company values.
Due to its vast reach, Google has created a culture change that has wide spread influences. In fact, Google's organizational culture has inspired many small businesses and large corporation owners around the world.
Zappos is also well known for its corporate culture that focuses on happy employees and team building initiatives. Tony Hsieh, Zappos's founder, even offered a buyout incentive for employees who did not feel they were a good fit after an extensive culture change occurred.
Warby Parker is a great example of a start up that accomplished long term success. Warby Parker's organizational culture embraces its company mission of providing a free pair of eyeglasses to a person in need for every pair of eyeglasses sold to a customer.
In order to emulate these successful organizations, businesses must make sure that employees feel aligned with core values and the overall company mission. A great organizational culture makes the difference between many businesses succeeding or falling short.
Poor Company Culture Examples
Uber is well known for their poor organizational culture and toxic work environment. After Uber employees took to social media to discuss sexual harassment allegations and an aggressive company culture, the brand took a massive hit to its reputation.
As of 2017, Travis Kalanick stepped down as Uber's CEO. Uber has since acknowledged how a failure to undertake a massive company culture change could harm their business.
Another company with poor corporate culture is Amazon. Employees have utilized social media and press outlets to discuss the negative work environment and working conditions they experienced while employed at Amazon.
Forever 21 has a workplace culture that is commonly critiqued. Not only has the retail giant faced lawsuits from its own employees, but the CEO only has a 30% approval rating.
Despite possessing a poor corporate culture, these businesses are still immensely profitable. As such, these companies are not indicative of most businesses that lack a strong company culture.
How to Improve Company Culture
A great workplace culture fosters increased long term productivity and bottom line profitability. Actionable tips for improving company culture include-
1. Team Building Opportunities
Employees work best when they enjoy their team members and work environment. When a work environment is toxic, overly competitive, or unwelcoming, team building can be a great first step.
Team building not only helps enhance company cultures but can be accomplished on a variety of budgets. Human resources professionals can even work together to put on regular team building events at the office, from group lunches to scheduled coffee breaks.
For businesses with larger budgets, outside the office team building activities can be a worthwhile investment. From all inclusive vacations to playing games at a local arcade, opportunities for team building are virtually endless.
2. Lead by Example
No matter how often a company mission statement is repeated or company values are discussed, if management does not lead by example, a strong company culture is unlikely to form. Ultimately, executives should model the behavior they expect from their team members.
Team members at a business must be accountable and transparent to sustain a great company culture. Executives should encourage employees to ask questions and incorporate team members during decision making conversations.
3. Employee Development Initiatives
Over half of businesses report that it is difficult to retain top talent employees. Implementing a strong company culture with ample development opportunities for existing team members is essential to retaining successful employees.
Not only are company cultures important for retaining valuable employees but they also attract outstanding new hires for whenever a business is ready to expand their operations. With great company culture, employees feel excited to work every day and bring both their personal careers and the company to the next level.
- Company culture is the collection of values, behaviors, attitudes, and characteristics a company possesses. Components of company culture range from within organization objectives to company mission statements.
- On average, companies with strong company culture have 400% more revenue growth.
- Methods to improve company culture include team building opportunities, leading by example, and providing employee development opportunities.