Your company culture is an intangible—yet powerful—component of your organizational health. Building a positive company culture can have a strong ripple effect throughout the business.
When building company culture, organizations need to take deliberate, strategic steps. The right initiatives will help you understand the culture today and the desired state. Success in creating a strong company culture takes investment and commitment from top leadership.
In this post, we’ll:
- Define company culture
- Explain why company culture is important
- Explore the impact of positive organizational culture on your business
- Share 11 steps for building a positive company culture
What is company culture?
Company culture is the personality (or “vibe”) of your organization. It includes behaviors, traditions, ideals, expectations, attitudes, and core values that leadership demonstrates and that employees exhibit to one another and to customers. The mission and vision of your company—and how those are communicated across the organization—are core elements of its culture.
The corporate culture defines the work environment for team members and shapes how they feel about working at your organization. Think about the experience your organization provides for its employees. Great company culture has employees who are engaged, connected, collaborative, and committed to the organization’s success.
When done well, a workplace culture reflects the corporate brand, exemplifies core values, and permeates every element of work. One way to look at company culture is as the connection among three key elements of the organization:
- Business goals
- The goals you set for the business reflect what you are trying to achieve and your plan to achieve them.
- Company values
- The values determine the approach to work, how employees interact, and the value placed on employee well-being.
- This includes both employees and customers or partners. How are employees at your organization treated? How about customers? Are there programs in place to support your employees at every stage and solicit their feedback? Is the customer experience central to your company’s values?
Your organizational culture will thrive only if careful attention and curation are spent on all three areas. The goals, for example, need to factor in the corporate values and employees. Employee wellness includes a commitment to goals and practicing values.
Company culture types
There are four primary types of company cultures. None of these are good or bad; some culture types make sense in certain types of organizations, while others work better at different organizations.
Companies in different industries or locales are more likely to be of one type over another. There may be very practical reasons why an organization, e.g., a hospital or a startup, creates a particular culture type. However, change is possible; cultural evolution, especially as a company matures, is normal.
Below is a brief definition of the four main types of company cultures.
In this culture, values such as teamwork, consensus, and employee participation are most valued. This is a culture that highly values collaboration and equality—and where employees are deeply connected to each other.
The culture is often referred to as one where employees function like a family. There are few hierarchies, and there are few management layers. Communication may be informal, but it’s frequent.
This culture is common among small and family-owned businesses.
This is a bold company culture type that encourages employees to move quickly and take risks. This culture encourages innovation and out-of-the-box thinking. It’s a culture rooted in brainstorming, ideation, and collaboration.
Start-up companies and tech companies frequently develop an adhocracy culture. Such organizations focus on finding new products and services or improving on existing offerings. These companies look to stand out from their competitors with new and exciting products and services.
This culture is focused nearly exclusively on getting products or services to market. It is a culture that can be particularly challenging for employees. However, in return, the culture provides high salaries and generous employee benefits.
Leaders in such cultures are often driven, demanding, and unrelenting. They have high expectations of their employees. The compensation and perks are designed to keep employees and increase employee retention.
This structure is the most common company culture. It relies on formal procedures that are followed each time.
There are multiple layers of leadership, including managers, supervisors, and employees. Roles are tightly defined and the focus is on completing defined work that is subject to supervision and assessment.
The hierarchy culture is often used because it spurs efficiency and organization. In ideal cases, everyone knows their role and purpose within the company.
Other culture types
While those four culture types are the most common, there are others, including:
- Customer-focused culture: In this culture, the emphasis is on delivering exceptional customer service and going beyond to boost customer satisfaction. When done well, these companies provide employees with the tools and autonomy to make decisions that drive customer loyalty.
- Purpose-driven culture: These companies have a well-defined reason for being and tend to attract employees who share their beliefs and values. They are often focused more on giving back to the community they serve than on profits and have inspirational missions.
- Innovation culture: While several other cultures place an emphasis on innovation, these companies look to enhance existing technology for new solutions. Such organizations encourage employees to experiment and push new solutions that others may have abandoned.
- Creative culture: These organizations encourage creative, collaborative, and team-driven work to bring ideas to fruition. Such cultures foster a spirit of shared work and ideas that build on each contributor’s creativity at every stage.
A clear understanding of what company culture is and the type of culture present is an important first step. When assessing whether change is necessary, organizations can begin by analyzing the current culture and proceed accordingly.
Company culture should be considered a strategic priority. If the right culture is not present, or the existing culture is dysfunctional, problems quickly arise.
Why is it important to build a positive company culture?
Company culture is about much more than a free lunch or casual Fridays. It’s about the alignment of company strategy with the practices used to get work done.
The employee experience plays a major role in defining a company’s culture. Creating a positive company culture can only be done by focusing on the people who work for your organization. Company culture begins, at a fundamental level, with providing for basic employee needs. Employees need the space, tools and technologies, colleagues, and procedures that fuel success. If those elements are not present, a positive company culture will be challenging to create.
Of course, there is no way to force people to be happy and satisfied with their work. However, by taking careful steps to measure, evaluate, and evolve company culture, organizations can take impactful proactive measures.
Expectations matter greatly in the process of improving company culture. Expectations must be a part of how teams interact, and leaders manage. These expectations need to align with company goals and values to be meaningful.
A process of continual evaluation and revision means there will be visible attempts to improve. When coupled with clear, consistent, and regular communication, staff will recognize this work. With evaluation comes the need to assess what works, and what does not, what and key indicators exist for each initiative. Here are some effective ways to measure your company culture.
Surveying your employees about company culture and their level of engagement can have many benefits. It can identify trends and patterns that provide leadership with clear indicators.
Some organizations conduct broader engagement surveys that are longer and cover multiple areas related to company culture. These more detailed surveys may address management, communication, compensation and benefits, and workload.
To complement those larger surveys, organizations may choose to conduct brief, occasional pulse surveys. These quick surveys usually focus on a single issue.
Structured conversations with small groups of employees allow for more detailed insights. The qualitative information gained can be used to explore issues raised in surveys or assess possible initiatives. It’s a good way to gain deeper understanding through anecdotes and examples that can add details to quantitative information.
These are a time-tested way to get feedback from employees who are leaving the company. They can reveal details about the company culture that employees may not want to share while still employed.
The downside is that exit interviews are reactionary and will not benefit employees who leave. If an organization is suffering from high turnover rates, exit interviews are not the ideal way to stem the tide.
Organizations are increasingly using stay interviews to facilitate conversations with employees who are still employed. These discussions can identify or test issues raised elsewhere and get candid information about what can be done.
Organizational cultural assessment instrument (OCAI)
These assessments can be used to evaluate the competing values that can shape what cultural type predominates an organization. This instrument maps the values against the top four organizational culture types described above.
Along with using measurement tools, organizations should establish core metrics it will use to assess culture. Among the most popular metrics are:
- Employee turnover rate
- Employee retention rate
- Productivity measures
- Employee referrals
- Communication measures, such as email open rates and page visits
How does positive company culture affect an organization?
When a company culture is predominantly positive, there are considerable benefits to the organization and its employees. Conversely, a dysfunctional company culture can erode trust, disincentivize employees, and lead to higher turnover rates.
Here’s a closer look at some of the major benefits of having a positive company culture.
Employees who enjoy their work and feel valued are generally more productive. They are committed to successful work outcomes, especially if their work impacts their colleagues.
Productivity increases are also the result of employees who believe in their employer’s mission and values. Employees will be more eager to come to work and produce good work.
With increased productivity comes other benefits as well, including better product quality and improved customer relations.
Lower employee turnover rates
The impact of high employee turnover can be debilitating. A high turnover rate means more expenses for recruitment and hiring. It forces remaining employees to take on additional work to make up for departed employees.
Whether turnover is voluntary (new job, retirement) or involuntary (layoffs, furloughs), the impact is similar. Turnover adds to higher levels of employee stress. It can prompt remaining employees to also think about looking elsewhere, which just perpetuates the issue.
A lower employee turnover rate means your employees are experienced and knowledgeable about the work and their roles. It also correlates with higher levels of job satisfaction.
Employees in organizations with low turnover rates tend to value working there. If the organization does the same (valuing employees and long tenures), the advantages are mutual.
Increased employee engagement
Employee engagement is a measure of how connected employees feel to their employer. When employees are highly engaged, they are more productive, positive, and invested in what they do.
Positive employee engagement is usually directly correlated with company culture. If the environment in which employees work is encouraging and supportive, employees can more easily thrive. The enthusiasm that positively engaged employees demonstrate can permeate their teams, customers, and collaborators, too.
Due to the deep connection between positive employee engagement and positive company culture, the strategies to improve both are similar.
A Harvard Business Review post notes that disengagement leads to major problems in comparison to engaged workforces. The study notes disengaged employers face 37 percent higher absentee rates, 40 percent more accidents, and 60 percent more errors.
Increased revenue and sales
When your employees are more productive and focused on meeting core goals, the financial results are clear. Positive company culture leads to greater efficiency. The positivity rubs off on clients and customers and leads to more sales and revenue growth.
Less workplace stress benefits employees and employers alike. Increased stress levels, on the other hand, have many negative consequences. Stress leads to more absenteeism, reduced morale, and behavioral health issues for employees. A Stress.org study showed that workload, interpersonal, work-life balance, and job security issues contribute most to increased worker stress.
Improved employer brand and recruiting
Your employer brand plays an important role in how the organization is perceived. Reviews—by customers and employees—influence whether or not people buy your products or services, or apply for job openings.
A positive corporate culture is usually evident during recruitment and interview processes. Candidates with the mindset and values that align with the organization will be more attracted to opportunities to work there.
Companies with a positive company culture can use it to their advantage when recruiting. By allowing employees to talk about the culture in advertisements, videos, and interviews themselves, candidates will see what is valued.
When values are aligned and employees are focused on the organizational mission, goal-setting is a much more efficient and productive process. Shared principles and group norms assist the development of strategies, goals, and tactics that quickly bring everyone on board.
Clearly defined goals and a unified approach foster a growth mindset. Beyond goal creation, employees will gain an understanding of why the work they are doing is important.
How to build your company culture in 11 steps
There are many steps that a company can take to improve its company culture. The steps your organization chooses to follow will depend primarily on two factors. The first is the present state of the company culture, and the second is the changes that are desired once initiatives are launched.
Here are 11 steps companies can take to create cultural change.
1. Gather feedback about the company culture from employees
Employees are your best source for understanding the current company culture. Ask them about it using the tools outlined above, including surveys and focus groups. Ensure anonymity and confidentiality so the feedback you receive is honest and candid.
The insights you gain from employees can be used to identify pain points that could be eroding company culture. Understanding these pain points and why they exist can inform solutions that improve the culture.
Some of what is shared can be hard to hear for leadership. However, it’s critical that a candid, unfiltered assessment is used as the basis for change.
2. Compare current culture to ideal state
As a business grows, it can be challenging to scale company culture. Consider the impact of adding new locations, expanding into new markets, or dramatically increasing the workforce. The culture that’s inherent among one group of employees can be hard to reproduce elsewhere.
With more employees and locations come more variables related to company culture. Each new employee brings their own experiences and values to the mix, which can lead to subtle changes in the culture. Over time, new cultures may develop, particularly among different departments or locations. Having clarity on what the desired overall company culture is will help you to make adjustments as needed.
3. Foster open communication between employees and upper management
Consistent, open internal communication is necessary at all levels of the organization. Ensuring that upper management and employees have opportunities to engage in two-way communication is crucial.
Newsletters and formal meetings where leaders talk to employees are fine. However, to be fully effective, there needs to be communication tools that allow for meaningful conversation in both directions. Informal lunches, sponsored work breaks, and similar small engagements allow leaders to hear first-hand about what’s working and what’s not.
4. Articulate the mission, vision, and values
Employees want and need to understand why they are doing the work they do. A well-defined set of framing documents defining mission, vision, and values is the first step. Involve employees in the creation of these documents and review them regularly. Evaluating whether or not the values remain the same as the organization grows provides a way to redefine and reshape as companies evolve.
Managers should talk about mission, vision, and values frequently, starting at the hiring stage. Orientation should reinforce the principles for new employees.
Include adherence to mission, vision, and values in performance evaluations. Reinforce their importance in communication, and celebrate work that exemplifies the tenets—especially values.
5. Recognize and reward employees
Employees have a strong desire to be recognized for their achievements in the workplace. Direct supervisors should be trained to identify good work and acknowledge it regularly and, when possible, among the employee’s colleagues. If there is not a consistent, systematized way to recognize good work, it’s imperative to create one.
Employee recognition programs can run the gamut. Employee awards programs are a good way to celebrate excellence. So, too, are tools where peers can recognize each other in the moment for a job well done.
6. Support diversity, equity, and inclusion practices
Diverse organizations are stronger. By bringing in new voices, perspectives, and lived experiences, companies are better prepared for an ever-evolving world. A diverse workforce also gives your business a competitive advantage, especially when considering new markets and audiences.
You can build a more diverse organization by rethinking your hiring practices. Hiring managers can be trained on how to best recruit from diverse talent pools. Diverse hiring committees and structured interview processes ensure that unconscious bias does not influence hiring decisions.
Once the workplace is more diverse, it’s important to support those employees. Employee resource groups or affinity groups can build and support different identities. These groups can be a valuable resource for insights into company culture.
7. Focus on wellness
Employees who are healthy—physically, mentally, and emotionally—will perform better and be absent less. Providing access to benefits and resources that support well-being shows employees that you care about them. When these resources are available, employees in need will be able to address issues quickly and responsibly.
8. Evaluate hiring and onboarding processes
Each hire you make is an opportunity to reinforce the existing culture or shift it as needed. Look to align your hiring processes with your stated mission, vision, and values.
Consider hiring for attitude and work style as much as for skills, which can often be taught following a hire. For example, a candidate may express that they work best as sole practitioners, independently producing excellent work. If your organization is built around team-centered work, such a hire may not thrive in your company culture.
Similarly, revise your onboarding process to talk about the culture within the organization. By showing employees how work is done and what is valued, you help them acclimate easier.
9. Practice authentic leadership
Having a purpose and defined values are good, but will only be genuine if leaders authentically embrace them. Leaders at all levels must commit to a positive company culture. They need to authentically embody the values, support the programs and initiatives, and lead accordingly.
Employees who do not see their leaders working within the stated values have little incentive to do so themselves. If they see leaders acting with integrity vis-à-vis those values, they are more likely to follow suit.
10. Provide flexibility
The COVID-19 pandemic has dramatically altered how employees think about work. Today, employees expect to have flexibility in how and when they work.
Employers need to consider whether some work can be done remotely or in hybrid settings. They need to evaluate the viability of flexible start times and four-day work weeks. Giving employees more control of their work life is a powerful way to improve the culture.
11. Foster employee relationships
Companies that have positive organizational cultures invest in their employees’ daily work experiences. Employees on distributed teams should have opportunities to connect outside of project responsibilities and daily tasks.
Some employees may see this as “forced fun,” and not every activity will appeal to all workers. However, team lunches, employee outings, trivia contests, and community service opportunities can build cohesion and camaraderie.
A company’s culture has deep and significant impacts on the organization and its employees. Building the right company culture is an important way to strengthen business outcomes and boost employee engagement.
At Gusto, we work with clients across industries to strengthen their hiring, onboarding, and talent management offerings. Our HR platform helps attract, hire, and retain employees that align with and improve your company culture. To learn more about your integrated HR platform, visit Gusto today.