You’ve probably heard about the company culture at widely-known places like Amazon, Google, and Netflix. But each company, despite size, location, or industry, has its own organizational culture – and whether you realize it or not, so does your business.
Company culture – which goes by several names – is like your company’s personality. Similar to an individual’s personality, company culture encompasses the attitudes, behaviors, traditions, expectations, and norms within an organization. It can be seen in the company goals, core values, and beliefs held among the team — as well as decisions made and employee interaction.
Your company culture is the impression your business makes on an outsider. It’s the way your company is characterized. It’s your vibe.
But it’s also so much more than that.
Culture can have an impact on recruitment, employee retention, performance, and sales. When done right, consumers will want to purchase the culture at your company and workers will want to be part of it.
We’ve discussed how to scale company culture in the past, but let’s take an even deeper dive into the topic. In this article, you’ll learn why company culture is important, how it develops, and the types, components, and examples of organizational culture. We will also explain how to assess and improve the culture at your small business.
Why is company culture important?
Think that internal company culture won’t have an impact on your external reputation or your revenue? Think again. There’s more to building a successful company than the quality of your products or services. Your office culture can have a direct impact on your likelihood of recruiting top talent, how long these employees stay with you, and their level of performance over time – all of which can directly influence your bottom line.
Let’s look more closely at these three areas of impact:
Impact on recruitment
In today’s job market, employers are vying for top talent. According to Indeed and Glassdoor’s Hiring and Workplace Trends Report 2023, we will continue to see a tight labor market. As important as compensation and benefits are to a potential hire, without good company culture your competitive appeal can take a nosedive.
Candidates are imagining what it would be like working on your team and how well they would fit in with your culture. As a small business owner, you want to create the best company culture possible (more on how to do that later). But you also must be able to effectively showcase and articulate your culture during the recruitment process in order to attract top talent.
Impact on retention
Studies conducted after the pandemic have found that poor corporate culture is a contributing factor to the “Great Resignation.” More employees are leaving jobs where they aren’t happy – largely due to workplace culture.
An MIT study found that toxic office culture is a top predictor of employee turnover. In fact, their research shows that it’s over 10 times more impactful than compensation for predicting employee attrition.
The moral of the story? If you want to keep great workers, you have to have a great culture.
Impact on performance and profits
As we’ve already established, you need good company culture to attract (and keep) the best talent who can perform at a high level. Additionally, unhappy and unengaged employees will be less inspired to work hard. Their performance – and your bottom line – can all suffer.
Furthermore, despite how talented a potential hire may be, if they don’t fit your corporate culture, they can do more harm than good according to Forbes. When employees aren’t happy, turnover rates increase and so too do your expenses. Hiring, onboarding, and training new workers can come with a high price tag.
How does culture develop in the workplace?
Culture is usually developed in one of two ways: It can be intentionally designed, or it can unintentionally happen over time.
Some business owners have the foresight to intentionally plan company culture – an approach that can have its benefits. Implementing the desired culture on day one allows you to immediately hire employees who are a good cultural fit and are committed to your mission. Your team can then more quickly and easily create a values culture where decisions stem naturally from a shared vision.
For some businesses, office culture develops more inadvertently. Instead of being intentionally planned, culture can fall into place based on the cumulative thoughts and behaviors of employees over the years. While this may seem like a more organic method to developing organizational culture, it can also lead to unintended poor company culture.
Components of company culture
There are several areas of a business that can influence its company culture. They can usually be broken up into formal and informal components.
Formal components of company culture are typically areas of the business that have been planned, such as:
- Company mission and vision statements
- Rules and procedures
- Compensation and benefits
- Professional development opportunities
- Onboarding procedure
- Relationship between management and employees
The informal components of company culture are generally areas of opportunity for human interaction and social connections. These include:
- Leadership styles
- Work environment/office space – cubicles/individual offices vs. open workspace
- How employees communicate with each other – Slack, email, chatting in common areas
- Employee involvement in decision-making
- Employee appreciation and recognition
- Flexible working arrangements
- Supportiveness of employees
- Social events
Types of company culture
In this section, we will discuss four types of company culture. While it’s not a finite list, these are some of the most common cultures in the workplace. Not only can there be others, it’s also possible for businesses to blend together more than one type of culture.
Innovation is a key part of an adhocracy culture. Employees in an adhocracy workplace are encouraged to have a visionary approach to developing, creating, and brainstorming. They are typically provided with the tools and leeway needed to be successful. Risk-taking is more accepted in this type of culture and there’s shared value placed on ingenuity and resourcefulness. Adhocracy culture is common among startups and the tech industry.
A clan culture is also known as “family culture” due to its family-feel approach to working. This type of office environment is described as collaborative and friendly. Clan culture tends to value teamwork and communication, and employee happiness is an important goal. Constructive criticism and coaching are two naturally accepted tactics in this environment. It’s common for smaller businesses or those that are family-owned to have a clan culture.
A hierarchy culture is typically characterized by traditional, clearly defined processes and procedures for things including work schedules, dress codes, division of responsibilities, and reporting structure. This type of culture distinctly separates management from employees. There isn’t much value placed on employee interactions or collaboration; instead, the focus is on day-to-day initiatives and the work getting done. Hierarchy culture is commonly found in companies prone to high-risk situations, such as healthcare and manufacturing.
Companies with a strong emphasis on performance, market share, and earnings commonly adhere to a market culture. This type of office culture can lead to internal and external competition, as lofty business-wide and individual goals are a priority. Value is placed more on company success than on employee satisfaction in this type of environment. A market culture tends to be prevalent in corporations and larger companies that have been in business for many years.
How to assess the culture at your company
It can be easy to determine the culture in some businesses. Others, however, may not be as clear or may be composed of more than one type of culture. It can sometimes be especially challenging to identify the culture in your own business. As a small business owner, however, it’s critical for you to recognize and understand your culture and how it impacts your company.
Here are guidelines for assessing your workplace culture:
Envision being a new employee: Review your hiring and onboarding processes. Is the team open and friendly? Do you have clear and informative communication around the policies and procedures of your office? Are you properly setting aside time to acclimate your new hire to your company?
Envision being a customer: Consider the interactions a prospective or current customer has when doing business with you. What impression are you making when someone views your website, visits your office, or calls your company?
Evaluate the effectiveness of your rules, procedures, and traditions: Are they well received and practiced? Are the resulting behaviors what you intended?
Survey employees: Create an anonymous survey asking employees to be open and honest about their interpretation of and feelings toward the company culture.
Talk openly with employees: Allow employees to share thoughts and ideas in a group setting, and/or individually where they have the opportunity to talk with you face-to-face.
How to improve your company’s culture
So, now you have a better sense of your work culture. However, even among the best companies, there is always room for improvement.
Here are some tips for building a great work culture:
Support new employees: Have a plan in place for making new workers feel welcome. Without a solid process, they will feel unwelcome, lost, and frustrated. Use Gusto’s onboarding checklist to help you get started.
Form a committee: Enlist a group of team members to brainstorm ways of encouraging specific behaviors, traditions, etc. Staff will feel more involved in creating the “personality” of your business, which can lead to a greater overall employee experience.
Lead by example: The culture at your company should be evident from the top down. Ensure that the type of culture you desire is obvious in your own behaviors, attitudes, and choices.
Recognize employees: Institute a formal employee recognition and appreciation program with incentives for exceptional performance.
Enhance autonomy: Employees value the opportunity to have control over their work. When possible, allow your team members flexibility in terms of scheduling, the type of work they’re responsible for, and how and when tasks are completed.
Create professional development opportunities: Set up your employees for further success within your company as well as externally. Show them you’re interested in their career development by creating opportunities for learning, mentoring, and mapping out a long-term plan.
Establish workplace wellness: Encourage physical and mental health by offering access to wellness coaches, incentives, and events. Reducing the probability of burnout should be a priority for the leadership of any company. Do your part by promoting work-life balance, allowing for wellness days, and holding regular well-being check-ins with your team.
Strengthen communication: Encouraging employees to speak openly with you and each other can boost morale, engagement, and performance. Continuously create opportunities for dialogue.
Be consistent: Policies, procedures, and programs are most effective when they are consistent throughout all levels. Consequences for irresponsible behavior, as well as rewards for good performance, should be predictable and uniform across the board.
Be competitive: One way to show employees how much they are valued (and to attract and retain top talent) is to provide competitive compensation and benefits packages. Gusto can help you offer affordable health and financial benefits to support your team.
Be transparent: Always be direct with your employees about the direction of the company, policies and procedures, consequences, compensation and promotions, hiring and firing, and other sensitive issues. Feelings of uncertainty can lead to distrust of leadership.
Remain vigilant: Attention to company culture should not be a one-and-done occurrence. Take the time to regularly assess your culture and be prepared to intervene when necessary.
How job candidates can identify culture (and what small business owners know)
There are several ways job candidates can determine if your business has a good company culture. It’s important that you take the time to review, improve, and prepare in these areas of your business.
Prospective hires can assess your culture by:
Checking out your online presence: From your website to your social media accounts, job candidates will most certainly check you out online. Make sure your organization’s culture comes through in your content – whether it’s posting about a social event, collaborative project, or tour of your office space.
Secretly shopping your business: Potential hires might try to see for themselves what it’s like conducting business with you. From the person who answers the phone to the person who seals the deal, make sure all members of your team are prepared to always make a good impression.
Talking with employees: What better way for a candidate to understand your company culture than to consult one of your current (or former!) employees? When your team members are encouraged to participate in and make decisions about your company culture, they will be better prepared to articulate the experience (and will likely have more positive things to say).
Asking questions: The interview process is a good time for candidates to try to reveal your work environment and culture. Be prepared to answer questions regarding flexible working arrangements, opportunities for growth, staff recognition, and more.
Best company culture examples
Businesses are catching on to the importance of culture and are making it a top priority. Check out these examples of great company cultures:
You don’t have to wonder what the culture is like at athenahealth – the word “collaborative” is plastered all over their website, with an entire section dedicated to their office culture. Athenahealth is also well-known for schedule flexibility, which is important to candidates in today’s hiring market.
Blackbaud is a provider of philanthropic cloud-based software that leads by example when it comes to giving back. Blackbaud incorporates into its set of values things like time off to volunteer and company-wide service projects.
The marketing and sales platform HubSpot has become widely known for its organizational culture. So much so that it published its Culture Code slide deck – a continually-updated, now public document that started as an internal resource. You can even download the template for your own business.
The company review site Comparably released its Best Global Culture 2022 report, which named Microsoft number one for company culture based on anonymous employee ratings. Microsoft also received A+ ratings in the categories of CEO, compensation, happiness, and perks and benefits.
Shipwell, a platform that automates freight transport logistics, builds its strong company culture on specific behaviors that are important to its founders. Some of the most brightly spotlighted characteristics are its focus on transparency and its accessible leadership.
Thanks to the recent ramping up of remote work, Zoom is a company that needs no introduction. While you’re certainly familiar with the video-conferencing platform, what you may not know about is Zoom’s distinct and thoughtful onboarding process for new workers. Orientation includes a day spent learning about the company’s very collaborative culture.
A final word
While part of workplace culture is the personality of your business and how your company is characterized by others, it can also have a significant impact on hiring, retention, performance, and profits. It’s critical to know and understand the culture at your company and to continuously make improvements where needed.
This article is the first in a five-part series. Check back for other articles that provide an in-depth look at examples, types, and importance of company culture – as well as ways to establish a healthy culture at your small business.