Company culture is the cumulation of attitudes, behaviors, shared values, traditions, and other characteristics in the workplace. It might sound like it’s all in good fun, but company culture can have a serious influence on the success of your business. 

As a business owner, you set the tone for your company culture. Your employees contribute to it, enhance it, and ultimately determine how long they want to be a part of it. This organizational culture that you create plays a factor in so many aspects of your business. Not only does it affect employee recruitment, retention, and performance, it can also have a big impact on your bottom line. 

Here are 13 reasons why company culture is important.

1. It gives your business an identity

You probably already know what goes into your business’ brand identity – things like your logo, tag line, fonts, color palette, and other visual characteristics. But have you considered that your company culture is also a defining element of your company brand?

Your workplace culture is not just something that is internally felt among your employees. It’s also an outward identity that your business develops.

Think now about your personality. A collective set of behaviors, attitudes, traditions, and values, among other things, come together to create your personality. It takes the shape that it does due in part to the decisions you make over time, and countless other factors.

In a way, corporate culture is a personality your business develops. Similar to your own personality, your business’ personality is the sum of many different parts of your company – such as your leadership style, shared values, mission, and vision. Even more specific details such as your dress code, how you acknowledge holidays and birthdays, opportunities for professional development, and perks like bringing your dog to the office or working from home. All of these factors (and many more) come together to create your corporate culture, your business personality.

2. It’s a unique competitive advantage

Just like how no two people have the same personality, no two businesses do either. Therefore, if you build a superior company culture, it will be nearly impossible for another company to replicate it. This gives you a competitive advantage in the limited labor market. In fact, company culture has been referred to as being the only actual competitive advantage one business can have over another. 

3. It’s something you can control

As the head of your business, you are in the driver’s seat when it comes to company culture. Whether intentionally or unintentionally, you set the tone, create the traditions, approve the decisions, initiate the behaviors and attitudes, and determine your leadership style. While many other factors – such as the state of the economy, your industry market, and consumer needs – are beyond your control, you have the unique opportunity to decide what type of corporate culture your business will develop.

Still not convinced? Here are ten company culture examples to learn from. Check out how other companies have intentionally driven their workplace culture to have a positive impact on their business.

4. It attracts top talent

In their 2023 Hiring and Workplace Trends Report, Indeed and Glassdoor found that hiring will continue to be difficult as the supply of workers is lower than the demand. Therefore, employers need to know how to attract talent during a worker shortage

In a tight labor market, top talent is swayed by more than just competitive compensation. When workers have leverage, a strong organizational culture with perks like remote work, flexibility, and attractive benefits is a deciding factor when applying and committing to companies. The better benefits and other perks you have, the better talent you will attract to your business. 

5. It helps you determine who to hire

Someone with great skills and experience is only a great hire for you if they fit your culture. Knowing how to hire employees who will fit well in your workplace environment starts by being able to identify which type of company culture you have. 

The main types of company culture include adhocracy culture (focused on creativity), clan culture (focused on teamwork), hierarchy culture (focused on a traditional hierarchical structure), and market culture (focused on top market performance). While these are four of the most commonly identified workplace cultures, the environment at your company might fall into a different category altogether or a mix of more than one type of business culture.

Having an understanding of your company culture and the type of person who thrives in it, you can better structure your recruitment and hiring processes to find the right people. This includes adding an explanation of your company culture in job descriptions and asking culture-specific questions during interviews.

6. It helps improve retention rates

Having a company culture that attracts top talent, and hiring according to who will best fit that company culture, can lead to higher retention rates. This is especially important during the Great Resignation – a term that is being used to describe the mass exodus from jobs in the United States following the COVID-19 pandemic. In 2021, the U.S. reported a record number of 47.8 million voluntary departures. Studies show that this elevated number of resignations is due to poor company culture. Specifically, workers pointed to feelings of disrespect, low pay, inadequate work-life balance, a lack of opportunities, and poor benefits as reasons for resigning.  

It might seem obvious if you’ve gotten this far in the article, but we will say it again for the people in the back: Culture matters! If you have a great company culture to offer your team members, the chances that you can retain them increase. When employees are respected and listened to, have positive interactions with co-workers, are adequately compensated, feel connected to something bigger, are trusting of leadership, and are motivated to perform well, employees are more likely to stay in their jobs longer.

Make sure setting a healthy company culture is front and center when it comes to establishing strategies for effective employee retention in 2023 at your business.

7. It attracts customers

A good company culture does more than attract top talent – it also attracts top customers. While employees want to be part of a company with a good workplace environment, consumers want to do business with it. 

Additionally, when consumers recognize that a company shares the same values and is committed to the same causes (such as environmental or social justice issues), it gives them an opportunity to use their buying power to support something greater. 

Good company culture can also demonstrate to customers that you treat your employees well and are committed to fair business practices, which can lead them to be more trusting of your brand. They might even feel so good about doing business with your company that they become ambassadors for your business – an easy thing to do these days with social media and cell phones at the ready. 

8. It helps you achieve your company values

Your company culture is your company’s mission and core values in action. It’s how you walk the walk. You can say your business is committed to things like fair pay, equal opportunity, and work-life balance, but actually incorporating them into your company culture is putting your money where your mouth is.

Living your values is another reason why your constituents – including your employees, investors, vendors, and customers – feel good about being associated with your brand. 

Let’s say you state that caring for the environment is an important shared value within your company. If you incorporate paid time off to volunteer for environmental causes into your company culture, your words become actions. Steps like this are about more than good public relations – they are an illustration of a double, or even triple, bottom line (people, planet, and profit).

9. It guides processes and procedures

Having a solid work culture can help reduce uncertainty throughout your business – but especially when it comes to how to design and implement policies and procedures. Things like your dress code policy, reporting structure, and policies around flexibility and remote work should all be in line with the type of company culture you want for your business.

Let’s take decision-making as an example. If you are aiming for a hierarchy culture, then you’ll create decision-making and approval procedures based on management holding all of the responsibility. If you would like more of a clan culture, decision-making will involve employees at all levels, employee engagement will be prioritized, and approval processes will be limited.

10. It can drive how you onboard new employees

A strong company culture should be a big part of your onboarding process when you hire new employees. The first few days on the job are crucial to making a good first impression on new hires. How eager your team is to introduce themselves and get to know new hires, how well prepared you are to set them up with the tools and resources they need to succeed, and how overall welcome they feel are all determining factors in their interpretation of your company culture and their employee experience.

Could your onboarding process use a boost? Use Gusto’s onboarding checklist and other onboarding resources to streamline your procedures for acclimating new hires to your business.

11. It fosters innovation

Things like creativity and innovation cannot be forced – it’s up to leadership to establish a working environment that fosters these characteristics. When you have a workplace culture that satisfies employees and motivates them to perform well, innovation can thrive. 

One reason for this is that groups who work well together can more easily and openly share ideas. Workers tend to feel more comfortable thinking outside the box when they aren’t afraid of being judged by others. 

Additionally, this type of environment is open to and accepting of failure. There’s an understanding that it’s part of the process when you’re aiming to be the first in your industry to accomplish something. Employees who are part of a healthy company culture are less worried about being retaliated against when ideas are unsuccessful. Creating a safe space for your employees can be the inspiration and motivation they need to become innovators.

12. It increases performance 

This one is pretty self-explanatory: Happy employees are high-performing employees. If workers are unhappy in a job – whether it be from lack of compensation, not feeling heard or respected, not enjoying the tasks and responsibilities, or not feeling a connection to the mission – they won’t be motivated to work at their maximum potential. 

Additionally, having an office culture that employees are eager to be part of makes your business more attractive. A welcoming, strong, healthy culture can help you more easily and effectively recruit and retain top talent. And what goes along with top talent? Top performance.

13. It helps achieve maximum profits

It goes without saying that one of the main focuses of becoming a business owner is to generate a profit – and creating a good company culture is one of the most effective ways to go about achieving max profits. Why? Well, for starters, refer back to what we discussed in the previous section: A healthy workplace culture inspires better performance. Improved performance means an uptick in sales, leading to an increase in profits. 

Customer service is another factor impacted by company culture. Happier, more motivated employees can provide better customer service to consumers. This leads to more satisfied customers who go on to become loyal customers – sharing their positive experiences via testimonials, social media, and word of mouth to inspire more people to spend their money with your company.

Additionally, it’s expensive to recruit, hire, onboard, and train new workers on a regular basis. When you hire the right fit employees for your culture – and when you treat them well and inspire them to stay with your business for the long haul – you save on fees associated with turnover. Retention is one key to keeping your profits where they belong – in your business.

And, as we already discussed, when done right, your culture can create an economic interest in your company. People will want to spend their money with you when they feel a connection to the way you run your business. There’s no better way for consumers to support a good mission and shared values than by using their purchasing power.

How to improve company culture

Now that you know why company culture is important, it’s time to determine how to improve the company culture at your small business. And let’s face it – there’s always room for improvement. 

Here are some guidelines for creating a healthy office culture:

Define and document your culture: Creating a good company culture starts with having a solid understanding of the current condition of your culture. 

Listen to your employees: Talk to, brainstorm with, and anonymously survey your employees to discover their interpretation of the company culture and where improvements could be helpful.

Start at the top: One of the highest priorities of your leadership team should be to illustrate the type of company culture you wish to see. Lead by example and your employees are sure to follow.

Maintain consistent messages across all mediums: From your website to social media to the way phone calls are received, it’s important to consistently engage your audiences in a way that supports your desired culture.

Build strategies around your company’s shared set of values: Institute paid time off for volunteering, create a volunteer committee, set up charity drives, and other means of putting your values into action.

Encourage employee connections: Allow time for your employees to connect and bond with their fellow workers. Create opportunities for teams to discover more about each other, learn to trust one another, and work well together.

Provide feedback: Performance management can play a big part in an organization’s culture. Employees want to know what they are doing well, what they can be doing better, and what expectations leadership has for them.

Adequately compensate employees: Payroll is always a priority when it comes to compensation. However, many employees today also place a high value on other benefits and perks such as flexibility, free childcare, and other factors that influence how happy they are at work. Let Gusto help you set your business apart with benefits that appeal to employees.

Create employee appreciation programs: All employees like to feel valued and respected. Employee appreciation programs can accomplish this, as well as motivate your workers to achieve maximum performance.

Be transparent: A good company culture doesn’t leave its employees in the dark. An honest environment goes a long way toward creating trust among employees and management. Show your employees the respect they deserve by being open and truthful regarding things like hiring and firing, layoffs, promotions, market status, budgets, and more.

Allow for flexibility and autonomy: Workers at all levels appreciate having ownership over their roles and responsibilities. Additionally, flexible working arrangements, adequate work-life balance, and attention to their well-being are becoming higher priorities of workers from all generations.

Company culture impacts every facet of the business, and every facet of the business plays a role in company culture. As we’ve established, good company culture is about more than office parties and paid time off. It’s crucial to your ability to appeal to consumers, recruit and retain employees, improve performance, and maximize profits.It takes planning and strategizing to intentionally develop the culture you desire and an environment that will allow your business to grow and flourish. We’ve just touched on how to improve company culture here, but our fifth and final article in this series will take a deep dive into the methods you can institute to create a healthier workplace culture and establish long-term business success.

Nicole Rothstein Nicole Rothstein covers a variety of topics related to finance, small business advocacy, and workforce and regional development. In addition to writing for and managing several blogs and publications, she has worked closely with federations, chambers of commerce, nonprofits, small businesses and financial institutions to create impactful content marketing strategies.
Back to top