What is organizational culture? Importance and how to develop it.

A thriving organizational culture is necessary to develop the qualities required for business success. You can see its consequences in your bottom line: companies with positive cultures are 1.5 times more likely to experience revenue growth of 15 percent over three years and 2.5 times more probable to witness extensive stock growth during that time as well.

Only 31% of HR leaders think their company has the type of culture that will help them succeed in the future, although 85% fail when they try to change their workplace cultures.

This guide covers everything you need to know about using company culture as a competitive edge, including what culture is and why it matters, and how to develop a roadmap for creating an effective corporate culture.

Organizational Culture Definition

Organizational culture is a set of values, expectations, and practices that tell team members how they should act. It’s what makes your company unique.

A thriving culture reflects uplifting traits that contribute to better productivity, while a toxic environment can bring out qualities in even the best companies that store them back.

Many people often confuse culture with a company’s mission statement or goals, but it is created through regular and genuine behavior rather than something like press releases.

Organizational Culture
Organizational Culture

When you observe how a CEO reacts to a crisis, how a team changes in reaction to new customer demands, or how a manager deals with an employee who makes an error, you’re seeing corporate culture in action.

How company (organizational) culture impacts the bottom line

Organizational culture has a huge impact on the business, from employee engagement and performance to the terms of contracts and benefits. When workplace culture aligns with your employees' values, they’re more likely to feel comfortable, supported, and valued.

Culture is one of the most important aspects of a company’s success. Companies that value culture can weather storms and business changes and emerge stronger.

When it comes to attracting top talent and outperforming the competition, culture is a significant advantage. 77 percent of employees would choose an organization with a better culture over one with a higher salary if they had the option. Almost half of the workers would leave their current job for a lower-paying opportunity at an organization with a stronger culture.

Employee satisfaction is inextricably linked to an organization’s culture, according to a recent Gallup poll. One of the key reasons that about two-thirds (65%) of employees stay with their organization is because of its culture (one-third).

Microsoft and Salesforce are two technology firms that have excelled in their industries as world-class performers and renowned brands owing to their commitment to culture. Microsoft, which was known for its ruthless competition under Steve Balmer, has been positively transformed by Satya Nadella, who became CEO of the company in 2014.

He began an effort to change the company culture, which upset the status quo in favor of continuous learning. Employees were encouraged to develop rather than demonstrate themselves. Microsoft’s market capitalization now flirts with $1 trillion, and it is competing with Apple and Amazon once more as one of the world’s most valuable businesses.

Salesforce is a company that always keeps its corporate culture in mind and has seen amazing growth because of it. Marc Benioff, the founder, and CEO of Salesforce, established standards for philanthropy early on that have continued to guide the company throughout the years.

Volunteerism is highly encouraged at Salesforce, where employees receive their first day to volunteer and are given 56 hours of paid time annually to give back. This focus on serving a purpose beyond themselves has turned Salesforce into one of the best places to work in America according to Fortune, all while profits continue to soar year after year; currently averaging 26% annual stock growth.

What components make up a great organizational culture?

Every company’s culture is unique, and it’s critical to keep what makes your organization special. The cultures of high-performing companies, on the other hand, consistently reveal certain qualities that the company should attempt to foster:

When the goals and drives of a firm and its employees are all pointing in the same direction, it’s called alignment. Exceptional organizations strive for continuous alignment with their vision, purpose, and goals.

Appreciation may manifest in a variety of ways, such as a formal accolade, a thank you note, or a promotion. A culture of appreciation is one in which team members regularly offer thanks and recognition for the efforts of others.

A culture of trust is essential to a business. Team members may be more creative and take risks when they have faith in one another and can count on each other to have their back when they try something new.

Great firms have a culture that means business, and it’s important to maintain momentum. They adore performance. In these organizations, capable workers encourage one another to advance by providing support and encouragement. Greater profitability and output are the results.

A culture of resilience is important in rapidly-changing environments where change has become the norm. This type of culture will equip leaders with the ability to watch for and respond to changes effortlessly.

Working together as a team requires collaboration, communication, and respect among team members. When everyone supports each other, employees will be more productive and feel happier while doing it.

All teams require the same qualities of integrity and trust in order to collaborate effectively. When teams rely on each other to make decisions, interpret results, and form partnerships, trust and honesty are essential. This aspect of culture is built on honesty and transparency.

A culture of innovation simply means that you’re constantly brainstorming new ways to improve your business model and bottom line. This involves getting the most out of available technology, resources, and markets by thinking outside the box.

Psychological safety provides the assistance employees require to take chances and give constructive criticism. Keep in mind that psychological safety starts at the team level, not the personal level, so leaders must take the lead in establishing a safe environment where everyone is encouraged to participate.

Several steps to building a high-performing organizational culture

Having a plan with specific objectives is key to developing and measuring the success of a great organizational culture. Several steps below guide building a culture of continuity that will have long-term positive effects throughout your company.

Be generous in Recognizing Employees

Acknowledging the achievements of every team member has a resoundingly positive effect on company culture. When everybody recognizes the successes of others, individuals begin to see how they’re part of a larger system.

Three-fourths of employees don’t feel appreciated at work, even though appreciation is one of the most important things to them. Recognizing employees has a positive domino effect on an organization, including higher employee engagement and productivity rates.

If you want recognition to be part of your company culture, it has to be something that happens regularly, not just for major accomplishments or work anniversaries. Encourage team members to give each other social recognition frequently, in addition to any monetary rewards.

If you want to improve your business, invest in social recognition. Companies that do this are four times more likely to see an increase in stock prices, twice as likely to witness an improvement in NPS scores, and also more inclined to experience individual performances getting better.

Consider implementing a points-based recognition program that will allow employees to easily build up substantial point balances. They’ll enjoy looking forward to redeeming their points for rewards that are personally meaningful to them, rather than receiving generic mugs or years of service awards that will gather dust on a shelf.

If you want to encourage other desirable traits, it’s important that recognition is also directly linked to company values and specific behaviors. After all, a whopping 92 percent of employees say they’re more likely to repeat an action if they’re recognized for it.

Finally, leadership must take center stage in your recognition efforts, as they are the cultural trendsetters for your entire organization. Incorporate a recognition talk track into your leadership program and share top pointers with managers on how to recognize individuals and why it’s important.

Let employees talk

Feedback and employee voice are not only important but essential to a company’s success. A culture that fails to value these things can face reduced revenue and unmotivated employees.

To start, you should use the proper tools to gather employee feedback like pulse surveys and workplace chatbots. This will allow employees to express how they feel in the moment easily. After that, analyze the results of the feedback collected to see what is working well and ineffective in your organization. By doing this, you can take action on these findings while they are still pertinent information.

Companies with cultures that encourage feedback experience both improved employee fulfillment and greater profitability. According to a Clutch poll, 68 percent of workers who get regular feedback feel fulfilled in their work, and Gallup found that companies with managers who were told about their strengths had 8.9 percent better performance.

In addition to the feedback-gathering methods described, it is important to be observant of clues that may signal cultural problems within your company. One example would be body language; often times it can communicate more than words ever could, even when employees feel uncomfortable speaking up.

Video conferences can help keep this nonverbal communication channel open if you’re working with a remote team. Managers should take advantage of all their meetings with employees as an opportunity to collect and respond to feedback, as well as act as trusted coach.

Grow leaders to culture advocates

Team leaders and managers are in control of your company’s success in developing a powerful culture. For example, if your workplace culture prioritizes particular values and your leadership team doesn’t live up to them — or even demonstrates actions that go against them — it detracts from the effort.

Team members will notice the disconnect between stated values and actual behaviors. They might even begin to imitate negative actions, believing them to have been rewarded by management.

By prioritizing culture in every aspect of their professional lives, your management team might help to create the culture you need. They should be prepared to discuss the company’s culture and principles as well as feedback from employees into their cultural advocacy efforts openly and honestly.

Although executives strongly believe that their organization communicates its values well, this isn’t always the case from employees' perspectives. Only 31 percent of them think so too. When they see leaders embodying company culture though, they’re much more likely to follow suit.

Live the corporate values

The culture of your company is built on its principles. While creating a mission statement is an excellent beginning, living by corporate values entails incorporating them into every part of your business. This includes not just customer support conditions, HR rules, incentive programs, and even out-of-office initiatives like volunteering.

Your team, partners, and clients will understand and appreciate the fact that your company lives its principles every day. You may also commend employees for demonstrating your values to demonstrate that they’re more than simply words, as well as incentivize them to create a value-based culture you desire to see.

Create relationships between team members

It’s difficult to build a company culture that can handle adversity when employees are scattered across the world and communicate in increasingly terse terms.

Team building activities are a great way to bring your team together and get them communicating, whether you’re all in the same office or remote. Discovering shared personal interests between team members is also beneficial, especially among those from different generations that might not have much else in common.

Understanding and empathy are vital to enhancing communication, creativity, and even conflict resolution.

Make Talent Development a Priority

Employees who are always learning and developing new skills help create great workplace cultures. This, in turn, encourages companies to invest more in their staff development. Some ways to do this include holding training sessions, coaching employees one-on-one, or providing them with additional responsibilities that will help them grow within the company.

A culture of learning has a significant economic impact. Find Courses' most recent benchmark research, which was conducted in late 2015, revealed that businesses with highly engaged employees were 1.5 times more likely to prioritize soft skills development.

According to the study, companies that had seen revenue growth were twice as likely to use innovative learning technologies and three times more likely to increase their learning and development budgets.

Make organizational culture an everyday priority

If an employee’s perspective doesn’t match your company culture, they will probably cause disharmony within the organization. Therefore, you should hire for culture and reinforce it during onboarding​ and after. You must teach practices and procedures, as well as share values.

When it comes to finding a new hire, get curious about cultural compatibilities, such as what matters to the interviewee and why they’re interested in working for your firm. These inquiries, on the other hand, should not be used as the only basis for selecting someone, because fantastic organizations have an open mind to different viewpoints that may help them maintain their culture current.

It’s also important to focus on building social relationships during the onboarding process so that employees can understand your company culture and values. These relationships will last throughout the employee’s time at the company, reinforcing shared values continuously.

Make employee experience unique

Given that your employees are modern consumers, they will most likely expect personalized experiences. As a result, you should focus on methods that can help every team member feel like they belong in the company culture. For example, tools such as pulse surveys and employee-journey mapping would be great ways to discover what matters to your employees and what their idea of an ideal corporate culture looks like.

Apply what you learn to customize the employee experience for your team. When you start showing your employees the same concern as you do your customers, a culture of motivation will take root in your organization.