Every organization has a way of operating, and usually, has a unique ‘aura’ – or what the kids would call a ‘vibe’. One thing that sets companies apart is their organizational culture. Some cultures have been carefully crafted, tested, and refined to create an ideal mindset. 

Other organizations, on the other hand, allow the culture to naturally come into fruition. Does it seem like people consistently go home early on Fridays? Instead of trying to prevent this, and swimming against the tide, you can take the opportunity to earn some goodwill. You might make it a meeting-free day or declare a ‘policy’ that no meetings can be scheduled after 3 on a Friday, for example. 

Organizational culture should be intentional, however, and should reflect the company values and mission that you wish your employees to embody and work towards. When in doubt, companies can familiarize themselves with common archetypes, or get inspiration from other organizational cultures as we get into below, and focus on the one that best matches their industry, values, and strategy. 

What Is Organizational Culture?

There are countless definitions for organizational culture (AKA workplace culture, corporate culture, company culture, etc.). To keep things simple, let’s go with the dictionary definition of culture, which is: “the set of shared attitudes, values, goals, and practices that characterizes an institution or organization.” 

In other words, organizational culture is what makes a company what it is; it defines the proper way to behave and sets the context for everything it does. With a strong company culture in place, there is less need for rules, regulations, constant monitoring, and punishment. Instead, the culture acts as an “invisible guide” which lets employees know what kind of behavior is acceptable, and how to act in ways that will bring positive recognition.  

Why Is Organizational Culture Important?

The concept of organizational culture for businesses is relatively recent, having been first coined in the 1950s. Today, it is recognized as an important aspect of productivity. Many studies have proven the benefits of a healthy culture for the promotion of business goals. 

For instance, this survey by Great Place to Work shows that there was a strong relationship between stock performance during the time of the pandemic and high scores for the quality of organizational culture. Companies on Fortune Magazine’s 100 Best Companies to Work For outperformed market averages by 16.5% in 2020.

The Benefits of a Strong Organizational Culture

There are two sides to the argument about why it is critical to build a positive organizational culture. One looks at the consequences to organizations that ignore the idea, or which permit a toxic culture to grow and persist. The other looks at the advantages that can be had by companies that work hard to build and maintain the right kinds of behavior and values.  

To illustrate the returns on investment in corporate culture, we have examined some of the related research by Gallup: 

Improved Profitability

Businesses are always interested in the bottom line. According to Gallup, companies that build effective cultures see an 85% increase in profit over 5 years. Similarly, such organizations enjoy a 138% growth in customers, partners, and investors during the same period. For any HR team that wants to convince the executive suite to start looking at cultural initiatives, these numbers are probably a good place to start. 

Increased Engagement

Most HR professionals are aware of the employee engagement crisis that we’ve seen as a result of the pandemic and the Quiet Quitting trend. Nowadays, improving engagement numbers is top of mind for many. Organizational culture allows a company to bring out the best in their employees, with Gallup reporting a 50% engagement increase during a 3-year period.

Greater Retention

The flipside of engagement is poor retention. When employees lose interest in their jobs, they either get fired or get tired. In any case, they eventually leave the company, along with all the skills that they have learned. Similarly, if word gets out (for example, through a company review site like Glassdoor) that your organizational culture is horrible, you will have difficulty hiring quality candidates. But, with a good culture, your company will be better able to maintain a skilled workforce and attract talent. Gallup states that organizations with an effective culture showed a 25% increase in employee headcount over 3 years.  

Types of Organizational Culture

Beyond the essential benefits that every organization wants, such as efficiency and profitability, the advantages of a positive culture depend on the nature of the organization. For example, a startup company, where creativity is a priority, will of course not have the same culture as a manufacturing plant, where uniformity and attention to detail are paramount. 

There is a huge range of organizational culture types, but the 5 most common are: 

1. Adhocracy

This term describes an organization where “ad-hoc” thinking, or “making it up as you go along”, is the most valued part of the culture. Adhocracies desire risk-taking, creativity, and initiative, and reward these behaviors accordingly. Examples of adhocracies are startups, some of the large technology companies, and sales organizations. These types of companies usually have flat hierarchies. 

2. Hierarchical

In direct contrast to adhocracies are organizations that enforce strict working roles and procedures. Efficiency and meeting goals set by the upper level of the company are what counts, whereas out-of-the-box thinking is often reserved for the corporate strategy team. Lower-level employees often feel that they are not valued in these systems. Typical examples of hierarchical companies are manufacturers, retail and restaurant chains, and governmental offices. 

3. Growth

By comparison, growth companies believe that each person has intrinsic worth. Every hire brings a certain initial value to the organization, but a company that emphasizes growth opportunities attempts to discover other qualities that each person can contribute. For example, somebody might be hired as a low level programmer, but through diligent HR practices and L&D programs, it might turn out that they have the skills to lead an entire department. Growth companies are not limited to certain industries. Instead, they result from a deliberate choice by management to expand decision making and development processes to include all levels of a company. 

4. Clan

These companies often start as family-owned businesses. They involve close personal connections as a way to reinforce dependability and loyalty. Once these organizations become larger, a clan culture will attempt to create the feeling of an ‘extended family’ through a high degree of workplace socialization. 

5. Market

In this archetype, results count more than anything. These cultures are ideal for organizations that want to see rapid growth that is mostly due to the high productivity of certain individuals. This can be a type of ‘dog eat dog’ environment where top performers see most of the rewards, while the majority either leave or experience stagnation. Common instances of market cultures are sales organizations and investment firms.

General Elements of Effective Company Culture

No matter what type of corporate culture is the most useful for a particular business, there are certain important factors that should either already exist or be developed by firms that see culture as important. 

Ethical Behavior

Honesty, credibility, fair treatment, and respectful conduct are all part of healthy cultural values. Look at it this way – when any of these characteristics are missing, poor behavior by and against employees is guaranteed to follow. But when a company actively works to improve organizational culture by emphasizing and living up to these ideals, employees are more likely to identify with the effort. 

You might ask, for example, can fair treatment be expected in a “market” type of culture, with its dog-eat-dog atmosphere? The answer is yes, if employees know what to expect when they are hired. 

Values

The difference between a workplace that shows ethical behavior and one with values is that the latter consciously promotes a strong culture. In addition, companies with a value statement are looking to shift their culture in a certain direction. Some might want to focus on diversity and inclusion, others on helping society in general, and others on the more traditional goal of profit. 

One famous value statement is Google’s, which was originally just this line: “Don’t be evil.” Since that time, like the company itself, Google’s value statement has grown to include many more points. These are a mix of insightful business practices and moral statements, which, for an ethical company, should always be combined. 

Employee Engagement

The end result of promoting ethical behavior and company values is employee engagement. In this case, you can think of “engagement” in a wider sense to include job satisfaction, motivation, and enthusiasm (although these are not always the same). There are many ways to measure the effectiveness of company culture, but, as stated above, employee engagement is currently a major HR concern. Luckily, there are various frameworks for assessing engagement, like this one by AIHR.  

How to “Build” a Corporate Culture

There is no one way to “build” an organizational culture. Unless you are employee #1, your company already has a culture. Instead, the mission of HR and other stakeholders is to:

Maintain a Positive Culture…

Some organizations are just lucky. This can happen because the founders already have a clear vision of what kind of organization they want to run. The key here for HR is to understand why your culture works, and repeat that success as you grow. Remember that, as we saw with Google, a company’s business strategy changes over time, and it’s almost always true that culture needs to adapt along with it. So the chances are that you will need to study your organizational culture at some point through the following:

• Surveys. Surveys issued to stakeholders attempt to define what the organizational culture is, why it is positive, and how company values are communicated. Stakeholders in this instance include employees at all levels, the board of directors, and clients.

• Recruiting. Here, you conduct an analysis of hiring practices and their effects. What kind of employees tend to follow your culture, and which ones resist? This can sometimes be determined by examining their backgrounds and the role for which they were hired. For example, if you find that employees hired through a DEI program tend to be more empathetic, then you can continue to search for new hires that way. Note that some types of workforce analytics can help you with the complex job of tracking recruiting decisions and outcomes. 

• Skills inventory. A skill inventory is, in some respects, the opposite of a skills gap analysis. Instead of looking at what skills are missing, it examines what kinds of abilities your workforce has, and at what level. For example, does your skill inventory analysis show an overall good level of communication? Using practical metrics is essential for processing this information. The goal here is to connect the kinds of soft skills that are present among your employees with your culture. For instance, if your company requires a lot of innovation, do you see that among the workers? Remember that some types of skills gap analysis start with a skills inventory.

…Or Revise Culture in a Strategic Way 

We can all wonder at the productivity of a company like Apple or Tesla and want that for our own organization. But if you work for an accounting firm, what would be the point? As mentioned above, there are endless kinds of organizational cultures, and they are often related to the industry where the company operates. If your company is facing challenges, and somebody believes that it might be the culture, then there are several steps to take to change the situation.

First, ask: “Is it really the culture?” It often happens that a company is founded, grows, and then declines. This can happen for many reasons unrelated to an organization’s general culture, such as competition, changes in the industry, or problems in the economy. But companies in trouble should always have a look at the mindset at the top of the organization to understand if the problems start there. In this way, you can avoid focusing on widespread cultural change and instead tackle more immediate issues. 

For the short term, your organization already has a culture, and it cannot really be remade quickly (while the long term is a different story; see below). If you feel that your company culture suits the industry that you are in, the most practical approach to challenges is to start with the basics – ethics and values. Characteristics like honesty and decency are a baseline. However, there are a large number of temporary measures that you can take. Is turnover too high? Is engagement poor? Is productivity lacking? There are numerous solutions to all of these problems. 

At first, you may find that there is no clear choice for an optimal company culture. A classic example of an industry with a tough balancing act is hospitality, where low wages cause high employee turnover. This seems to indicate poor values. However, in this instance, profit margins are very thin and companies simply cannot afford to pay more. In addition, skill levels in the hospitality business are low, so workers quit often but can easily be replaced. Companies in the hospitality industry that run into cultural issues often need to skip massive changes and instead spend a bit more on hiring leaders who offset low employee wages by being empathetic and supportive. 

In the long term, many things are possible. A large-scale revision of organizational culture is usually part of a strategic initiative. First, the executive level decides on a new direction, and then stakeholders in HR and leadership figure out what cultural changes are needed to match the strategy. In this situation, the human resources department is often responsible for:

• Recruiting more employees who fit the strategic vision
• Ensuring that remaining employees have the right skills to support the strategy
• Communicating new cultural values to the employees, with an emphasis on leadership

A drastic overhaul of strategy and culture is not only possible but common. Businesses everywhere are adjusting to different realities when it comes to workplace disruptions such as artificial intelligence, new generations of employees, and DEIB initiatives. HR teams should keep this in mind and brush up on their change management skills.  

Leadership: How Organizational Culture Is Created and Maintained

The historical establishment of organizational culture was, in a way, accidental. There was little awareness of this issue, so few companies intentionally created one. Instead, they were a result of the type of product being made, the personality of key figures, the local societal culture, and other elements. 

Nowadays, as the benefits of a well-designed organizational culture are understood, more companies are working to develop them. Probably the single most important factor in building a productive organizational culture is leadership. This is true for the following reasons:

All organizations run on some type of hierarchy (apparently, even animals look for leaders) and at the top of the hierarchy is the boss. This person makes it known what kind of behavior is acceptable based on how they act (unless they are hypocrites, which directly creates a toxic culture). A leader who sets the tone by following organizational values is acting as a role model. 

Leaders decide what kinds of actions and attitudes by employees are promoted. Many of us can think of incidents where bad workplace behavior – being pushy, bullying, dishonest, or back-stabbing – was rewarded, but this is a short-term strategy. Over time, the environment created in such places leads to significant problems with employee retention. So any leader who wants to keep a good staff intact will recognize employees for acting properly.    

A good leader is in the position to showcase the performance of certain workers, but a balance is important. Too little recognition from a manager hurts employee morale, while too much focus on outstanding workers looks like favoritism. A leader who makes everyone feel valuable is contributing to building an inclusive and productive workplace culture. 

Learning Culture Is the Best Culture of All

Leaders, executives, and employees in general can benefit from one critical workplace function, and that is learning and development. With the right L&D program, companies can start affecting culture, beginning with the basics, by enhancing ethical behavior. The same goes for teaching company values and training in vital skills that an organization undergoing change usually needs. Here are a few of the areas where L&D plays an essential role in supporting organizational culture:

Leadership

Leadership is absolutely crucial for reinforcing culture. This is particularly true for companies that believe in the modern concept of leadership; i.e. that leadership has less to do with your position in the hierarchy and more to do with behavior. A true leader helps their peers, acts as an example, and speaks out when something is wrong. Smart companies use leadership development programs for the career paths of employees who show potential as a way to prevent cultural problems in the first place. In terms of culture, these programs tend to focus on:

• Fostering inclusion in decision-making
• Recognizing outstanding employees
• Building trust through honesty and professional competency
• Showing actual interest in the careers and personal lives of workers 

Empathy

Not everyone winds up as a leader. But there is another skill that is essential for almost every organization, and that is empathy. According to McKinsey, empathy in the workplace contributes toward higher productivity and better organizational health, in addition to boosting culture. Empathy and culture go together because the basic sign of a poor culture is that employees don’t feel that they have value, suffer disrespect, and are even afraid to go to work (AKA the “Sunday Scaries”). Courses to develop empathy show how employees can relate their feelings to what others are going through as a way to prevent these kinds of workplace issues. 

Soft Skills

Empathy is just one of many soft skills that are of value to organizational culture. As part of building a skills inventory, HR teams can learn about where their employees stand when it comes to other abilities that support culture. These include:

• Functioning as part of a group through open communication, active listening, and teamwork
• Acknowledging the importance of others through emotional intelligence and collaboration
• Doing your part and supporting productivity through time management, creative thinking, adaptability, and resilience

If your company culture needs revising, then a skills gap analysis will tell you if these abilities are missing. This is actually a common process for any organization implementing a strategic change. 

DEIB

Diversity, equity, inclusion, and belonging can be seen as different levels of cultural development within an organization:

Diversity – a company recruits from a wide variety of cultures

Equity – the organization ensures that people from all of these cultures have equal opportunities and outcomes

Inclusion – People from across the company participate in essential processes and decision-making

Belonging – all employees feel accepted and valued

Of course, DEIB is not a skill, but there are definitely skills associated with it. One of the most important is cultural competence, for which you can implement a development program.

Upskilling

Revamping your culture often goes along with strategic changes. On the HR level, whenever a company heads in a new direction, employees must learn a different set of skills and/or upgrade the skills that they already have. Obviously, this happens through L&D. But companies that are facing a fundamental shift in how they do business find that the need for upskilling is ongoing. In this situation, you might think about starting a continuous learning program. 

Companies with Strong Organizational Cultures

To get inspired, here are a few examples of well-known companies and the organizational culture that they have effectively put in place:

Zappos 

Known for its “clan” culture, Zappos is a shoe manufacturer that requires workers to attend eating contests and offers cash separation bonuses to unsatisfied employees as a way to encourage them to quit.

Netflix

A “market” culture company that pays some of the highest salaries of any large technology firm, Netflix describes itself as more of a professional sports team than a family-run business. 

Microsoft

This company was on a downward trend until it instituted a “growth mindset” and more than tripled its stock price. 

Strengthen Your Culture with Growthspace

Establishing an effective organizational culture requires many types of skills. If a company wants precise use of technology, employees need training in its use; if communication is vital, then soft skills must be enhanced.

For every skill, Growthspace is the enabler. Its multi-experience development platform matches precise L&D requirements with trainers, mentors, and coaches who are experts in their respective fields. With Growthspace, organizations can rapidly and efficiently scale L&D programs to support goals ranging from individual soft skills to fundamental organizational change management.