Organizational Culture: How Does Company Culture Impact Your Business?

Every business, large and small, has its own distinct culture and norms. As a business owner, how your company’s culture is supported and expressed can significantly impact your business, affecting everything from employee productivity to branding and sales.

Here are some things you should know about workplace culture – what it is, why it’s important, its identifiable characteristics, and the fundamentals of building a strong, healthy company culture.

What Is Company Culture?

Company culture refers to the collective beliefs, behaviors, and traits that shape how employees interact with one another and handle outside business transactions. Just as individuals have unique personalities, each business has its distinct cultural identity.

This cultural identity includes the shared values, norms, and practices that guide employees’ actions and decisions. These elements can significantly impact employee satisfaction, productivity, and overall organizational success. Ultimately, this organizational identity influences everything from everyday interactions to how the organization approaches business challenges and opportunities.

Company Culture Definition

Defining company culture can be challenging because it’s not static. Instead, it’s the cumulative result of its members’ interactions and behaviors. This dynamic nature means that company culture is continuously evolving. Over time, it can develop and mature, influenced by several factors, such as leadership changes, market conditions, and internal growth.

A strong company culture can create a sense of belonging and commitment among employees, encouraging them to work towards common goals. It can also attract talent that aligns with the organization’s values, ensuring a cohesive and motivated workforce. Conversely, a poorly defined or negative culture can lead to disengagement, high turnover, and difficulty in achieving business objectives.

Understanding and nurturing company culture is essential for leaders who wish to create a positive and productive work environment. By recognizing the importance of culture and actively working to cultivate it, organizations can enhance their overall performance and create a more satisfying workplace for their employees.

What Are the 4 Different Types of Culture in Businesses?

Understanding the corporate culture within an organization is crucial for creating a productive and cohesive work environment. Here are the 4 work culture examples commonly seen in organizations:

Market Culture

Market culture within an organization prioritizes the bottom line, measuring success through profitability and results. This competitive atmosphere can help attract highly competitive employees driven to win and excel. Leaders in a market culture can be demanding and expect high employee performance. While the environment can be high-pressure, it also energizes employees who are enthusiastic about achieving ambitious goals.

Clan Culture

Clan culture emphasizes collaboration and teamwork, placing a high value on relationships, participation, and overall company morale. In an organization with clan culture, managers may act more as advisors or guides than figures of authority, helping to create a supportive and inclusive atmosphere. Businesses with clan culture can minimize barriers between leaders and employees, promoting flexibility and adaptability in response to change. Employees looking for mutual support and collective action may thrive in this environment.

Adhocracy Culture

Adhocracy is an example of a workplace culture that focuses on innovation and risk-taking. It helps to create an entrepreneurial environment that encourages employees to pursue ideas that may seem unconventional to a more conservative organization. This culture embraces the “high risk, high reward” philosophy, celebrating creativity and bold initiatives. Employees in an adhocracy are empowered to explore new possibilities and drive transformative changes within the organization.

Hierarchy Culture

An example of a more conservative organizational culture is the hierarchy culture, which sticks to a more traditional corporate structure with a clear chain of command and multiple management levels separating leadership from employees. The cornerstones of this culture are stability and reliability, with defined processes aimed at achieving company goals. This cultural environment promotes consistency, predictability, and a stable environment where employees have clearly defined roles and expectations.

Why Is Organizational Culture Important?

Organizational culture permeates every dimension of business operations and employee relations. Work culture’s importance lies in its impact on a business’s success, which is why culture matters in the workplace.

How does a company’s culture impact business? Here are 10 ways a positive and healthy culture can influence the success of a company:

1. Drives Employee Engagement and Retention

A positive and healthy work culture helps to provide employees with a sense of belonging and commitment. When people feel aligned with the company’s values and mission, they are more likely to be engaged, motivated, and satisfied with their work. This leads to higher retention rates, as employees are less likely to leave a company when valued and understood.

2. Enhances Performance and Productivity

A healthy organizational culture creates a supportive environment where employees can thrive. Clear expectations, mutual respect, and effective communication can help to create a harmonious workplace where everyone knows their roles and feels empowered to perform at their best. This can help increase productivity and improve overall business performance.

3. Attracts Higher-Quality Candidates

A well-defined and attractive company culture can be a significant differentiator in today’s competitive job market. Organizations with a strong, positive culture are more likely to attract top talent who seek not only a paycheck but also a fulfilling work experience that aligns with their values and career aspirations.

4. Builds Resilience

Organizations often face changes due to market dynamics, technological advancements, or internal growth. A resilient culture can help smooth transition during periods of change by providing a stable framework within which employees can adapt. A culture emphasizing flexibility and continuous learning will be better equipped to navigate uncertainty and innovation.

5. Creates a Strong Brand Identity

A healthy work culture can build a strong brand identity by helping to make employees enthusiastic and aligned with the company’s values, which they naturally communicate to customers and partners. This authentic representation can enhance trust and loyalty, creating a consistent and positive brand perception in the market. When employees feel connected and proud of their workplace, it can translate into genuine advocacy that strengthens the brand’s reputation and appeal.

6. Customer Loyalty

As mentioned previously, the culture within an organization often extends outward, influencing how the company is perceived by customers, partners, and the broader community. A strong culture emphasizing customer satisfaction, ethical behavior, and social responsibility can enhance the company’s brand identity and build lasting customer loyalty.

7. Encourages Innovation and Creativity

A workplace culture that values innovation encourages employees to think freely and take calculated risks. When people feel safe experimenting and sharing new ideas, groundbreaking products, services, and processes can result, helping keep the company ahead of the competition.

8. Improves Communication and Supports High-Performance Teamwork

Effective communication is a hallmark of a strong organizational culture. Open lines of communication and transparency encourage collaboration, ensure everyone is on the same page, and reduce misunderstandings. This collaborative spirit enhances teamwork and drives collective problem-solving and innovation, ultimately positively impacting team performance.

9. Encourages a Healthier Work Environment

When an organization has a positive work culture, employees are more likely to feel valued and connected, significantly reducing stress and burnout. This positive atmosphere leads to decreased absenteeism, as employees are more motivated to come to work and do their best, ultimately creating a more harmonious and productive workplace.

10. Boosts Employee Enthusiasm

Companies with a healthy work culture create a supportive and inclusive environment where individuals feel appreciated and engaged, especially through regularly recognizing their efforts. This heightened enthusiasm translates into increased motivation and creativity, driving the company toward more significant innovation and success.

Characteristics of Workplace Culture

Within an organization, everyone plays a role in creating workplace culture. Top leaders are generally responsible for developing a mission, vision, and values statement that supports an organization’s purpose for existence. Organizational goals should align with the purpose and mission. These big-picture concepts provide a framework for a company’s culture, but the people and their attitudes shape it daily.

Some characteristics of organizational culture include:

• Leadership. How do leaders spread company culture? How authentic are their decisions in supporting the organization’s purpose, mission, and/or value statements?
• Communication. Is there consistency in communicating culture and values from leadership to employees to customers? How well does a company communicate clearly to staff members and to customers?
• Change management. How does your business evolve to meet external stressors like economic conditions, technology demands, employee needs, and market demand? Can your company adapt with open lines of communication, realistic expectations, clear definitions of roles, and transparency? Or is it chaotic and slow-paced with unclear structure?
• Attitude. What message do your company’s actions send to employees, freelancers, vendors, and customers? Are those in leadership and management positions optimistic and encouraging? Are hiring managers sensitive to vetting employees who support your company’s values and working well in a team or independently?
• Employee Well-Being. Are equality, diversity, and inclusion supported in the workplace? Are employees supported in their pursuit of growth and development? Do employees feel acknowledged and recognized meaningfully, such as with good benefits and perks?

Creating a Strong Business Culture

Every business has a culture, whether you participate or even accept the concept. Business owners have much to gain from a thriving company culture. As with most things, big rewards require effort. When molding and creating a company culture that yields the desired benefits, the approach may feel more intuitive for some leaders, while others may find themselves in unfamiliar territory. Take the opportunity to develop a corporate culture that has meaning for you, and it could play a key role in helping you achieve your business goals.

Here are ten steps to boost awareness of and loyalty to your workplace culture across staff members and customers:

1. Start with leadership. Be a role model for what you expect; employees will naturally tend to reciprocate the behaviors and patterns you and your leadership team establish as the norm.
2. Identify your organization’s purpose and identity. What is important to you? What is the impression you want to leave on employees and customers?
3. Communicate that desire, write down your expectations, and ensure all managers are on board. Hold company-wide meetings to roll it out to staff. Be sure to embrace transparency and ask for, listen to, and use employee input. Focus on clarity in your language – don’t be vague. Invite and encourage feedback, especially if something seems off within your organization’s culture.
4. Update and revise handbooks, processes, and procedures to ensure the business culture is supported at the core functioning level. Establish standard expectations for employees and create or update job descriptions that align with the overall culture you’re trying to adopt.
5. Reinforce the message across all channels (branding, hiring, onboarding, performance reviews, newsletters, emails, internal social activities, community support, meeting protocol, team selections, etc.).
6. Don’t be afraid to get help. Although the process needs to be managed and developed internally, you may need some external help and guidance to get the ball rolling.
7. Keep an open mind and respect employee concerns and frustrations. These issues may arise from inconsistencies between a company’s perceptions of its culture and actions. You can use these as opportunities to improve your workplace culture for even greater benefits.
8. Make business decisions that support your messaging and desired organizational culture by aligning every action with your core values and mission. Authenticity is key. Employees and customers alike quickly recognize and appreciate genuine efforts over superficial gestures.
9. Be the first to deliver bad news. No one likes to hear bad news but hearing it from an outside source is even worse. Being the first to provide news of any kind cultivates a culture of transparency and trust within your organization. When leaders proactively address challenges and setbacks, they show accountability and respect for employees.
10. Encourage inclusion. The quickest way to break a healthy company culture is to exclude people. You can encourage inclusion by valuing and respecting every team member’s diverse perspective and contribution. A healthy company culture thrives when everyone feels welcomed and appreciated. Excluding individuals can quickly erode trust and morale, creating divisions that hinder collaboration and innovation.

What To Do When an Organization’s Culture Seems Broken

Even the best-laid plans can sometimes go awry, leading to a broken or toxic company culture. This environment can harm employee morale, productivity, and overall business success. If you find yourself facing this challenge, it’s crucial to take immediate action.

Improve Company Culture

Here are some steps to begin the repair process of a broken company culture:

1. Acknowledge the problem: The first step in addressing a toxic culture is acknowledging that there is an issue. Denial will only worsen the problem.
2. Lead by example: Culture starts at the top. Leadership must embody the changes they wish to see within the company.
3. Clear communication: Communicate the changes and expected outcomes with your team in a transparent way. Improving company culture starts with open communication and being as transparent as possible with your employees.
4. Solicit honest feedback: Encourage employees to share their thoughts and feelings about the workplace environment. If common concerns are raised, it’s vital to investigate them further and find a resolution. When possible, involve your employees in the solution.
5. Revisit and revise policies: Review your existing policies and procedures to identify those that may contribute to a poor work culture.
6. Recognition goes a long way: Recognize each team member’s unique contributions. Employees who feel appreciated are more likely to stick around – even through challenging times.
7. Prioritize employee well-being: Prioritizing employee well-being lays the foundation for a genuine and positive company culture, showing a true commitment to your team’s health and happiness. When employees feel genuinely cared for, trust, loyalty, and a deeper connection to the company may result. People can easily see through insincere gestures, so efforts to support well-being must be authentic.

Maintaining a Strong Culture in the Workplace

Creating a positive company culture hinges on genuine actions and transparent communication. You can build trust and reinforce a supportive and positive work culture by prioritizing employee well-being and making business decisions aligned with core values. Your workplace culture’s set of beliefs and values describe what is important to the company, both internally and externally.

While a definition is limited to words, your company culture is as much defined by its actions and the faces representing its brand as it is by what it declares in its mission statements and established goals.

In recognizing the profound importance of organizational culture, business owners and human resources professionals have a pivotal role to play. Your role is to be an employee advocate to help ensure the organization’s goals and mission are accomplished while aligning with employee needs.