What Is Company Culture?
Company culture describes the shared values, goals, attitudes and initiatives that characterize an organization. It sets the tone for how managers lead employees and shapes the overall ethos of the workplace.
Company culture is a naturally occurring phenomenon, so an organization will develop one whether intentionally or not. Aspects such as the workplace environment, company policies and employee behavior can all contribute to company culture. This leads to company culture manifesting in various different ways depending on each company.
A successful company culture is one that is bought into by everyone from the newest intern to the CEO. It’s living and breathing your core values, and allows characteristics like curiosity, respect, teamwork and employee health to flourish.
Company Culture Definition
Company culture refers to the shared values and practices that shape the ethos or the ‘personality’ of an organization. It’s the way people feel about the work they do, the values they believe in, where they see the company going and what they’re doing to get it there.
Why Is Company Culture Important?
The importance of company culture goes far beyond the vibe of your office, and influences every aspect of an organization. Company culture largely affects how employees approach their work, interact with coworkers and present themselves to partners outside the company.
Impacts Employee Retention
A positive company culture incentivizes employees to stay with an organization for the long-term. According to a 2022 FlexJobs survey, toxic company culture was cited by employees as the number one reason for leaving a job. In turn, Gallup found that employees who feel strongly connected to their organization’s culture were 3.7 times more likely to be engaged at work, and 55 percent less likely to actively look for another job.
Drives Employee Engagement
A positive company culture can boost employee engagement, enthusiasm and dedication to their jobs. For example, employees who view their company culture as positive are 3.8 times more likely to be engaged at work. Plus, highly engaged teams outperform their peers by 10 percent in customer ratings, 17 percent in productivity and 21 percent in profitability.
Attracts Top Talent
Company culture is a major consideration for prospective employees on whether or not to join an organization. Job seekers often look for companies that prioritize employee well-being, empathy and meaningful work, so a company culture that reflects these values can be the key to bring in the best talent. Forty percent of job seekers view colleagues and culture as a top priority when considering career opportunities.
Leads to Innovation
Company culture can be created to foster increased collaboration, creativity and risk-taking initiatives, ultimately leading to innovation. Adhocracy culture for example, a type of company culture focused on adaptability and sharing new ideas, encourages employees to innovate and develop the next big product or service. Companies that build a strong innovation culture are 60 percent more likely to become innovation leaders, according to Boston Consulting Group.
Types of Organizational Culture
Based on a company’s shared values, attitudes and practices, a company culture can be sorted into one of four basic organizational culture categories.
Clan (Collaborative) Culture
A clan culture is a people-focused, highly collaborative work environment where every individual is valued, prioritizing communication. It often values action-orientation and the embrace of change, and it involves breaking down barriers between the executives and employees and encourages mentorship opportunities.
Adhocracy Culture
Adhocracy culture is an innovative, adaptable work environment which highly seeks to develop the next big industry breakthrough. It often values risk-taking, individuality and creativity. Typically, this type of culture prioritizes converting new ideas to market growth and company success.
Market Culture
Market culture is a results-oriented work environment where external success is placed above internal satisfaction, prioritizing the bottom line. It often values meeting quotas, reaching targets and getting results. Market culture also commonly involves degrees of separation between the executives and employees.
Hierarchy Culture
Hierarchy culture is a traditional, risk-averse work environment where there exists little room for adaptability and change, prioritizing clear direction. It often values well-defined processes, stability and uniformity. Plus it often involves a set chain of command and multiple degrees of separation between the executives and employees.
What Does a Good Company Culture Look Like?
To gauge the company culture at your own organization, it can be helpful to know what a good or positive work culture looks like. These are just a few elements that make up a good company culture.
1. Respect Among Employees
A good company culture is one where employees are treated with mutual respect and are encouraged to practice it in return. Respect can take the form of regularly asking for employee input and feedback, recognizing employee accomplishments, being empathetic toward peers or showing appreciation for another coworker’s time and effort.
2. Diverse, Inclusive and Belonging Work Environment
A work environment that is diverse, inclusive and belonging at its core signals to all employees that their voices and perspectives matter. Promoting various viewpoints, ideas and skills at work can also pave the way for increased creativity and innovation.
3. Clear Mission and Values
Having a clear company mission and set of company values help guide all employees in what they do and how to treat others everyday on the job. These aspects set direct expectations and align everyone in a company toward shared goals, empowering employees to hit the ground running and work together to accomplish these goals from day one.
4. Effective Leadership
Leaders are the role models of a company and crucial to the success of a team. An effective leader will be able to motivate, uplift and build strong relationships with their employees, leading to a higher likelihood of collaboration, employee satisfaction and performance in the workplace.
5. Professional Development Opportunities
Providing professional development opportunities enables employees to improve their skills and knowledge in the workplace, and propel them further in their career. Helping an employee grow can be done by offering leadership training, continuing education stipends to complete relevant courses or chances to take on new projects and responsibilities.
6. Transparency
Transparency and honesty are the first steps to building trust with employees. Being a company that prioritizes transparency in conversations can prompt employees to be transparent as well, fostering open communication and accountability on all sides.
7. Employee Well-Being
People are at the core of making a company succeed, so an organization that invests in employees’ well-being is a solid indicator of a good company culture. This can look like a company providing comprehensive healthcare benefits, paid time off and sick leave, flexible working hours or employer-sponsored wellness programs.
8. Low Employee Turnover
If employees are sticking around and turnover is low at an organization, this is a sure sign of good company culture at play. This signifies that employees are likely engaged, fulfilled and satisfied at work, incentivizing them to remain with a company for longer.
