Organizational Culture: What Is It and How to Build or Change It

Nov 15
The concept of organizational culture isn’t new, and it’s been well-accepted for decades that there’s a direct link between a strong company culture and business outcomes. Sustained success and profitability are goals that every organization strives for, so it makes sense to understand and prioritize your company culture.

In this article, I’ll explore what organizational culture is and how to build a great one. I’ll also consider some of the ways that you can change or improve your existing company culture and some strategies that can help.

What Is Organizational Culture?

Organizational culture is a combination of values, expectations, and practices that work together to guide and inform the way an organization and its people behave.

The term “organizational culture” is often confused or used interchangeably with a company’s vision, purpose, or mission statement. But culture is a more intangible asset. It makes its presence felt in the best and worst of times and everywhere in between. When there’s a PR crisis, an impossible deadline that calls for multiple teams to burn the midnight oil, or when an employee experiences a bereavement or other personal loss – the workplace culture shines through in the way leaders and colleagues behave, pull together in the same direction, and support one another.

In businesses where there’s a strong organizational culture, people just “do the right thing” – unthinkingly, unquestioningly, and without exception.

Why Is Organizational Culture Important?

As I mentioned earlier, having a strong corporate culture is a benefit that goes straight to the bottom line – and there’s plenty of research to support this claim. A 2019 study on organizational culture and its correlation to business outcomes and financial performance revealed that cultural factors such as collaboration, employee engagement, employee retention, and customer satisfaction are directly linked to revenue growth.

 Here are a few statistics to consider:

  • Executives who believe that they have an extremely healthy organizational culture are 1.5 times more likely to report average revenue growth of more than 15 percent over three years.
  • Public companies with extremely healthy cultures are nearly 2.5 times more likely to see significant stock price increases over the same period.

    But profitability isn’t the only reason to build and sustain a winning organizational culture. It also makes a business an “employer of choice” in the eyes of prospective job seekers, and they’ll be more successful in attracting the best skills than their market competitors.

According to Glassdoor, 77 percent of workers consider an organization’s culture before applying for a job there, and almost half of employees would quit their current job to go work at an organization with a better culture, even if it meant having to take a pay cut.

Companies that have a strong corporate culture also reap the benefits of a happier, more productive, and more loyal workforce. Organizational culture is among the top indicators of employee satisfaction and one of the principal reasons that almost two-thirds of people remain with their employer.

Just walk into an office at an organization with a strong organizational culture and you’ll immediately sense the vibe. Employees smile and laugh more frequently. They also appear more relaxed, respectful, punctual, and hardworking.

And, when inevitably, difficult situations or events happen, the company and its people can draw on the strength and resilience of their workplace culture to work through their challenges.

The 4 Types of Organizational Culture

We’ve established that building a strong corporate culture is vital. Next, let’s consider the different types of culture that exist in businesses today.

The Competing Values Framework, a cultural assessment tool that was developed in the 1980s and is still used today, identifies four discrete types of company culture.

Clan Culture

In a clan culture, people interact in a relaxed, friendly, and positive manner. You’ll often find that employees have much in common beyond just their jobs – shared interests, personal values, and hobbies, for example. In clan cultures, leaders are respected rather than feared. People who work at such companies report high levels of collaboration, teamwork, and idea-sharing.

The potential risks of cultivating a clan culture are that if people feel that they’re allowed to be relaxed and have fun at work all the time, it could result in the environment lacking discipline and authority.

Adhocracy Culture

In organizations with adhocracy cultures, there’s a focus on innovation and winning in the marketplace. Life in these companies is fast-paced and there’s seldom a “dull moment.” People are encouraged and even expected to try out new things, take calculated risks, and experiment.

A potential pitfall of an adhocracy culture is that trying to consistently maintain this pace and level of performance could cause people to buckle under the pressure and experience burnout.

Market Culture

In organizations with market cultures, there’s a relentless focus on the customer, becoming the most successful player in the marketplace, and achieving consistently strong revenues and performance. There’s an expectation that people will unquestioningly do whatever is required to get the job done and meet tight deadlines.

The danger of such a culture is that focusing so obsessively on results and market position could result in high levels of employee turnover. The organization could also lack a sense of community.

Hierarchy Culture

As the name suggests, hierarchy cultures have a strong emphasis on structure and control. These organizations are meticulous about making rules and setting boundaries, and people are expected to abide by them without complaining or asking questions.

The potential drawback of operating a hierarchy culture is that employees may not feel trusted and they be unable to express their creativity. This could lead to feelings of resentment or apathy.

What’s the Difference Between Organizational Culture and Organizational Climate?

Many people think that an organization's culture and its organizational climate are one and the same, but there are notable differences between the two.

Organizational climate is less about the shared values, attitudes, and behaviors that define a company and its people. Instead, it’s more about perceptions - how people experience their workplace and how they feel about being part of the organization.

A company’s organizational climate might change quite frequently because it’s determined largely by the leadership that’s in place at any given time. It’s a far more tangible concept than organizational culture.

Types of Organizational Climate

Just as there are several types of organizational culture, organizational climate can also take several forms. Let’s take a look at a few of the most common:

  • People-oriented climate – The primary focus is on the feelings and experiences of individuals working in the organization.

  • Rule-oriented climate – Policies, structures, and boundaries are the basis for all actions and decisions.

  • Innovation-oriented climate – People are encouraged to be creative and “think outside the box.”

  • Goal-oriented climate – The primary focus areas are outcomes and the achievement of defined objectives.

Qualities of a Great Organizational Culture

Companies that successfully build and sustain a strong workplace culture typically demonstrate the following characteristics:

An Empathetic and Supportive Environment

The majority of employees feel safe and empowered. They genuinely care about one another’s success and wellbeing both inside and outside the workplace. If someone is experiencing professional or even personal difficulty, their colleagues will rally behind them to assist and support in whatever way they can.

Collaboration and Communication

There’s ongoing open and constructive dialog between individuals, teams, line managers, and subordinates. There’s little conflict, office politics, or finger-pointing. Employees respect one another and display gratitude, trust, and integrity.

Effective Leadership

Leaders set the tone from the top; they lead by example, show empathy, and are good listeners. They consistently bring people together instead of being divisive. They’re fair, approachable, and are quick to recognize employees for their hard work and a job well done.

Employee Recognition

People are most motivated when they feel that their efforts are being acknowledged and appreciated. Recognition doesn’t need to take the form of bonuses; people notice and appreciate small gestures such as emails, gift cards, half-days, or late starts.

Workplace Wellness

Employee wellness includes looking after employees’ physical comfort in the workplace as well as their emotional and mental health. Companies with a strong organizational culture will allow people to take breaks when they need them, are sensitive and accommodating of people’s personal lives beyond the office, and don’t demand excessive overtime. They reap the benefit of this approach in the form of greater employee loyalty and retention, less absenteeism, and greater productivity.

Focus on Growth and Development

Most employees have an innate desire to grow in their roles and better themselves. Companies with strong cultures make sure they have formal and informal mechanisms that give people opportunities to spread their wings. These could include free training courses, job sharing, or coaching and mentoring opportunities.

Building a Good Corporate Culture: Main Steps

Building a positive organizational culture won’t happen overnight; it requires a substantial investment of time and energy. But the rewards are unbeatable. Here are some tactics to incorporate into your strategy:

Clarify and Communicate Goals

People generally perform best when they’re clear about what they have to do, but more importantly, why they have to do it. This means it’s vital to make sure every department, team, and individual has defined and achievable objectives to work towards. That being said, it’s equally important that these goals are regularly revisited and, where necessary, adjusted to accommodate changing business priorities. Make sure that you give your team a “seat at the table” when setting and measuring these goals.

Embrace Diversity and Inclusion

Companies with the best organizational cultures will welcome individuals from all backgrounds into the fold. Encourage people to celebrate their differences. Be intentional about creating moments for people to share their life experiences and cultures. Set a zero-tolerance policy for any form of discrimination. Also, work with your HR team to ensure that recruitment and hiring processes are fair and unbiased.

Have Fun

We all know that our day-to-day jobs can be a source of stress and anxiety. Employees are expected to work hard and give their best. But there’s also a time and a place for fun and laughter. David Ogilvy perhaps said it best with these words: “Where people aren't having any fun, they seldom produce good work.”

Establish an Employee Recognition Program

As we mentioned earlier, people respond positively to being acknowledged for a job well done. It needn’t cost you huge amounts of money to give them a well-earned pat on the back. So, why not consider including some of these initiatives into your employee recognition efforts?

  • Offer in-person compliments

  • Send gift cards

  • Reward long hours or stressful projects with extended lunch breaks, half-days, or late starts

  • Take people out for lunch or organize after-work drinks

  • Set up regular “lunch with leadership” occasions for high performers

  • Organize birthday cake and gifts and offer paid birthday vacation days

  • Offer free parking or subsidize commutes

  • Offer paid “volunteer” days or let people donate to a charity of their choice

  • Offer employees access to wages they’ve already earned through Earned Wage Access programs

How to Change Organizational Culture

If you feel that your company culture could use improvement, here's what you can do:

Formalize and Communicate your Values

The fundamental first step to improving your organizational culture is defining what you’d like it to look like. Then, ask employees what they’d like it to look like. It's also sensible to engage an external culture consulting firm to help you through this process.

Incorporate Culture Into Your Business Strategy

Don’t let your business strategy become a piece of paper that just gathers dust in a drawer somewhere in the HR department. Be bold about addressing it in quarterly business updates and at Town Hall events. Feature it prominently on your annual reports, website pages, and career pages.

Prioritize Accountability

Living your organizational culture should be easy for everyone to do if it’s been well-thought-out and communicated. But it’s all too easy for people to forget about culture when stress levels are high and deadlines are looming. For this reason, it’s a good idea to write your culture and its associated expected behaviors into the KPIs of individuals and teams. Ensure it’s reviewed and discussed during regular performance appraisal sessions.

Set Clear “Non-Negotiables”

Set the ground rules about what constitutes unacceptable behavior in your organization and regularly communicate this to people at all levels.

Ensure Culture and Brand Alignment

Have your HR and marketing teams work in lockstep on everything that you put out in the media and in marketing campaigns. Be sure to also review the words you use on your website and in your job advertisements. Your culture should permeate every public-facing touchpoint of your business.

For more insights on building and enhancing your company’s culture, visit our blog or contact us today to learn how we can help.