The Ultimate Guide to Company Culture

What is company culture?

According to global research firm Gallup, feeling connected to a company's organizational culture has both a personal and professional impact on employees. Yet, as one Gallup study revealed, only 20% of employees feel a connection to their organization's culture.

Before discussing the tangible impact of company culture, it's important for leadership to know what it is and how to cultivate it. While definitions of company culture vary, many can agree on this core definition: it is a set of shared company values and attitudes that determine behavior and standards in the workplace. Simply put, it's just how you do things around the office.

Why is company culture important?

Having a strong company culture helps businesses stand out in crowded markets. It is also a strong performance driver. There are countless benefits for businesses that take the time to build a solid culture. Many of those benefits extend beyond an employee's professional life and work within the company. Here are just a few of the reasons why leaders should be making company culture a top priority within their organization:

Employee retention 🤝

According to Gallup, employees who feel connected to the company culture are 55% less likely to search for other jobs. This is because culture affects everything. It impacts how decisions get made, how people work together, and who gets noticed, rewarded, and promoted. When employees have a positive experience with these aspects of corporate culture, they're more satisfied, and turnover rates decline.

Productivity and performance 📈

The same Gallup study shows that those who feel connected to company culture are 3.7 times as likely to be engaged at work. They are also 68% less likely to experience burnout. When employees are happy and thriving at work and able to work together well, it reduces stress and results in clearer thinking and decision-making. This, in turn, can boost productivity and help keep the momentum going toward success.

Attraction of top talent 🌟

Simply put, a strong culture acts as a magnet for attracting skilled professionals. Data from Gallup once again demonstrates that if you rely heavily on referrals from employees, having the right company culture makes them 5.2 times as likely to recommend their workplace to others.

Your company culture makes up a huge part of your reputation as a business. You don't want word to get around that your workplace culture is questionable. If that happens, you may very well struggle to get the very best talent interested in working with you.

What are the key components of company culture?

There's no doubt that a positive and consistent culture has the power to make or break an organization. Once you understand why you should spend your time and energy working on it, it's time to analyze what goes into company culture and how you can cultivate a positive environment in your business regardless of the type of organization you work in.

While company culture seems like a complex concept, you can break it down into simpler components that have the most influence on it. If you're trying to build (or rebuild) a positive culture in your company, try focusing on the following six strategic areas of your business.

Values ❤️

Company values can be yet another thing that's challenging to define. For most, they are simply the beliefs, principles, and priorities that drive your business. Core values form the DNA of the company. They inform the way you do everything, from the type of products you create to where you allocate resources to how you relate to stakeholders.

For example, if craftsmanship is one of your company's values, you likely pay close attention to detail when it comes to product design and manufacturing. If you care deeply about integrity, you will likely see it everywhere, from how you give employee feedback to the honesty you show when speaking about your company's sustainability efforts. 

When every employee shares your organization's values and lives them out in how they work and interact, they form the basis of an undeniable company culture.

Mission 🚀

Your company mission is all about what your company does and what purpose it serves in the marketplace and in the world at large. What does your company accomplish, and how does it go about doing that? While this may seem unimportant, your mission is critical.

In a 2016 study published in a working paper from Harvard Business School, researchers purported that high-purpose organizations where employees fully understand how their daily work connects to the company mission perform better financially than their direct competitors. They also have stock prices up to 12 times higher. A clear mission makes employees feel that their work has meaning.

When employees think this way, they're more likely to be happy, work harder, and remain loyal to the company. In turn, these actions and attitudes are what drive overall company performance.

Leadership style 🫡

Your leadership style refers to your behavioral approach to guiding, motivating, influencing, and managing those who report to you. It's clear that how you behave as a leader matters in creating a viable company culture. Negative behaviors will create a tense environment.

Developing leadership skills that are often considered universally important (like effective communication) can help you improve your culture. This is because it often leads to better collaboration, engagement, and productivity. However, it's also important to know what your employees desire to see in your leadership.

For example, younger millennials and Gen Z want ethical, inclusive leaders who truly care about their well-being. Having leaders whose leadership and performance management style reflects these desires can make employees feel heard, which in turn can positively affect workplace culture.

Communication and transparency 💬

According to the 2024 Edelman Trust Barometer, nearly one-third of people around the globe don't trust business leaders. When people find that they can't trust a leader, it often causes them to disengage from their work and from the overall mission of the company.

In a study of engaged employees, 96% of them trust their employer. When the trust disappears, so does the engagement. This underscores the importance of having transparency in the workplace. It is what builds trust with employees, raises morale, promotes accountability, and enhances business performance.

Open communication is the foundation for building a company culture that values transparency. When you foster a culture of openness, employees are more likely to feel that you are being truthful with them. As a result, they will more readily buy into corporate initiatives. Communication also empowers employees. Usually, those who feel more empowered perform better in their jobs.

Employee engagement 🤝

Employee engagement refers to the dedication, enthusiasm, and emotional commitment a person feels when they go to work. You may not realize it, but there is a strong link between a solid company culture and highly engaged employees.

Your company should create a culture based on a shared mission and values and explain how an employee's job connects to those things. This helps employees form an emotional connection with their work, which leads to higher engagement. Those engaged employees then positively influence the company culture by becoming:

• Less absent
• More motivated
• More productive
• More creative
• More committed
• Better at customer service

If you want your culture to improve, it's clear that driving employee engagement should become a priority for your leadership.

Employee recognition 🏅

Only one in three U.S. employees feel that they have been recognized or praised for their efforts at work in the last seven days. Unfortunately, a lack of meaningful recognition at work routinely leads to high turnover. This is because employees who don't get the recognition they desire become twice as likely to leave within the year.

However, it's important to understand that an occasional thank you or mass-produced certificate is not the way to go. Employee recognition that builds culture is rooted in authenticity. Employees want to be individually recognized. They want feedback and awards that are specific to their work and accomplishments. Gallup also reports that they want both their immediate supervisor and the CEO of the company to recognize their work. This shows the importance of building culture from top to bottom.

It's also important to see that employee recognition as an opportunity. It allows you and your leadership team to reinforce your company culture among all employees. When you publicly reward people for behavior that reflects cultural values, it shows other employees that culture matters to those at the top.

Different types of effective company culture

As you consider building your company culture, you must recognize that not all cultures are the same. There are three distinct models of corporate culture. Each has its own unique structures, characteristics, benefits, and drawbacks. While no one type of culture is better than another, it does help to understand each model so you can select the one that will work best for your company.

Hierarchical culture 🪜

In a hierarchical culture, people at the top hand down decisions for employees. They usually do so using clear communication structures and policies. These workplaces clearly outline roles so everyone understands who has authority, who they should communicate with, and who they are accountable to. You'll know a hierarchical culture by the following characteristics:

• An emphasis on job titles and levels
• Constant reinforcement of rules
• Top-down communication
• Place more value on individual achievement
• Focus on maintaining order and efficiency

These cultures can result in clear decision-making, improved communication, and predictability for employees. Still, be aware that they can hinder creativity and limit employees' freedom to talk about problems.

Team-based culture 👨‍👩‍👦

Team-based cultures are exactly what they sound like--a culture rooted in collaboration. The focus in this type of culture is on equality. This means authority is a bit more spread out, people make decisions together and with the skills and opinions of the entire team in mind. You can recognize a team-based culture by the following characteristics:

• Encouragement for everyone to contribute ideas
• Employees are able to freely express concerns
• Managers assign tasks based on skill and expertise instead of by role
• Very few siloed teams or employees, as everyone works together
• Regular meetings and feedback loops to address challenges and course-correct

Many employees love team-based cultures because they're more flexible and offer better communication. They enhance innovation by taking a cross-functional approach. They also increase productivity as employees work on tasks that fit their skill sets. Still, it's important to recognize that welcoming different perspectives can lead to conflict. Also, assigning work based on strengths can lead to unequal distribution.

Innovative culture 🌐

An innovative culture focuses on cultivating creativity across the organization. Leaders encourage employees to brainstorm new ideas for improving products and branding. Workplaces with an innovative culture often have the following characteristics:

• Strong leaders who communicate, delegate, and set goals
• A high level of autonomy for all employees
• Trust and psychological safety among teams
• Unique and innovative strategies to foster creativity
• Positive attitudes about failure
• External sources of inspiration
• Sincere focus on employee collaboration

An innovative culture has several benefits. These include increasing employee satisfaction and engagement, attracting top talent, and gaining a competitive advantage. Yet, without a clear hierarchy or structure in place, this type of culture can also create confusion for employees. It may also result in an unfair distribution of work and make it challenging to measure progress.

How do you cultivate a strong company culture?

Cultivating a strong corporate culture is far from easy. Undoubtedly, it will take a great deal of self-awareness and organizational evaluation. It will also require having leaders who are willing to put in the work it takes to change. Some may be wondering where to start when it comes to building your strong organizational culture. Here are three areas you can focus on right now that will foster positive vibes among your employees and improve company culture.

Inclusivity and diversity 🌈

Gallup research suggests that Gen Z wants a diverse, equitable, and inclusive workplace. While this used to be optional for leaders, this simply isn't the case anymore. If you want to attract and retain top talent, you won't be able to leave DEI out of the equation. Without it, younger workers feel a sense of disrespect. They also struggle to bring their authentic selves to work, which eventually leads to stress, burnout, and high attrition.

Company culture benefits from DEI initiatives. This is because they foster a sense of belonging among employees. This, in turn, increases engagement and productivity. However, making diversity and inclusiveness important has several business benefits. These include driving innovation and business performance.

Firms with diverse leadership are 45% more likely to report market share growth. They are 70% more likely to report capturing new markets.

Encouraging work-life balance ⚖️

Gallup research shows that Gen Z and younger millennial employees want to work for employers that value their well-being. Employee stress leads to higher healthcare costs, chronic absenteeism, and reduced performance. Unfortunately, these negative outcomes cost companies nearly $300 billion per year. Having healthier employees means they are happier, more engaged, and more productive.

You can promote a culture of work-life balance by first offering flexible working arrangements. Allow employees to work from home some of the time or even create their own schedules. Encouraging them to take time off for mental health or to take care of personal business also helps employees feel less stressed.

It's also critical to encourage managers to maintain proper boundaries. They should avoid calling employees during their downtime. Doing so reduces the chances they'll feel like their jobs are intruding on their personal lives.

Learning and development opportunities 💼

Learning and development are two areas that are often overlooked when it comes to shaping a positive workplace culture. It may surprise you to learn that your employees likely value opportunities to learn and grow in their professions. When you provide professional development, it signals to employees that you support them and want to see them succeed.

It's a good idea to help your employees identify skills gaps and offer training to help close them. You can use lunch-and-learns, free courses, mentorships, and training to do this. However, it's an even better idea to talk to your employees about their professional goals and help them understand what it takes to reach them. Assist them in mapping out an action plan to get there, and then provide development that aligns with that plan.

Creating learning opportunities that are specific to each employee makes them feel valued. You'll also get the benefit of having skilled employees who are ready for leadership roles whenever they become available. This reduces your need to recruit employees from outside the company and builds a culture of longevity.

Measuring and assessing company culture

Once you've put in the work to build a great company culture, how will you know that it's working? It's important that you create realistic goals and devise a plan to regularly measure and assess your company's progress. Two tools that can help you in this regard are surveys and KPIs.

Surveys and feedback 👂

Surveying your employees helps you gauge employee satisfaction and cultural alignment. If you want, you can develop your own survey. Try to use questions that cover the following:

• Policies and practices
• Leadership behavior
• Employee recognition
• Safety and respect
• Support
• Development opportunities

You can also use proven methodologies like Employee Net Promoter Scores (eNPS). This measures the likelihood that employees will recommend others work at your organization. You can also consider the Employer Satisfaction Index (ESI). Either way, make sure to take steps to avoid bias in your questioning. Also, reassure employees that their responses are anonymous so they will feel more comfortable being honest.

Key performance indicators (KPIs) 📏

Just as your company uses KPIs to assess employee performance, you can also use them to assess your own culture-building efforts. A few metrics you may want to focus on include:

• Employee engagement survey results
• eNPS scores
• ESI scores
• Employee Resource Group (ERG) participation
• Retention rates
• Turnover rate
• Absenteeism rates

By measuring these KPIs, you can check whether your culture-building strategies are working and see what you may need to change. If you find that you're not hitting the mark, look more closely at the data. Try to spot trends that can help you figure out what is working and which areas of your culture-building may need more effort.

Building a positive company culture is well worth the effort

Creating an amazing company culture won't be easy, but it will be worth it. It will benefit your employees by increasing belonging, engagement, and productivity. A positive culture will also benefit your business by increasing innovation and performance. Finally, it will help you reduce turnover.

Building a positive company culture is an ongoing effort, but you can begin taking steps toward your goal today. Commit to recognizing employees' hard work and offering flexible scheduling. Work toward inclusion and give employees opportunities to learn and have fun. Show them you value their feedback and care about their well-being.

These actions will go a long way toward helping you build a workplace culture your employees will love.

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