A strong organizational culture helps companies attract the best talent and keep their top performers from leaving. Its effects also trickle down to your bottom line as your employees become more engaged and productive. According to Deloitte, 94% of business owners and 88% of job seekers believe that organizational culture is key to their growth.
Unfortunately, a survey by the Institute for Corporate Productivity reveals that only 15% of the organizations that responded feel that they have achieved the ideal culture change. This article will help you gain a comprehensive understanding of organizational culture, why it is important, and how it can be developed.
Looking for the Best Tools to Build a Strong Workplace Culture? Check Out These Expert-Vested Employee Recognition Platforms!
What is Organizational Culture?
Organizational culture—also known as company culture, corporate culture, or workplace culture—is the collection of beliefs, expectations, and objectives of a company. It sets the tone for the whole organization, establishing a set way of thinking or doing things that is shared to a large extent by (ideally) all employees. New employees who want to be a part of the organization must also be able to adapt to this culture before being fully accepted.
Some people may confuse organizational culture with the company’s mission statement or business goals, but these terms do not mean the same thing. However, they may help define your overall organizational culture in one way or another.
While the term “organizational culture” might be new to some people, it has actually been around since the 1950s. It received very little attention for decades and did not become a popular topic of discussion for organization theory until the 1980s.
So what suddenly changed?
One of the many drivers of the sudden surge of interest was the growing demand for new ideas and HR models that enable effective organizational management. Work morality was developing quickly at the time, and the need for expressivity and involvement increased along with it. The emerging labor landscape demanded an expansion of organizations' cultural perspectives.
Types of Organizational Culture
According to two prominent organizational scientists, Robert E. Quinn and Kim S. Cameron of the University of Michigan at Ann Arbor, there are four types of organizational culture: Clan, Adhocracy, Market, and Hierarchy.
- Clan cultures operate like families through nurturing mentorship and collaboration.
- Adhocracy cultures are dynamic and entrepreneurial. Employees are risk-taking innovators who value growth and trendsetting.
- Market cultures are results-oriented. People focus on competition and measurable achievement.
- Hierarchy cultures are formalized and focused on long-term goals. Employees value structure, stability, and efficiency.
Clan Culture
Clan culture is characterized by a strong focus on the members of an organization. The workplace is highly collaborative and consists of individuals who communicate freely and feel valued.
In simple terms, a company that has a clan culture looks like a big family. The rank-and-file employees are like siblings, and the executive-level managers are the parents. There is a horizontal organizational structure that helps remove the barrier between the two groups, and there are plenty of mentorship opportunities that maximize the growth of the staff.
Read More: Remote Mentorship: Strategies for Successful Mentoring in Virtual Teams
Given how closely knit this type of organization is, its level of employee engagement is very high. However, the clan culture is very hard to maintain as a company scales up and takes on more employees.
Adhocracy Culture
A company with an adhocracy culture prioritizes innovation and adaptability. Its employees are always looking for the next big thing, allowing the organization to stay ahead of the curve and the competition.
One distinguishing characteristic of this type of company is that it values individuality. It encourages its employees to think outside the box and not hesitate to bring any idea to the table.
Adhocracy culture makes an organization dynamic and fosters a creative work environment, exposing new opportunities for growth and potential resources to tap into. However, this model is inherently risky, as new ventures can either succeed or hurt the business.
Another drawback of this culture type is that it inspires competition instead of collaboration and integration.
Market Culture
In the market culture, companies prioritize profitability and are always focused on the bottom line. There is often a clear distinction between leadership roles and other team members.
Nevertheless, the expectations from each position are clear, and their individual objectives are aligned with the bigger business goals. They are all results-oriented and obsessed with reaching quotas and hitting targets instead of internal satisfaction.
Companies that adopt the market culture are often highly successful and profitable. However, it creates a fast-paced and highly competitive work environment, which could lead to workplace stress and burnout if not managed well.
Hierarchy Culture
As its name implies, hierarchy culture is a very formalized and structured work environment. There is a clear chain of command, and procedures determine what everyone does in different work situations.
There are different management tiers in addition to the distinction between leadership roles and employees. This separation between various roles is often indicated by the dress code that each employee has to adhere to.
While the hierarchical organization sounds very rigid, it does have many benefits, especially if implemented well. It provides a clear direction for each member of the organization, making it easier for them to achieve the overall objective.
That being said, companies with a hierarchy culture have little room for creativity, so it is harder for them to adapt to sudden changes in the marketplace.
Why Is Organizational Culture Important?
In essence, developing a healthy organizational culture gives employees the space to do three very important things: perform better, be more autonomous, and remain loyal to your organization. In short, it increases employee engagement.
Positive Team Culture Empowers Employee Engagement
New data shows that employees who are more engaged are 41% less likely to be absent from work and 17% more productive—yet no companies of all stripes are ensuring they integrate the best employee engagement software.
Aside from having a big impact on productivity, the right company culture can increase an organization’s employee retention rate. In the same data set, there is a 24% reduction in turnovers for high-turnover organizations.
In industries where turnovers are low, businesses with highly engaged employees have significantly fewer turnovers — a reduction of 59%.
To be clear, the threshold for the annualized turnover in this report is 40%. High-turnover organizations are those who are above it, while low-turnover organizations are on the lower side of the line.
Attracting the Best Talent With the Right Culture
Even before a potential hire joins your company, you can already see the effects of your organizational culture. In an article posted by Business News Daily, company culture is one of the biggest considerations for 77% of job hunters today.
The same article states that 65% of millennials in the US and the UK value work culture over employee compensation.
Simply put, the right culture can help you attract the best talents, and make your workforce happier, more productive, and less likely to leave, all of which have a positive impact on your business.
The Characteristics of Organizational Culture
Each organization—like the people in it—has its own personality. Organizational culture consists of seven distinct characteristics. Different businesses value each of them in varying degrees, and therein lies the uniqueness of each workplace culture.
Let’s take a closer look at the characteristics that define an organizational culture:
Innovation
Companies that are on the high end of this spectrum value innovation and are more open to risk-taking if it allows their employees to come up with groundbreaking ideas and initiatives.
Those who place a low value on innovation are just fine with their employees doing the same things in the same manner that they were trained to do them. This approach is safer, but it leaves less room for improvement.
Attention to Detail
This characteristic is all about accuracy. A company that pays close attention to details encourages its employees to carry out each task with precision to generate reliable and predictable results.
Emphasis on Outcome
Organizations that emphasize the outcome are focused on the results and flexible about the how. In other words, employees are encouraged to do whatever it takes to get the job done.
Emphasis on People
Organizations that value this characteristic examine their decision-making process closely and how it impacts all employees. They treat all workers with respect and dignity and believe that the interests of the company and employees go hand in hand.
Teamwork
Teamwork is evident in workplaces where employees are encouraged to operate in groups instead of individually. This approach is based on the premise that collaboration and positive relationships drive better results.
Aggressiveness
The aggressiveness characteristic shines in a highly cutthroat environment. It encourages its employees to be assertive, especially when pursuing a competitive advantage over rival companies.
Stability
Predictability, guidelines, systems—these are just some of the elements that determine an organization's stability. Highly stable companies are bureaucratic in nature, which is why those on the other end of the spectrum implement a more free-flowing approach.
Examples of A Good and Bad Organizational Culture
It is easy to read and discuss organizational culture, but can you spot it in an actual workplace? If not, here are the signs of a healthy workplace culture and an unhealthy one.
Good Workplace Culture Examples
- Your company’s cultural values are clear, and everyone knows them
- You draw the attention of highly qualified applicants
- You have a tradition of workplace excellence
- Your company has a healthy employee turnover rate
- The conflicts in your organization are resolved in a positive manner
- Office politics in the workplace are kept to a minimum
- There is a high level of trust between employees, including leadership roles and staff
- You invest a lot of resources in talent development and training
- Your company is doing well financially
Nike is a prime example of a company with a great organizational culture. All it takes is one look at Nike’s workplace, and you will realize how energetic the employees are. Who wouldn’t be if your company is willing to shut down the office for one whole week for a “quick” mental health break?
And yet, there’s more to Nike’s current culture than happy employees. The company aims to achieve greatness both inside and outside of work, and this goal is clear to all members of the organization.
Bad Organizational Culture Examples
If there are ways to identify a good organizational culture, a bad one also has telltale signs. Here are some of the examples of an unhealthy team culture:
- The shared values of your company are not clear, especially to the employees
- Even your managers are not sure what your core values are and cannot lead by example (check out our article on three types of toxic managers for more information)
- The turnover rate in your company is high
- Many of your employees are late or absent for various reasons
- When your employees do report to work, they often have to do overtime, even during weekends.
If you see any of these symptoms in your office, you should sound the alarm bells immediately.
Developing a Healthy Organizational Culture
There is no question that a company culture that prioritizes employees’ psychological safety is key to business growth. However, building it takes a lot of work.
To begin, a company’s leaders should ask their employees, customers, board members, and other key stakeholders their perspectives on two sets of values: the company’s current core values and its aspirational values. Do they encourage mentorship? Are they results-oriented? Do they work in quick sprints? Do they desire more or less of anything in particular? After gathering information, executives can coalesce this information into a starting point for shared values.
Following this process, it’s important that leaders initiate the attitudes, beliefs, and behaviors they want to see across the organization. In this way, managers switch from a culture of “boss” to “coach” as they lead by example.
To help support a strong ongoing culture, HR needs to step up, too, in shaping and communicating the organization’s values and desired behavior. This can be accomplished by acquiring compatible new hires, talking about the company culture with current employees, and reinforcing behavior through peer-to-peer recognition that ties back to values. HR can keep an eye on progress by using tools to gather input throughout the employee lifecycle.
Tools like employee rewards systems, EAPs, and employee experience platforms provide organizations with data-based, people-driven insights that link culture to strategy.
You could leverage technology by using the best HR software available today, but the important thing is to be consistent and not give up. It is normal for people and organizational behavior to drift from time to time. But if you continue to be clear about the expectations and provide guidance where needed, you will be creating the recipe for success.
Throughout time, global cultures have shifted, splintered, uprisen, and altered in myriad ways to reflect the values of their people. From a business perspective, how does this translate to the workplace? Organizational culture is a system of shared values that can shape employees’ performance, behavior, and beliefs.
However, it’s not a stale system. Leadership author Abdi Osman Jama puts it this way: “An organization is a living culture that can adapt to reality as fast as possible.” Over time, a company and its culture can—and should—constantly learn and develop alongside its members.
One primary reason that culture should evolve is to keep employees engaged in their work. However, according to a 2019 Gallop study, the percentage of "engaged" workers—those who are highly involved, enthusiastic, and committed to their workplace—is just 35 percent.
Increasingly, human resources is playing an important role in engaging employees in order to nurture company culture. Many executives already see the value. According to an article in SHRM, leaders from around the world say that enhancing employee engagement is one of their top five global business strategies.
Turning Organizational Culture into An Asset
While organizational change is constant, your company can take continual steps toward defining its purpose and brand — that is, why it exists and how it wants to be known. Over time, aligning your team members with your workplace culture will become a competitive advantage. Here’s how to turn your organization’s culture into an asset.
1. Hire for Cultural Fit
A strong culture fit can yield greater job satisfaction, longer tenure, and improved performance. To show candidates what you’re all about, integrate your culture into your employer brand messaging, job content, and interview processes.
To reach external talent, use career sites and social channels to broadcast your organizational culture. Prospects want a closer look at the company's day-to-day life. Beyond job postings, your career page should highlight your company values and current employees through in-depth and specific stories. Assessing for culture fit helps ensure that those who apply are opting in to the shared values and behavior.
Another important way to bolster organizational culture is by hiring from within. HR can encourage employees to pursue opportunities by providing internal mobility tools that teach them about career opportunities and allow them to express their interest in different roles.
The last point is to stay operationally focused. Just like managing your assets via a CMMS, managing your people requires the right tools and processes.
2. Communicating with Your Workforce
Employees who feel included in decision-making are more motivated and engaged. A Tinypulse survey revealed transparency is the top factor contributing to employee happiness. You can utilize employee engagement software to help develop a culture of trust and inclusion.
3. Prioritizing Belonging
Feelings of safety and rapport can improve communication, collaboration, and alignment. It’s important to keep in mind that subcultures will likely develop among different departments and groups of people. Workplace diversity should be championed and woven into a company’s overarching culture.
