What is Organizational Culture and Why Is It Important?

December 8, 2021
What is Organizational Culture and Why Is It Important

There are several different ways that people define organizational culture. A strong percentage of people, however, have a skewed perception of what culture truly means. Most people assume that organizational culture focuses on how your company looks from an outsider’s perspective. This may include the general dress code, the publicized mission statement, the way that an office is set up and any employee perks that are known to the public. While these can often be considered an extension of company culture, they’re not defining principles. However, culture is an important part of business. Management consultant, educator and author Peter Drucker once said that “culture eats strategy for breakfast.” This implies that the culture of your company always determines success regardless of how effective your strategy may be. When he said that culture eats strategy for breakfast, Drucker pointed out the importance of the human factor in any company. To reiterate this point, we’ll review what organizational culture is and why it’s important.

Organizational Culture Definition

Culture is a term used to define the customs, achievements, values, norms and general beliefs of a certain group of individuals. Organizational culture therefore defines the environment for everything that happens within a company. It’s the spoken and unspoken behaviors and mindsets that define how your business functions on a day-to-day basis. It also codifies what it’s like for employees to work there. Organizational culture includes the mission and objectives along with values, leadership and employee expectations, structured performance management and overall engagement levels. By building a strong culture, businesses can provide consistency and direction, guide decisions and actions, fuel the workforce and help reach their potential.

While organizational culture is an integral part of a business, it’s not always visible to long-term employees. It blends into the daily routine and becomes second nature. Regardless of whether you’ve just joined the company and you are overwhelmed with new routines or you’re a seasoned employee who no longer notices the fast-paced environment around you, organizational culture continues to exist. The longer you’re at a business, the more it becomes ingrained into who you are.

Different Types of Organizational Culture

There are hundreds of different types of organizational cultures, but a few categories tend to dominate most industries. Clan culture tends to focus on interpersonal connections, mentoring programs and aims to create a feeling of family. Market culture focuses on promoting competition and rewarding winners. Adhocracy culture is geared toward innovation and tends to eliminate traditional structures of an organization. Finally, hierarchical culture focuses on top-down business decisions. This has been fairly efficient in the past and is common in businesses today, but many people no longer value working in this type of culture. Any company can be a mixture of cultures and should adapt a unique approach that aligns with their strategy. For example, the cultural values and environment of a daycare center will be different than a surgical center where precision and standard practices are vital to business success.

The Relationship Between Organizational Culture and Leadership

It’s been found that company culture is one of the most influential factors in determining whether a business is successful or not. To ensure that you are targeted towards success, your organizational culture should align with your strategy. This should be communicated and fostered through leadership. Leadership teams have the opportunity to make or break company culture and they are essential to how it’s perceived by employees. Both employee and leadership behaviors need to be aligned and communication should remain open for employees. This will help create a stronger culture where employees are heard and valued.

7 Reasons Why Organizational Culture is Important

Organizational culture is one way that people determine whether or not they’ll do business with a company. The overall branding image, values and mission statement needs to align with both a candidate’s and potential client’s needs. This ongoing alignment is important to any profitable business, but culture offers far more than just that. Here are seven reasons why organizational culture is important in today’s society.

1. Improved Recruitment Efforts

Finding qualified talent can be an uphill battle, especially with so many up-and-coming businesses. This has caused many individuals to refine their job search and hiring criteria. Over a third of employees claim that they would pass on their dream job opportunity if the corporate culture wasn’t a fit. By fostering a strong organizational culture, you’ll improve recruitment efforts and gain the interest of top candidates. However, what one person sees as ideal company culture, another may view as a culture they don’t fit in with—everyone is different.

Create a strong company culture that aims to attract the type of individuals that you want working at your business and over time, the right talent will follow. For example, some people prefer the fast pace of an entrepreneurial culture, where others might prefer the steady pace of a more established, traditional business and culture. It’s important to note, one size does not fit all.

2. Smoother Onboarding

Companies with strong organizational cultures tend to have smoother onboarding experiences. This is because there are repeatable systems in place to ensure new employees have access to the resources they need to adapt and integrate with the culture of your office the transition period. Better onboarding procedures often translate to increased employee loyalty and overall longevity. During this process, communicating culture will help new employees understand core values and day-to-day operations.

3. Decreased Turnover

Organizational retention can be difficult for many businesses in today’s competitive environment. A strong organizational culture can help decrease turnover by creating a sense of inclusivity and community while honoring diversity within your industry. Roughly 38% of employees report wanting to leave their jobs due to negative company culture and 60% of employees have left or would leave a job because of poor leadership, so taking the time to create positive cultural values that coincide with your business’ objectives is essential.

In the U.S., 74% of respondents in a Glassdoor multi-country survey said they would look elsewhere for work if their company culture were to deteriorate. To continue benefiting from strong employee retention, organizational culture needs to be a dynamic process that is nurtured over time.

4. Enhanced Employee Engagement

Employee engagement refers to how committed, connected and passionate an individual is about their work at a specific organization. It’s how individuals build a meaningful connection with a business and has long-lasting positive effects.

By creating an immersive organizational culture, employee engagement increases exponentially. Obviously, this engagement will depend on the type of culture that’s fostered and promoted, but there is a huge potential for positive engagement with a strong organizational culture. For example, companies who have a strong culture have up to 72% higher employee engagement rate than those with weak cultures.

5. Increased Productivity

When employees are happy and satisfied with their job, they work harder. Even though organizational culture can slowly become less obvious to employees, it’s still ingrained in their daily work efforts. By creating a strong company culture aligned with your organizational objectives, you can increase employee productivity and therefore, increase overall work output. The majority of workers in the U.S. believe that organizational culture is one of the biggest influencers of their job performance. In fact, a 2019 survey found that 76% of employees believe culture helps positively influence their culture and efficiency, motivating them to do their best work.

6. Stronger Brand Identity

How you communicate your brand is important for both marketing efforts and organizational culture. Your brand represents how the public sees you—it’s your business’ reputation. While some aspects of your brand image can be controlled by external factors, most of it will come from your company culture and any interactions that individuals have with employees and leaders. The stronger your company culture, the more powerful your brand identity becomes. Your employees may even become individual brand advocates without any additional persuasion.

7. Stimulated Performance

When your organizational culture is one that fosters individual development, community and inclusivity, you’ll help stimulate employee performance and achieve more goals. Employee satisfaction combined with higher performance creates a strong talent pool of dedicated employees who will continue to value being a part of your company. Over time, this creates a positive cycle that can exponentially increase the success of your organization.

    Fostering a Healthy Organizational Culture

    To foster a healthy organizational culture, make sure that you’re communicating with your employees throughout the year and actively listening to their concerns or ideas. According to a new study from the Institute for Corporate Productivity (i4cp), Culture Renovation: A Blueprint for Action, only 15% of global survey respondents reported that their organizations have achieved highly successful culture transformations. While it takes work, company culture can be strengthened with time and small changes in how you interact with your team can create a ripple-effect throughout your office. When necessary, provide constructive employee feedback and try to be consistent with how you handle varying situations. It can be difficult to completely transform your organizational culture, but it is possible.

    While company culture may shift over time, it can be guided in the right direction with a little effort from management. Strong organizational culture is not created overnight. It requires work from leadership from day one and needs to be at the forefront of important decisions. However, dedicating the time and effort to create a strong organizational culture will allow you to reap the benefits and point your business growth in the right direction. To support your efforts in creating the right culture that focuses on employee growth and management, TriNet offers full-service HR solutions for small to medium sized businesses across several industries. Our HR expertise offers compensation guidance, talent management, employee support, leadership training and even expertise on sensitive issues, so you can create a comprehensive culture that resonates with your employees. Learn how TriNet’s full-service HR solutions can help your business today.

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