Ask 10 people to define “company culture” and you’ll get 15 different answers. But after studying great workplaces for over 30 years and listening to how employees describe their workplace experience, Great Place To Work® has decoded the psychology behind company culture.
What is company culture?
Company culture is how you do what you do in the workplace. It’s the sum of your formal and informal systems and behaviors and values, all of which create an experience for your employees and customers.
At its core, company culture is how things get done around the workplace. “How” includes both the formal systems, and the informal behaviors.
For example, your company may use instant messaging software to communicate throughout the day (system), and it may also be okay to yell at a coworker to get your point across (behavior). Your systems and behaviors give employees the “rules of the road” for interacting with the business, and each other.
Company culture is often something you can feel, even as an outsider.
I can recall the first time I walked into the lobby of a company on our Fortune 100 Best Companies to Work For® list. As I approached the door, employees who were walking in and passing by made eye contact and said “hello.”
The employee behind the desk greeted me warmly, offering me a cup of coffee and a comfortable seat. There was a distinct, positive energy in the building. My first experiences as a guest gave me a taste of how they “do things around here.”
How to identify your company culture
The best way to understand a company’s culture is to ask employees. This could be through an employee experience survey platform like Emprising™.
You’ll hear some people describe a company culture with statements like “people are willing to talk to each other, share what they know and take the proactive step to get you in touch with the right person,” or “people always come first”.
Cool perks like unlimited vacation time and innovative policies may help shape company culture, but they do not make a great workplace. The experience of your people does.
Where does organizational culture come from?
Of all the ingredients that make up your organizational culture, the most important variables are how:
- Employees communicate with each other
- Decisions are made
- People are hired, promoted, and let go
- Employees are recognized
- Employees celebrate their work and each other
Every company does each of these things, but as in most things, it’s not what you do, it’s how you do it.
Why is company culture important?
Company culture is important because it directly affects company performance on key metrics including finances, employee retention, innovation and customer service.
1. Financial returns
According to research by Great Place To Work and FTSE Russell, annual returns for the 100 Best Companies have had a cumulative return of 1,709% since 1998, as compared to a 526% return for the Russell 3000 Index during the same period.
2. Employee retention
Effective employee retention strategies, such as fostering a diverse workforce and creating an inclusive, equitable, and rewarding company culture, contribute significantly to employees' willingness to stay at the company for a long time. Millennials, for example, are 11 times more likely to leave their company than Gen Xers if their needs for purpose at work are not met.
When employees experience inclusive leadership behaviors and systems, they are better poised to speak up, share ideas and adapt to change. This is what we call a culture of innovation or Innovation by All™.
4. Customer service
Studies confirm that employee happiness translates into employee efficiency, creativity and productivity. This, in turn, has the same effect on customers.
In our own research on the average U.S. workforce and how they compare to Great Place To Work-Certified™ companies (companies where employees rank the company culture highly), we found that employees at Certified workplaces are 34% more likely to rate their customer service as “excellent.”
4 keys to building an effective company culture
1. Start where you are
Whether you have five employees or 50, there’s no better place to start than where you are. Initiate conversations with your employees about what makes your workplace distinct.
They’ll give you the language around what makes your culture tick. For marketing agency Brains On Fire, these initial conversations formed the basis of their company values.
2. Define the boundaries
Effective company culture doesn’t happen by accident, so once you have a pretty good understanding of what’s working in your workplace, apply your aspirational vision.
What is the experience you want to your employees to have? What do you want customers to say about your company? What behavior is inbounds and what is out-of-bounds?
Based on employee feedback, Brains On Fire created a series of “golden rules,” or team values to encapsulate their principles and guide employee behaviors, such as “clear is kind” and “de-escalate versus escalate.”
3. Model the way
This is where leaders must step up to move beyond words into action. Your mission, vision and values often reside on the wall, but the company culture is HOW you achieve those ends.
If integrity is a core value, make sure everyone knows what it means to ACT with integrity. If transparency is a core value, make sure you demonstrate WHAT transparency looks like.
And remember, you’re either building, breaking or rebuilding trust in every interaction with employees, so make your early ones count.
4. Measure your progress
Even our best intentions may fall short of producing the desired employee experience, so make sure you’re getting regular feedback.
Your people want to share their thoughts and recommendations for change, and the more you ask them, the more they’ll offer their best thinking to help continuously improve your business. Monitoring and analyzing employee feedback trends via an employee survey platform like Emprising will help guide your strategic HR decisions.
Assess and transform your company culture
Change involves introspection, so, naturally, the best leaders put a lot of focus on reflection. If you want to analyze your company culture and measure your progress, reach out to us about our survey and assessment tools for transforming company culture.