What It Is, Why It’s Important, and How to Build It
When management expert Peter Drucker proclaimed that “culture eats strategy for breakfast” in 2006, he got business leaders’ attention. In just five words, he summarized why many companies fail to thrive. Almost overnight, the former back-burner topic took on new urgency in boardrooms across all sectors.
Today, it’s hard to find an executive team that doesn’t prioritize their company’s culture. But despite the heightened focus, mistaken beliefs persist about the essence of workplace culture and what leaders should do about it.
Misconceptions about Organizational Culture
Many business leaders who think they understand the term “organizational culture” are often stumped when asked to define it. They find the concept so intangible that it’s hard to put it into words. So, they often resort to concrete initiatives that they think will build culture and benefit their company, including:
- Providing popular workplace perks
- Promoting core company values
- Formulating formal policies
Each of these things can enhance or augment an organization’s culture, but none of them will create it. And as many leaders discover, culture can still languish even if one or more of these tactics are initiated.
CEOs often assume they can create their company’s culture by enhancing the employee experience. For example, led by the tech boom in the 1990s, workplaces began to sprout bean bags, game tables, and break rooms stocked with treats. Dress restrictions evaporated, pets came to work, and festive gatherings became routine.
Fun perks are enjoyable, but they don’t form a company’s culture. Instead, they create a trendy atmosphere that has little bearing on how a workforce functions. And while these appealing extras can make people happy in the short term, they often overshadow underlying detrimental issues.
In addition, companies offering these perks to incentivize their employees can instead make them feel like commodities. Regardless of how many pizza parties are on the schedule, no one wants these fringe benefits in exchange for meeting unrealistic expectations.
Core Company Values
Many companies develop a set of core company values to inspire their employees and reflect their organization’s standards to the public. These tenets are usually based on qualities that are important to the company leader, such as:
Once organizations establish their core values, they often display them prominently to demonstrate a commitment to these high standards. For example, these defining principles are usually framed on workplace walls, highlighted on corporate websites, and included in various messaging formats.
Formalizing company values is a commendable way for leaders to frame their company. But many CEOs mistakenly think that by doing so, they are also forging their organization’s culture. Unfortunately, the market is full of businesses with core values that don’t line up with what’s really happening in the workplace.
Employees often cite poor treatment by management and peers as a sign of poor workplace culture. Their opinions usually stem from negative experiences based on their heritage, age, sexual orientation, physical ability, or background.
Companies that understand that a strong culture is inclusive and supportive often create policies to address these issues. They believe that publishing diversity, equity, and inclusion guidelines will establish an environment where their people can thrive.
But spelling out how people should interact within an organization doesn’t automatically change people’s attitudes or how they act.
As with core company values, the policies must be brought to life to meaningfully improve a company’s culture.
Behaviors: The Essence of Organizational Culture
Despite people’s many perspectives and misperceptions about work culture, the term can be distilled into one word: behaviors.
Organizational culture isn’t comprised of perks, abstract core values, or policies. Instead, it is evident in staff members’ daily actions and attitudes. It shows up in how they approach their work, interact with each other, and interface with the public and other stakeholders.
And the range of behaviors a workforce adopts will determine whether its culture is healthy, mediocre, poor, or even toxic. A company has a strong culture when its staff’s behaviors align with organizational goals and guidelines. But this outcome isn’t accidental.
A vibrant, supportive culture only happens when leadership intentionally cultivates specific behaviors.
Leaders who limit their approach to perks, values, or policies will be disappointed in the results. And they’ll have even deeper problems if they simply leave their company’s culture to chance.
Instead, they must consistently communicate and reinforce the behaviors that drive success to prevent counterproductive ones from developing organically. These can range from conduct that weakens project deliverables to actions that cause significant conflict in the workplace.
Why a Strong Company Culture is Essential
An organization’s culture is a mosaic of its staff’s everyday behaviors. It’s reflected in everything they do, and it’s so pervasive that it impacts every area of the business—for better or worse.
Culture can cause operations to sink or soar, stymie plans or bring them to fruition, and make or break a company’s reputation. Ultimately, the quality of a company’s culture can stifle profits or escalate the bottom line.
Some of an organizational culture’s most significant consequences occur in the following areas:
- Employee engagement
- Customer satisfaction
Every organization vies with competitors to attract highly qualified recruits. While the war on talent is nothing new, today’s job seekers have refined their criteria for potential employers and are looking for more than the highest bidder.
In 2019, Glassdoor’s Mission and Culture Survey found that 77 percent of adults would consider a company’s culture before applying to work there. Then the pandemic reordered everyone’s priorities and younger generations grew more prevalent in the workplace. Now even more members of the evolving workforce rank organizational culture over all other factors when they’re eying potential employers, including compensation.
Consequently, most job seekers will scrutinize a company’s website and recruitment materials to learn about its culture before filling out an application. They’re searching for an employer that reflects their values and a workplace where they feel they belong, have a sense of purpose, and will be supported to succeed.
Organizations that demonstrate a strong culture not only draw more highly qualified prospects than their rivals. They also attract people who will blend with and enhance the existing team.
Retaining and maximizing top staff’s potential is perhaps even more vital than recruiting them. Culture drives the level of employee engagement, or how connected people feel to their organization. And engagement is crucial in preventing turnover and keeping workers motivated.
New hire attrition is one of the most vexing problems for companies spending considerable money and time on recruitment. And it’s not an occasional headache. According to Harvard Business Review:
- Nearly 33 percent of people look for a new position in their first six months on a job.
- And 23 percent of employees leave before their first work anniversary.
One of the primary reasons recruits depart so quickly is that they feel uncomfortable in the company’s culture. In some cases, they may have misread the culture before they were hired and then realized they weren’t a good fit. But too often, companies purport to have a healthy culture and then don’t deliver as promised. And new employees won’t stick with a company that doesn’t walk the talk.
Veteran employees also exit, and many do so in search of higher salaries. But as reported by MIT Sloan Management Review, toxic workplace culture is 10.4 times more likely to contribute to attrition than compensation. Their researchers cite five attributes as having the largest negative impact on employees’ rating of their organization’s culture.
Workers disapprove of companies that embody the following qualities and display corresponding symptoms:
Lack of consideration, courtesy, and dignity for others
Inequality relating to LGBTQ identity, disability, race, age, gender, cronyism, and nepotism
- Unethical behavior
Dishonesty, lack of principles, and regulatory compliance failure
- Cutthroat behavior
Backstabbing, ruthlessness, and secrecy
- Abusive behavior
Bullying, harassment, and hostility
Toxic culture is a primary driver of the Great Resignation, but culture doesn’t have to be egregious to negatively affect the workplace. For example, a stagnant culture may not make people leave, but it also won’t engage and inspire them to perform well.
Employees operating in a sub-par culture are more likely to be “quiet quitters,” doing enough to earn their paycheck and nothing more. But people who are locked into a vibrant, positive culture are motivated to do their best work.
A favorable culture is supportive and inclusive, which are necessary qualities to motivate people to bring their best selves to work. But to be top performers, the culture must also help them hone the characteristics they need to excel.
A high-performing culture is rooted in the behaviors necessary to generate individual and organizational success. Companies that use their culture to reinforce exceptional skills and habits will generate consistently strong producers.
For example, highly productive companies often develop a coaching culture to help people work more effectively. They teach people how to strengthen behaviors such as:
- Communicating effectively
- Paying attention to details
- Being responsive
- Looking for ways to improve
- Being proactive
Companies that don’t emphasize these traits in their culture are less likely to maintain optimum productivity. Their operations will ebb and flow because they lack the cultural engine that can keep a steady pace.
Most companies can measure their success by the end-user experience. For example, how customers react to an organization’s products or services will determine its market share. And buyers form their opinions based on the quality and delivery of their purchase.
So, in addition to ensuring highly productive internal operations, outstanding organizational culture is the basis of continuous customer satisfaction. It influences everything from the innovation and precision it takes to develop the commodities people want to the speed and attentiveness of customer service.
Companies cultivate brand loyalty when employees consistently demonstrate exceptional behaviors that are the hallmark of a robust company culture.
These customer-focused behaviors include:
- Creating a great impression.
When workers are proud of their organization, it resonates with the public. These employees radiate enthusiasm when they first interact with customers and sustain that positive attitude with every touchpoint.
- Modeling integrity.
Buyers prioritize honesty in their transactions and appreciate knowing that people they do business with have their best interests at heart. But they avoid companies whose representatives demonstrate hazy ethics.
- Being highly responsive.
Even employees who make a great first impression can lose customers if they’re slow to follow up. Conversely, companies that emphasize responsiveness throughout every service issue make buyers feel heard and appreciated.
- Delivering results.
Beyond being highly responsive, employees operating in a high-performing culture do whatever it takes to meet customers’ needs. Buyers appreciate dealing with employees with a can-do attitude who don’t make excuses.
- Working as a team.
Employees greatly enhance the customer experience when they support one another and collaborate effectively. Buyers will sense the teamwork even if they don’t interact with everyone who contributed to the effort.
- Making encounters easy.
Companies that train their staff to think from customers’ perspectives create positive experiences. In addition, a high-performing culture encourages employees to find ways to simplify processes, shorten wait times, and create win-win solutions.
- Developing relationships.
A key aspect of great service is treating customers like people instead of accounts or transactions. Great cultures promote connecting with clients on a personal level and making them feel special.
Most people are game to do business with an organization if they like what they see on the surface. But companies that consistently satisfy the public generate lifelong customers.
An extraordinary work culture is the biggest differentiator in a crowded marketplace where pricing, products, and services are constantly duplicated or bested.
Business leaders developed a newfound appreciation for resilience and stability after undergoing the turmoil generated by the pandemic. Those whose companies fared best during the COVID maelstrom shared a crucial common denominator—powerful organizational culture.
This critical advantage provides structural support for everything companies do and helps staff maintain stamina, confidence, and unity—especially in challenging times. The crisis point of the pandemic is behind us, but the experience left wary business leaders acutely aware that anything can happen.
For example, respondents to a Deloitte survey of over 2,000 CEOs across all industries reported that they now expect catastrophic events to happen occasionally or even regularly. These pragmatic leaders are already preparing for future turbulences. Even if they can’t predict upcoming crises, they’re putting systems in place to make their businesses as resilient as possible under any circumstances.
Along with fortifying operational infrastructure, forward-thinking CEOs are planning and investing in strategies to bolster their organizational culture.
Their tactics include promoting and teaching behaviors that enable preparedness, innovation, and fluid collaboration, so their employees are poised to work seamlessly, regardless of unexpected events. By reinforcing these behaviors, they’re supporting and fortifying their teams so that they are prepared to evolve, rebound, and endure any upheaval.
As companies become more successful, they frequently add locations or broaden staffing to accommodate their escalating business. But a profitable trajectory depends on maintaining the superior performance that enabled them to expand. And even if they started out with a sturdy culture that made such consistency possible, exponential growth could dilute it fairly quickly.
When an individual or small group launches a business, they lay the groundwork for its culture. The founder or core team models the behaviors they believe will drive success, and their employees follow their example on “how we do things around here.” This pattern works on a small scale but becomes untenable when a growing staff no longer has daily access to the leader.
Therefore, it’s critical for expanding companies to harness and preserve the culture that created their success. The only way they can achieve this goal is to document their culture and create a process to reinforce it continuously throughout their organization.
Companies can also extend their workforce via mergers and acquisitions. But a culture clash can easily ensue when one organization joins or absorbs another. Leaders who understand culture’s impact don’t just consider the tangible components of combining two enterprises. They also work proactively to ensure the union’s success by constructing a healthy culture throughout the blended workforce.
Developing High-performing Culture
CEOs aiming for consistent success should remember Peter Drucker’s quote from the beginning of this article. No matter how many strategies they pour into finance, marketing, and operations, they’ll come up short if they fail to factor in workplace culture.
The smartest tactic is to flip the paradigm and develop a plan and a process to build the culture that will enable other business strategies to succeed.
Many leaders may wonder how to begin such a complex endeavor because organizational culture is so multi-faceted. CultureWise Founder and CEO David J. Friedman recommends that CEOs use an eight-step framework to simplify the process of creating an effective culture initiative:
- Define the employee behaviors that drive your success.
- Ritualize the practice of these key behaviors.
- Select people who are right for the company’s culture.
- Integrate new hires into the culture.
- Communicate the culture throughout the organization.
- Coach to reinforce the culture.
- Lead the culture by example.
- Drive the culture through accountability.
While each part of his method is a vital part of building and sustaining a high-performing culture, he notes that the first two steps have a disproportionate influence on the initiative’s overall success.
Defining Optimal Behaviors
As noted above, core company values can inspire employees, but they don’t create workplace culture—behaviors do. That’s because values are ideas subject to multiple interpretations, making them difficult to demonstrate consistently. But behaviors describe specific actions that are universally understood. Values are abstract nouns, while behaviors are expressed in a verb format describing things people do.
Leaders must identify the behaviors that drive individual and organizational success to shape the culture they want for their organizations.
To help leaders think more practically about this step, Friedman suggests defining behaviors in four categories:
- How employees work with customers
- How employees work with each other
- How employees approach their own work
- The attitude employees display
He cautions against writing cliches and recommends that CEOs list and describe the behaviors that personally resonate with them. These working definitions will form a common language that helps build a unified culture.
Ritualizing the Practice of Behaviors
People rarely get better at a skill or stay on track with a goal without practice. Every individual or team accomplishment results from consistent, repetitive habits that help them improve. This principle is equally valid in building an outstanding workplace culture.
After leaders clarify the behaviors they want to shape their company’s culture, they must help their people master them. Friedman defines rituals as practices done repeatedly so that they become second nature. By introducing rituals to strengthen the defined behaviors, leaders provide regular opportunities for people to think about how and why they are done.
As Friedman writes in Culture by Design, instead of randomly doing things when they come to mind, “rituals shift our focus on behaviors from episodic to systematic.”
He recommends that every staff member, from the executive level down, routinely participate in rituals designed to reinforce company culture. And for people to get the most out of them, he suggests having the rituals focus on one behavior at a time. He notes,
“By incorporating daily and weekly rituals to practice these behaviors together in our work life, we create multiple opportunities to think about, discuss, and internalize them.”
Rounding Out the Framework
The first two steps in Friedman’s eight-step process lay the groundwork for creating a high-performing culture. The other six steps are integral to making it last.
CEOs can’t launch a culture initiative and expect it to operate on autopilot. Instead, after defining the traits they want their culture to reflect and providing a methodology to practice them, leaders must commit to an ongoing process to continuously strengthen their culture.
They can work toward this goal by:
- Hiring people who will not only fit in the culture they’re building but bring unique strengths that will enhance it.
- Making the organization’s culture a primary focus in the company’s onboarding process and helping new hires understand its significance.
- Finding ways to regularly communicate and reinforce the culture to the team using various messaging tools and technology platforms.
- Developing managers to be coaches dedicated to bringing out the best in their people and helping them perfect specified behaviors.
- Visibly modeling the behaviors and setting the example they want their staff to follow.
- Creating an environment of positive accountability that encourages people to take ownership of their actions and attitudes at work.
This comprehensive, ongoing effort will enable leaders to forge a vibrant, cohesive company culture. These measures are effective for an on-site workforce as well as remote and hybrid teams, with whom maintaining a strong culture can be particularly challenging. Forming a strong culture is more important than ever as work models continue to evolve and become more fragmented.