What is company culture and how do you develop it?

Company culture plays a huge role in an organization’s success. The right organizational culture can help a company attract and retain top talent. It can also improve employee engagement and help the company gain a competitive edge in the market. 

But what is company culture and why is it so important? What kind of impact does it have on new hires and existing team members? And what steps can organizations take to foster a corporate culture that drives results?

Let’s take a dive into everything you need to know about company culture—and how to build a strong culture at your organization.

What is company culture?

Company culture is the shared values, attitudes, behaviors, and standards that make up a work environment. It is about the experience people have at work and how that experience aligns with the external brand and messaging of the company. 

Culture is what creates the day-to-day experience at a company. And when an organization has a good company culture, employees are engaged, committed, and excited to come to work. And that stretches from brand new employees all the way up to the leadership team.

That's because, in a healthy culture, there are clear expectations. Expectations around how work gets done, why that work is important, and how teams are expected to treat each other. There is also a sense of alignment between the company vision and core values and how those values and vision actually show up in the workplace.

4 types of company culture

Company culture is difficult to define and can feel like a moving target to get “right.” But, in reality, there is no real right way for all organizations. To help get a better idea of how it functions, we can take the four cornerstone types of company culture, as defined by business professors Robert E. Quinn and Kim Cameron:

• Adhocracy culture: Also known as the “create culture,” this is a highly innovative and fast-moving environment.

• Clan culture: A highly collaborative company culture that thrives on teamwork.

• Hierarchy culture: As the name suggests, this is a structured work culture that typically follows established roles and processes.

• Market culture: A goal-oriented, high-pressure culture that focuses on output and goal attainment.

As you can see, each of these company cultures is different and is rooted in various core values. You could find great success or struggle with any one of these, depending on your organization’s size, structure, and goals. So being able to step back and understand what kind of culture your company currently embraces is an important step in determining where you want to go next. Is the culture you currently have working well, or could it use a different strategy?

5 factors that contribute to organizational culture

There are a number of factors that contribute to company culture, including:

1. How the organization treats employees 

How a company treats its team members plays a huge role in defining the company culture. For example, an organization that has an employee recognition program? That company is going to have a different culture than an organization where managers take credit for their employees’ work.

2. The company’s mission

If an organization has a strong mission, it can influence company culture as it gives employees a shared sense of purpose. (It can also lead to better business results. According to research from Deloitte, companies with a mission outperform companies without.)

3. How decisions are made

The decision-making norms within a company can also influence workplace culture. For example, a company that asks for employee feedback when making decisions is going to differ from a company where the CEO makes the call alone.

4. How people communicate with each other

Communication norms also factor into the company culture. Some companies have an open, friendly communication style that leads to strong relationships. Others have a more “keep to yourself” culture that limits non-essential communication.

5. Expectations around work style and volume

How organizations expect their employees to work also plays a major part in company culture. For example, is the atmosphere more laid-back or more of a high-performance culture? Do team members have flexibility in where and when they work? Is work-life balance a core part of the work experience—or are employees expected to respond to work requests on nights and weekends?

Why is company culture important? 

One big reason company culture matters so much is because it is important to employees. According to a recent survey from Jobvite, nearly 40% of workers ranked company culture as “very important.” Therefore, investing in company culture has a variety of long-term and short-term benefits. Here are a few examples:

Company culture has a direct impact on employee retention

For organizations to succeed, they need to be able to attract and keep top talent—and culture has a direct impact on retention. According to a study from global staffing firm Robert Half, 35% of workers would turn down the perfect job if they didn’t feel it was the right culture fit. And a recent Employee Retention Report from management platform TINYpulse found that employees who rated their company culture poorly were 24% more likely to leave their job for another opportunity within a year.

Company culture can drive employee engagement

When your employees are excited about your company culture, it leads to more engaged team members—and when your team is more engaged, it drives positive results for your business. According to the Gallup State of the American Workplace Report, engaged employees are 17% more productive and have 41% lower rate of absenteeism than their less engaged colleagues. 

Employees want to grow with the company

A great company culture is a culture that invests in its employees’ success, well-being, and happiness. And that investment can not only help employees feel better at work but move forward in their careers.

A more positive work environment leads to increased productivity

A good company culture is one that fosters a positive experience at work. And when employees have a positive experience at work, they typically feel better about going to work every day.

On the flip side, a toxic company culture can also impact employees in a variety of ways, including:

• Higher levels of stress. When employees are working in a toxic culture, it can make them feel more stressed—which can lead to a host of negative outcomes. For example, according to research from Stress.org, more than half of employees miss between one and two days of work per year due to workplace stress. And 31% miss between three and six days.
• Decreased engagement. Just like a healthy culture fosters employee engagement, a toxic culture causes engagement to plummet. This can lead to poor outcomes for the employee and the business. According to research outlined in the Harvard Business Review, disengaged workers had 37% higher absenteeism, 49% more accidents, and 60% more errors and defects than their engaged counterparts. And companies with low employee engagement scores experienced a host of negative effects—including 18% lower productivity, 1 % lower profitability, and 37% lower job growth.

What does a healthy company culture look like?

It’s one thing to understand a healthy company culture in theory. But what does a healthy culture look like in practice?

There’s no one-size-fits-all solution to building a strong company culture. But there are some universal best practices.

Steps to develop company culture

Clearly, a strong corporate culture is essential for a company’s success. But how do you develop that culture?

Let’s take a look at the steps for developing company culture:

1. Define your values

Your company’s set of values is what dictates all of the elements of your company culture. That includes how people treat each other to what kind of expectations there are around work.

So, when developing your company culture, the first step of the process? Defining your values.

Sit down with your leadership team and clearly define the values you want to incorporate into your company culture. For example, your company values might be sustainability, respect, and transparency. Or they might be kindness, equality, and innovation. Or maybe integrity, honesty, and fairness feel like your core values.

Whatever your values are, it’s important to define them from the get-go—because it’s those values that will act as the foundation of your company culture.

2. Set goals

You set goals for everything in business. So why not set goals for your company culture?

Think about your corporate values and how you want to bring those values to life in your culture. Then, translate that into goals.

For example, do you want to build a culture around diversity? First, recognize that building around diversity means creating an inclusive culture. Then, while your goals might include increasing your diversity hiring by 50% in the next 6 months or adding more women to your leadership team, you also need goals on inclusion and belonging. These goals might include increasing the retention rate of diverse employees, or increasing the percentage of your workforce that answer positively when asked if they feel a sense of belonging on their team. (BetterUp has tools that can help you build a culture of inclusion.)

Or maybe you want your company culture to revolve around work-life balance. In that situation, your goal might be to have every employee take at least three weeks of PTO each year.

The point is, culture is bigger than any single focus area or goal. But company culture is just a concept until you put it into action. So make sure to set clear goals around the culture you want to build.

3. Ask your team what they want to see in the company culture

Your employees are the people who are most impacted by company culture. So, if you want to create a strong company culture—and retain and attract top talent in the process? Ask your employees what kind of culture they’d like to work in.

Send out employee surveys. Ask for feedback on what they like about your existing culture and what they think could be improved. Ask for their insights into what their ideal corporate culture looks like. Then, use their feedback to drive your organizational culture strategy. That way, you can build a culture that not only works for the company but also works for the employees.

4. Develop a plan for working your culture into the day-to-day work experience

As mentioned, company culture is, at the core, about the experience people have with your organization on a day-to-day basis. So, when developing your company culture, it’s important to think about how you’re going to bring that culture to life in the daily work environment.

Again, let’s say your company culture is built around diversity. That might mean offering employees paid time off for any cultural or religious holidays they celebrate. Even if they don’t fall under your normal paid holiday schedule. Or, using the work-life balance example. You might implement a communication policy that lets employees know they’re not expected to respond to work emails after 6 pm or on weekends.

Your company culture is how your employees experience work every day. So when you’re developing your culture, make sure you think about how to work your culture into the day-to-day work experience.

How to evaluate company culture

There are a few different wants to evaluate culture within an organization, including:

1. Ask leaders to describe the company culture
2. Ask employees to describe their experience working at the company
3. Look for alignment between leadership’s explanation and employees’ description
4. Look for examples of the company’s values in the day-to-day workflow
5. Read through employee surveys and exit interviews
6. Look at employee engagement and retention metrics

How to improve your company culture

Need more insights on how to improve your company culture? Try these tips:

1. Make appreciation a part of your culture. Employees want to be recognized for their hard work. So, if you want to improve company culture, start by showing them that recognition. According to research from Deloitte, more than half 54% of employees prefer a verbal “thank you” for their day-to-day accomplishments—so simply encouraging your managers to thank their employees is a great place to start.
2. Look for ways to offer flexibility to your employees. When it comes to company culture, there are few things more important to employees than flexibility. For example, according to research from GoodHire, 68% of American workers would prefer to work remotely over working in an office — and 61% would be willing to take a pay cut for the option to continue working remotely. So, if you can, offer your employees work flexibility. That might include remote options, a hybrid work arrangement, or flexibility with their work schedule and hours.
3. Make sure your compensation and benefits are competitive. It doesn’t matter what kind of company culture you build — if you’re not paying your employees well, you’re not going to be able to keep them. If you want to improve company culture, do your research on salary and benefits packages in your industry and area. Then, make sure what you’re offering your team members is competitive.
4. Check in with your employees. You can’t improve company culture if you don’t know what needs to be improved. Regularly check in with your employees and ask them what could improve their experience at work.
   
   

Examples of companies with strong organizational culture

There are a ton of companies out there that are building strong organizational cultures. Some examples of organizations known for strong, well-defined cultures include:

• Warby Parker. A foundational aspect of Warby Parker’s company culture is to “create an environment where employees can think big, have fun, and do good.” As such, the company puts together a variety of fun activities at work as well as opportunities for employees to get involved in the community.
• SquareSpace. SquareSpace’s company culture is about fostering creativity and innovation. As a result, they’ve gained a reputation as a company where employees are encouraged to speak their mind and share their ideas.
• Google. Google is known for its strong company culture (and plenty of perks!) — including the 20% rule. This rule gives employees 20% of their work time to develop new skills and work on whatever they think will most benefit the company.

Now to build your company’s culture

“What is company culture?” is a broad question. But at the core? Culture is about creating a work environment that reflects your organization’s values and empowers your team’s best work.

Whether you’re looking to develop an existing company culture or build it from the ground up, you can be sure that your efforts are in the right place.