What is company culture, and why is it important?

Every company develops a culture, whether it is shaped and nurtured by leadership or grows and shifts organically as the company grows. Either model can lead to a welcoming, supportive culture that drives company success or a toxic culture that eats away at a company and eventually leads to its demise.

The best chance of developing a successful company culture comes from the leaders’ efforts to build a culture that reflects their values and goals.

The basic definition of company culture revolves around a shared set of values, goals, attitudes, and practices that create a work environment.

No strategist or expert has created, nor ever will create, a one-size-fits-all work culture that magically makes all prospective employees want to work for that company and all current employees want to stay. But that is the key benefit of good company culture: more people will want to work for your company and help it succeed.

Through research in the 1980s, business professors Robert E. Quinn and Kim Cameron found in about 90 percent of companies, one of four company cultures dominated. None of these cultures can be defined as "good" or "bad," rather they are distinct cultures that can work for different types of companies.

Clan (or collaborative) culture

Quinn and Cameron defined this culture as clan culture, but over the years the term collaborative culture has been embraced by some to make it seem less insular. Collaborative culture creates a family environment where leadership is more horizontal.

Working together as teams and reaching consensus on decisions are key features of a collaborative culture. Leaders are seen as mentors who facilitate the group dynamic. The work environment is generally happy as employees get to know each other on a personal basis and develop strong relationships. Communication and transparency are other highlights of a collaborative culture.

While a collaborative culture encourages teamwork and open communication, it can sometimes lead to distractions and reduced productivity due to constant discussions. To avoid hurting feelings or causing conflicts, tough decisions may be delayed or avoided altogether. 

Striking a balance between collaboration and focused work time and creating a safe space for constructive disagreement is essential for maintaining the efficiency and adaptability of a collaborative culture.

Adhocracy culture

Startups often adopt an adhocracy culture, which is about driving change and innovation. Facebook famously reflected this culture with its "move fast and break things" philosophy. Individual creativity and risk-taking are valuable commodities as companies seek to create the next big idea.

Employees often thrive in this environment as they are encouraged to learn, innovate, and pursue off-the-wall ideas, even if they ultimately fail.

A company founded with an adhocracy culture may have to eventually adopt aspects of other cultures as they succeed and grow, though Google continues to thrive while remaining in an adhocracy mode. One of the downsides to an adhocratic culture is that consistency, accountability, and coordination can sometimes be lacking yet must be managed closely.

Market culture

In market cultures, the main focus is on competition and putting customers at the center of everything. They're always striving to outperform their competitors and make customers happy. 

However, this intense drive for success can put pressure on teams and employees, leading to stress and potentially making things difficult for them. To make this culture work well, leaders need to find a way to strike a balance between pushing for great results and ensuring their team's happiness and well-being.

Hierarchy culture

Hierarchy cultures prioritize structure, organization, and clearly defined lines of authority. This structured approach can provide stability and a sense of order, ensuring roles and responsibilities are well defined. Employees often know their place in the hierarchy, which can help establish a clear chain of command and streamline decision-making processes. This can be especially important in industries where safety, compliance, and precision are critical.

However, hierarchy cultures risk excessive bureaucracy, where layers of approval processes can slow down decision-making and innovation. In such cultures, employees may also feel blocked or demotivated due to a lack of autonomy or opportunities for creative problem-solving.

Additionally, hierarchy cultures can sometimes be resistant to change, as the established structures and processes may take time to adapt to new circumstances. Organizations with hierarchical cultures need to strike a balance between structure and flexibility to remain agile and responsive to evolving business environments.

Every company develops a culture, whether controlled or not. Recruitment and retention will hinge on a company's culture.

Modern employees want to know if they will "fit in" with a company before they even get the job. According to a 2021 LinkedIn survey, 40 percent of prospective employees consider company culture a high priority.

Because employees spend a good portion of their waking hours at work, company culture is a significant factor in keeping employees. Deloitte found companies that actively manage their company culture enjoy a 40 percent higher employee retention rate. Due to this clear cost benefit of employee recruitment and onboarding, employee retention should be key to any company.

No matter which type of company culture your company models, there are employees out there looking for an employer who is a good fit. Performance improves when workers feel they fit with their company, and they are more dedicated to meeting the company's goals.

How does company culture affect employees?

Employees are 40 percent more likely to stay with a company if they feel its culture aligns with their values and beliefs.

No checklist exists to determine a good company culture, as every company must develop and nurture a culture unique to them. However, some aspects of a strong (or healthy) company culture include:

• Well-defined and easily understood company values and standards

• Trust, transparency, and accountability between team leaders and staff

• Fair compensation and benefit packages

• Employee recognition for performance that advances the company's goals

• Opportunities for employee growth and advancement

• A diverse and inclusive workforce

• A good work–life balance

Who is responsible for company culture?

Company culture will develop naturally for better or worse. However, leaders can guide it to create a more welcoming environment for current and prospective employees.

Ideally, a company will build its culture based on its mission, vision, values, and beliefs, from the moment a founder conceives the company. If not, companies can push the reset button on their current company culture and shift the emphasis and direction to help the company achieve its goals for all stakeholders.

Whether a company is starting to build company culture from scratch, better define and build on existing culture, or reset a culture that's not working, following these four actions will set the course for a strong culture that works for your company.

Define company core values

Core values will get right to the heart of your company's purpose and standards, but they must be more than words on paper. Company founders and leaders must establish these core values and then build their business models and practices to meet those standards.

Prospective employees will be looking for consistency in these core values as they evaluate a company. They will quickly learn if a company only provides lip service to their stated values.

When Uber went through a public breakup with its founder and had to re-establish trust with riders and drivers, it adopted a new set of company values, including the phrase "Do the right thing. Period." Ousting the founder and other long-time executives showed the company's commitment to that value.

Craft a vision and mission

A company’s mission and vision determine a big-picture view of the organization, but implementing those values will take day-to-day commitments that can be built from company culture goals. These goals will reflect the reason the company was founded. Company culture goals may sound grandiose, but they will serve as a signpost for all employees to guide their direction.

For example, Google may have sounded out of its mind when it established the goal to "Build for everyone," but the innovation and ease of use inspired by that goal led to the company's dominance in the search domain and turned the company name into a verb. 

Build culture through a team effort

Culture is a naturally occurring phenomenon that can be imposed top-down (for example, by a parent corporation) or created by a collective. Involving your entire team in developing a company culture is the only way to successfully create a culture that fits your company and its goals.

An established company can bring employees from various departments into the early stages of determining a company's cultural values and goals or involve employees in developing the day-to-day practices that will help that culture develop and evolve. Leaders at all levels must understand the values and goals to help convey them to employees.

As the company works to grow its culture, leaders must:

• Set an example: Leaders should embody the company culture in the way they show up each day, setting a clear example of how to live the company’s values and goals.

• Define the vision, mission, and core values: Articulate the company's long-term goals (vision), purpose (mission), and guiding principles (core values) to provide direction and meaning to employees' work.

• Communicate often and with clarity: Keep employees informed through regular updates, using clear and straightforward language. Encourage open dialogue, allowing employees to ask questions, provide feedback, and share concerns.

• Build and maintain trust in both directions: Lead with integrity, keep promises, and trust employees to perform their tasks independently. Offer feedback, recognition, and fair conflict resolution to foster mutual trust and confidence.

Companies can also make a deliberate effort to keep employees motivated and bought into the company culture and mission by:

• Expressing appreciation to employees for their work and commitment to the company culture

• Motivating employees to buy into the culture and support customers. Don't assume you know what motivates them. Ask!

• Supporting employees through work and personal issues in ways that reflect the company's stated values

Follow company culture best practices

Building a stronger company culture will not come without growing pains, as you may be asking employees to go beyond what you’ve expected in the past and to do things differently. You may have employees who resist this change and others who leave because they don't believe in the new culture.

You'll have more success building the company culture you envision by following these steps:

• Lead by example: Leaders at all levels should follow the daily activities your team has outlined to develop a stronger culture. Employees won't buy in if they don't see their team leaders and CEO following the plan.

• Reinforce appropriate behavior: Recognizing employees who adopt good cultural practices can go a long way to building buy-in. Money and swag never hurt, either.

• Provide feedback: Leaders need to let their employees know what is expected of them and when their actions don't reflect company values. If they don't know their actions are working against building a strong culture, they are more likely to continue.

You may have a vision of your company culture, but the only way to know if that vision matches reality is to assess your company culture. This must be done by asking people inside and outside the company.

First, ask your employees how they perceive your company culture. If they are not buying what your leaders are selling, you'll find out quickly enough when you ask. Maybe they aren't even aware of your vision of company culture and don't see the company mission beyond their work domain.

Second, ask prospective employees what they have learned or (over)heard about your company culture. They may be hearing different voices that would not be raised in the vicinity of company executives.

Third, ask customers and potential customers how they perceive your company culture. Do their interactions with your employees align with the message you intend to project?

You don’t need a sweeping revamp of your company culture with committee meetings, timetables, and implementation planning to improve your company culture. Try these four easy steps:

• Say thanks: Deloitte found that 54 percent of employees prefer a verbal "thank you" for accomplishing their day-to-day tasks. Teaching team leaders to say "thank you" to employees regularly creates an encouraging work environment.

• Offer flexibility: Workers appreciate companies that provide flexibility, be it the opportunity to work remotely, adjust work hours to meet family or personal needs, or slip away for an hour for a doctor's appointment.

• Provide fair pay and benefits: Not much is secret these days in the wage and benefit realm, so even the nicest of companies will lose workers if they’re not offering competitive pay and benefits. Some of this can even tie into flexibility as some workers might sacrifice a little pay for better flexibility.

• Talk to your employees: Team leaders and executives should regularly check in with their employees to ask how things are going and if there are things they need to perform their work better. Leaders need to be open to employees' suggestions.

Executives and workers alike are familiar with the tales of the worker amenities at giant companies like Meta (Facebook), Google, Microsoft, and the like, but smaller companies also build strong organizational cultures through their founding values and missions.

A few companies that have built strong company cultures include:

Shipwell

Shipwell co-founder and CEO Jason Traff positioned his desk right past the reception desk so employees know they’re always welcome to stop by with ideas or concerns.

The freight transport logistics company has every new employee go through a session with its culture desk, which includes a discussion with the company's founders to learn and share about the company, its purpose, and its culture. "We take a lot of time to talk about our core behaviors and how we measure up to them," Traff says.

Nerdery

Nerdery provides digital support to companies in the healthcare, retail, and manufacturing sectors, which means pulling together workers with a broad spectrum of experience to serve these diverse industries. Building a cohesive culture has been easier than expected as the company asks employees to share their interests to create vast awareness.

Sharing their experience has created a bottom-up culture that Nerds across the board find refreshing and enlightening. The company creates a video each time a person is promoted to share that employee's passions and quirky personality.

Blackbaud

As a provider of cloud-based software for the philanthropic industry, Blackbaud naturally attracts employees committed to supporting nonprofit entities. The company nurtures that passion by organizing service projects, providing time off for volunteering, and offering a company match for employee giving.

Employees are also involved in determining recipients of the Blackbaud Community Grants to nonprofits in the Austin area.

The company encourages fun as employees organize activities for events they love, such as the pinewood derby, Harry Potter, and an annual Star Wars movie marathon.