What is company culture and why is it important?

Culture – it’s not just a buzzword. As famously expressed by Peter Drucker, ‘culture eats strategy for breakfast, lunch, and dinner’. Culture, put simply, refers to the values, practices, beliefs, and purpose of an organisation that are unique to itself.

In recent years, organisations have increasingly recognised the importance of company culture to their businesses. These developments stem from several factors: a new generation of workers, that expect businesses to play a positive role in their lives as well as in the wider world; employee satisfaction; the promise of greater productivity levels… But what is culture? And why is it important?

Culture is the sum of an organisation’s values, purpose, and ultimately, its people. It is vital to organisations, and HR software can help HR shape and direct company culture.

What is culture?

Company culture is an organisation’s vision that connects its workforce to a purpose which should empower them and unlock their true potential, as well as making customers feel happy to use their services. Culture connects engagement, productivity and purpose. It’s not just about having values. It’s not just about positive leadership. It’s not just about flexibility. It’s all the above. A failed culture can sink a business; it’s simply too important to get wrong.

Culture is critical – it signifies the recognition that a business is only as good as its people and that people are its most important resource. Moreover, it empowers its people to do better, as well as shape and direct an organisation’s path towards success. So, what makes culture so important?

Culture aligns organisations

Organisational alignment is one of the most crucial objectives facing companies today. It is fundamental to the cohesion necessary to smooth business operations. It can be a very difficult goal for business. For instance, growth, decline, restructures, mergers and acquisitions all threaten ease of communication across organisations. In fact, SHRM reports that two in three mergers fail due to the cultural misalignment. Businesses that view mergers exclusively as a vehicle to meet specific objectives while failing to manage the transformation of cultures and the communicational hurdles it can bring, run the risk of collapse.

A good company culture ensures that all employees understand the objectives, targets and values, as well as what is expected of them. This is perhaps the most crucial element of smooth collaboration across an organisation.

Involving all employees in an organisation is very important. It spreads common direction, so team attitudes and mentalities are aligned with their company’s direction. Recruiting talent that shares the vision of your organisation keeps the cogs meshing and eases collaboration. Because they’re a good culture-fit, they are more likely to motivate and inspire their teammates, increasing productivity and making them extremely good investments, when compared with exclusively technical fits.

Culture attracts the right talent

Does culture really eat strategy for breakfast? Furthermore, the issue of whether and when to prioritise culture or skill set has long been debated. That most commentary has leaned towards culture fit in recent years is unsurprising for several reasons.

A great culture is good for marketing vacancies and attracting the best talent suited to your organisation. In some respects, culture is the most important part of retaining employees, especially when, for instance, an organisation is facing challenges or significant developments. Additionally, it’s much easier to teach job specific functions than to teach an individual how to collaborate well.

A candidate can have all the right qualifications, interview well, and talk the talk, but if they don’t share the same vision as a company, or if a toxic candidate is elevated to a managerial position, it can have poor consequences for your business. You can also attract potential hires by giving a new hire welcome kit that reflect your company culture as a whole.

A toxic workplace culture can doom a business

A poor workplace culture can negatively contribute to business. Hiring employees that don’t mesh well within a company’s culture and aren’t able to collaborate effectively can follow with:

  • poor work quality,
  • low job satisfaction,
  • a toxic environment,
  • higher rates of employee turnover,

all of which can be devastating for a business. Indeed, SHRM estimates turnover can cost as high as 50-60% of the annual salary of the turned-over staff.

Organisations that fail to recognise the importance of employee independence, flexibility and role fulfilment, run the risk of organisational misalignment, contributing negatively to the business and even damaging their reputation.

What makes a strong culture?

So, there’s no question that company culture is extremely important to an organisation’s processes and consequently its bottom line. But this raises the question of what makes a strong culture?

In a business that has a strong culture, leaders and employees understand and commit to an organisation’s values because they’re reinforced internally by deliberate training and decision-making at every level.

A weak culture by contrast, gives rise to a fundamental disconnect between stated (if it’s even stated in the first place) and actual culture. Indeed, a lack of stated culture or a misaligned culture is one where there’s no support, or where an established culture is not perpetuated by its workforce.

Culture isn’t a coat of paint you can lay to conceal organisational misalignment and it’s not something to be shoehorned in after the fact. An image-first approach to culture, where organisations prioritise being seen to do good by their purpose, rather than being truly committed can have a negative effect, when the non-aligned employee population is rudely awakened to the hypocrisy between what an organisation says and what it actually does.

How can HR help?

A recent study by Culture Vigilance found that employees’ understanding of ‘broken’ culture included:

  • not enough investment in people
  • insufficient accountability
  • bad behaviour by seniors
  • high pressure
  • poorly articulated ethics
  • the need for more diversity and inclusion.

Whether it’s by establishing initiatives to greater engage employees, or recruiting and selecting applicants who share the organisation’s beliefs, values, and attitudes, HR is in a strategic position to influence company culture.

Organisations should aim to intertwine HR functions closely with senior management to identify what the organisation should look like, and the extent to which the reality reflects this.

This means putting people first, understanding human empathy, an organisation’s relationship with the public and environment, as well as how factors such as hierarchy, urgency, and organisational subcultures, diversity among others, interact within a workforce.

Are you worried about how a toxic working culture is affecting your business? Learn more about how HR can help an organisation steer clear of falling victim to a toxic culture.