Quick look: Organizations with a strong company culture better retain employees, increase their bottom lines, and deliver superior products and customer service. And while a healthy culture occurs organically, it takes careful planning, strategizing, and listening to achieve it.
Retaining current employees is likely among your organization’s top priorities. However, did you know that due to poor workplace culture, 45% of workers report having thought about leaving their current company, and 30% have begun actively searching for a new job in the past six months?
Culture matters. But as the need for small businesses to focus on company culture increases, organizational leaders may wonder what exactly company culture means and how to foster a strong and supportive one.
What is company culture?
The Great Place To Work® Institute defines company culture as “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.”
An example of a formal system could be the use of Microsoft Teams to communicate during the day, while an informal system could be the notion that it’s acceptable to pop over your cubicle wall and joke about a work assignment to your colleague.
In essence, a company culture informs both employees and outsiders how an organization “does things.”
The Great Place To Work® Institute goes on to define the most important components of company culture as being the way:
- Employees communicate with each other
- Decisions are made
- Workers are hired, promoted, and offboarded
- Staff are recognized
- Employees celebrate their work and their colleagues
The importance of a strong company culture
Every business wants a healthy company culture, but how exactly does having one benefit the organization? Here are four significant advantages associated with a successful culture:
1. Better financial performance
It pays to have happier employees. Research from Great Place to Work® and FTSE Russell, a global index and data provider, found that in 2020, the 100 Best Companies to Work For® outperformed the market by 16.5%, with an approximate 37% return compared to the market’s overall 21% return.
And that trend isn’t new. Historical data from the two organizations found that since 1998, the 100 Best Companies have experienced a cumulative return of over 1,700%, compared to just 526% for the rest of the market.
2. Increased employee retention rates
MIT Sloan Management Review analyzed 34 million employees’ data between April and September 2021 and found that a toxic culture was the top driver of attrition. The study explains that a negative culture is over ten times as likely to contribute to an employee leaving than compensation. Other top predictors of employee turnover included job insecurity and reorganization, failure to recognize employee performance, and a poor response to the COVID-19 outbreak.
3. Enhanced innovation
A supportive culture can improve your company’s services and solutions. When employees feel comfortable, they’re more likely to share their ideas, speak their minds, and adapt to change.
4. Better customer service
Employees who genuinely enjoy their jobs and feel connected to their employers provide better customer service.
The Great Place to Work Institute® found that workers at Great Place to Work™-Certified businesses were 34% more likely than the average U.S. workforce to rate their customer service as “excellent.” This is especially important when you consider that 75% of customers are willing to spend more to buy from companies that provide good customer service.
What does a successful company culture entail?
A good company culture leads to happier employees, more innovative offerings, superior customer service, and a better bottom line. But what does it include?
At its core, a strong company culture is built upon the reasons people stay at your organization. While business leaders may have an idea of what their employees like and dislike about working at the company, they must take the time to understand what’s important to the staff. Employee surveys may be administered, and managers may host open, honest discussions with their team members to gather feedback.
A successful company culture should also ideally align the business with its customers. Korn Ferry reports that organizations that have a customer-centric culture experience the biggest positive impact on sales performance than all other cultures. High-performing sales organizations were shown to be nearly twice as likely to have a customer-centric culture compared to average and low performers.
Business leaders should assess their current processes and align them to the customer’s path by asking themselves if their selling processes are flexible and if they include the steps buyers need to go along their path.
How to improve company culture: 5 simple tips
Company culture is constantly growing and changing and must develop organically. However, there are five steps small business leaders can take to ensure they are doing everything they can to foster a welcoming, productive, and supportive workplace.
1. Identify your starting point
Before you can strategize how to better your company culture, you must first assess it.
As mentioned above, leadership can send out employee surveys to understand the sentiments of current workers. Analyzing your business’ Glassdoor reviews may also be helpful as they may reveal additional information about what workers like and dislike about the organization, where they live, why they are staying, and past employees’ opinions.
Business leaders may also refer to the following checklist when assessing their company culture:
✓ Do my employees feel they have a voice?
✓ Do our workers have autonomy in their roles?
✓ Does our organization communicate transparently?
✓ Does our staff feel valued?
✓ Are our policies enforced uniformly?
✓ Do our leaders practice what they preach?
✓ Does the organization encourage learning and development?
✓ Is the business adaptable?
✓ Do our employees feel a sense of belonging at work?
✓ Do they feel supported by their managers?
✓ Does our staff understand how they contribute to the business’ mission?
✓ Does the company support a healthy work-life balance?
✓ Are the organization’s values visible around the office and on its internal websites and communication platforms?
2. Determine what defines your company culture
Once you understand current and former workers’ thoughts on your company culture, it’s time to brainstorm what culture means for your business.
The Society for Human Resource Management (SHRM) outlines six key factors that form an organization’s culture:
- Values, including:
- Outcome orientation: Emphasizing achievements and results
- People orientation: Insisting on fairness, tolerance, and respect for individuals
- Team orientation: Emphasizing and rewarding collaboration
- Attention to detail: Valuing precision and approaching situations and problems analytically
- Stability: Providing security and following a predictable course
- Innovation: Encouraging experimentation and taking risks
- Aggressiveness: Fostering a fiercely competitive spirit
- Hierarchies, or the extent to which the company values traditional levels of authority. SHRM defines three levels of this:
- High: A well-defined organizational structure is in place, and workers are expected to work through official channels
- Moderate: A defined structure is in place but it’s acceptable for employees to often work outside formal channels
- Low: Job descriptions are loosely defined, and the organization is tolerant of employees challenging authority
- Degree of urgency, or how quickly the business drives decision-making and innovation. Generally, a business with high urgency quickly completes projects and needs to respond to a rapidly changing marketplace. Meanwhile, a company with a moderate level of urgency completes projects at a reasonable rate. Low urgency is associated with employees that work slowly and consistently and value quality over efficiency.
- People orientation or task orientation, whereas a company with a people orientation typically puts their people first when making decisions and believes that their employees drive the organization’s success. In contrast, a business with a task orientation generally puts tasks and processes first when making decisions and feels that efficiency and quality drive the company’s accomplishments.
- Functional orientation, or which functional areas the organization emphasizes most (i.e., research and development, customer service, etc.)
- Subcultures that exist in addition to the dominant culture. Those within a subculture may have norms and traditions that differ from the rest of the organization but still support the company’s core values. Subcultures may also cause complications, however. For instance, a regional office may have a culture that differs from the one that leadership encourages.
Today’s workforce is dispersed, and as you map out the cornerstones of your company culture, it’s important to consider how culture may affect in-person, hybrid, and remote employees differently.
3. Communicate your culture
Company culture emerges naturally but can begin with outlining values. Leadership should be encouraged to demonstrate key aspects of the company culture. This may produce a trickle-down effect to employees.
It may also be helpful to establish a committee responsible for tying these values to leadership and regularly assessing the strength of the company culture.
4. Measure success
It’s crucial that business leaders routinely gather feedback and assess trends related to the company culture.
This can be done by once again administering an employee survey or measuring your organization’s employee net promoter score (eNPS), a scoring system designed to determine employee engagement and satisfaction.
To calculate eNPS, workers should rate their willingness to refer the company to a friend or colleague on a scale of 1-10. Results are then categorized as follows:
- Ratings from 0-6 are called detractors
- Ratings from 7-8 are called passives
- Ratings from 9-10 are called promoters
eNPS is then measured by following this formula: eNPS = % Promoters – % Detractors
5. Lean on a PEO
While it sounds like something that instinctively and effortlessly occurs, a strong company culture is no accident. Nurturing a supportive workplace requires continual effort and strategizing, which busy small business leaders may not have enough time for.
A professional employer organization (PEO) can bridge the gap. By helping you define your culture and assess employees’ sentiments, PEOs can guide you toward achieving a productive, engaged, and innovative workplace.
ExtensisHR, for instance, has a team of dedicated HR Managers who provide expert HR assistance on various topics, including culture. Additionally, ExtensisHR provides affordable access to 15Five, a performance management software that encourages a healthy culture by administering employee surveys and facilitating employee recognition and 1-on-1 meetings between managers and their team members.
Wondering how to improve your company’s culture? You’re not alone. Contact ExtensisHR to learn more about how we can help.