7 Importances of Organizational Culture and How to Build It

Natasha Serafimovska

Career Coach, Professional Resume Writer, Freelance Writer

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The world of work has drastically changed in the past few years. Where a good salary and a nice office might have been enough to attract talent in the past, employees today expect flexibility, growth opportunities, and a healthy work environment. In fact, 77% of applicants say they’d consider a company’s culture before applying for a job. 

Companies still struggle to foster a great organizational culture for many reasons. Firstly, despite their limited power, HR departments are often left to drive change alone. Secondly, increases in remote and hybrid schedules have made it more challenging for organizations to engage their workforce and build genuine relationships. So, even though 40% of HR leaders have increased their culture budget since the pandemic’s beginning, only one in four remote/hybrid workers feel connected to their organization. 

Here we look at why is organizational culture important and how to foster a great culture regardless of your industry or the working styles of your employees.

What is Organizational Culture?

Organizational culture is an organization’s shared values, beliefs, and norms encompassing how people interact with each other and the outside world. In other words, culture is the “personality” or the “character” of an organization. It can have a profound impact on the way the business operates.

A solid organizational culture offers companies a tremendous competitive edge. It helps them attract and retain top talent, fosters creativity and innovation, and promotes a positive work environment. For instance, companies in the top quartile of healthy cultures can 3X the returns they provide to their shareholders. Conversely, a weak or negative organizational culture can lead to high turnover, low morale, and poor performance.

Characteristics of a Good Organizational Culture

Many different traits define an organizational culture. Some of the most important are:

How a Good Company Culture Boosts Employee Performance

Your corporate culture can support employee performance in many different ways—whether that’s by giving them flexibility in work schedules, freedom to choose their own projects, or by simply providing learning and growth opportunities.

Having that level of agency also boosts people’s confidence by driving accountability and giving them control over their working life.

Importance of Organizational Culture – 7 Reasons

Your organizational culture colors every aspect of how you conduct business. Everything matters – from how employees collaborate to how good managers treat them to how they talk to their customers. Leaving organizational culture to chance can leave you with an indifferent workforce at best and dysfunctional business at worst.

Here are the seven top reasons why organizational culture is so important:

Helps to Retain Employees

Lately, employee retention has been somewhat of a mystery to businesses that’ve seen their workforce leave in droves. 40% of employees say they’re considering quitting their job this year. Shockingly, research cites toxic culture as the number one reason for it.

A healthy organizational culture can help retain talent by driving a sense of belonging and demonstrating genuine care for its employees’ wellbeing. 

Increases Overall Engagement

Organizational culture can drive engagement by making employees feel like they’re part of something bigger. Unfortunately, 65% of the U.S. workforce is disengaged, and more than half of employees who left their jobs this year said they lacked a sense of belonging. 

However, a positive work environment fosters trust and gives employees open channels for communication. Organizations with the highest levels of engagement also see an 81% drop in absenteeism and a 23% increase in profitability.

Boosts Productivity

There are several ways a positive work environment can boost employee productivity. Things like experiencing gratitude or receiving respect and appreciation are proven to help employees be more productive. 

Creates a Great Office Environment

Healthy work environments foster camaraderie and transparency within the workplace. Employees are far more likely to have a sense of belonging and observe company values if you promote excellent workplace practices.

Demonstrates True Leadership

Building a business is one thing, but creating an amazing organizational culture is another. Organizations that are praised for having a great workplace and corporate culture also have a great and forward-thinking leadership team.

Smoothes Out the Onboarding Process

When you operate in a toxic corporate culture, it’s not uncommon to see people working in silos or isolation. Employees are either afraid to ask questions or don’t care enough to have questions in the first place. This leads to knowledge gaps, process inefficiencies, and difficulties with onboarding new hires.

Makes for a Strong Brand Identity

Social proof is one of the best ways to build a strong brand identity, whether that’s by receiving positive customer reviews or great word-of-mouth from your employees. A LinkedIn study has found that employees who feel cared about at work are 3.7 times more likely to recommend their employer to others. So, if you’re a brand known for a stellar organizational culture, you’d inevitably attract talent. 

6 Steps to Make an Effective Company Culture

Building an influential company culture is easier yet more complicated than it sounds. It’s easier because you don’t need to start from scratch or implement fancy tech to see positive change. It’s more complicated because it requires commitment from all levels of the organization for it to work.

Here are six steps you can implement to start moving in the right direction.

Start from Where You Are

Thinking about giving your corporate culture an overhaul can be daunting. But, instead of worrying about everything you need to do or waiting for your company to get bigger, start from where you are right now. Identify some of the most common issues your employees are struggling with and be proactive in addressing those first.

For instance, is there a problem with accountability? Do people report feeling overly stressed and unsupported? Take this feedback, and think of specific ways to address them in their daily work.

Make Rules and Define Boundaries

A positive work environment thrives when there are rules and guidelines employees must follow. Often, these can come from your corporate values or an employee handbook, which highlights tolerable and intolerable behaviors. It’s easy for people to make mistakes or overstep the boundaries if they aren’t aware of what those are.

Here, rather than dwelling on the negatives, put a positive spin on the whole conversation by highlighting the positive behaviors you encourage and want to see.

Go for Action, Model the Way

Your employee handbook and corporate values will be just words on a piece of paper if you don’t embody them as an organization. That said, for these values to permeate the whole company, the leadership team needs to lead the way. 

It’s very easy for employees to become cynical when asked to do something a team leader wouldn’t even do. In contrast, employees are far more likely to follow when the leadership team talks the talk and walks the walk. 

Invite Transparency

As a leader, you might not know what’s working or not working, but don’t guess or assume. Instead, invite your employees to share their thoughts. You could call an all-hands-on meeting and invite employees to speak. You could also have an open channel on Slack or Teams for innovative one-on-one discussions. Requesting employee feedback could give you a wealth of insights you might not be able to get otherwise.

Give Your Employees a Voice

Rather than highlighting existing concerns, inspire a culture of ongoing openness and collaboration by encouraging employees to speak up. Whether to highlight inefficiencies or suggest new ideas on how to work better, employees need to feel heard and appreciated.

Measure Your Progress

Like with anything else in business, go by your data. Cultural improvements also lead to improved business performance, but this can take some time. So when implementing changes, ensure that you track data along the way. 

For example, see how many tacos were given in a week or month if you’re promoting an appreciation program by giving out tacos in Slack for a job well done. Also, are employee absences reduced? Are more projects finished on time? Has your employee turnover been reduced? It’s also a good practice to run quarterly employee net promoter score (NPS) surveys to see how satisfied your workforce is overall. 

Bottom Line

Building and maintaining a great work culture depends on many factors, from a strong leadership team and committed workforce to great systems that encourage positive behaviors.

That said, don’t leave organizational culture to chance. Be proactive in showing your employees you care about them. Lastly, don’t forget to put good practices in place to transform your workforce from observers to positive drivers for change.