What is Organisational Culture?

Having a good organisational culture is key to business success. The effects of this can be seen in the company’s bottom line: according to research, with a healthy culture, the company is one and a half times more likely to have its revenue grow above 15% over 36 months and is two and a half times more likely to see its stock grow too.

According to the Achievers 2022 Engagement and Retention Report, the Great Resignation continues with employees seeking balance, growth and support. The research showed that 66% of employees are likely to look for a new job in 2022 and a staggering 41% do not feel valued at work. The research highlighted that those who weren’t planning to look for a new job were those who felt supported and valued by employers.

So, what is causing the continuation of the Great Resignation? Again, the Achievers report has shown that this is down to the organisational culture that is suffering due to a lack of communication and connection.

What is organisational culture?

Given the importance of organisational culture according to research, it’s vital that businesses know what this means and how to evolve their company culture to be one where employees aren’t seeking to leave in their droves. So, what is culture? And more specifically, what is organisational culture?

There are many definitions online about what culture is for a company. Essentially, it is a collection of practices, expectations and values that inform and guide team members. Some people think of it in terms of the company’s personality and character that makes the workplace what it is.

Having a great organisational culture means there are lots of positive traits leading to improved performance. On the flip side, with a dysfunctional company culture, there are qualities hindering success.

It’s important not to confuse this organisational culture with the company’s mission statement or goals, though both of these do play a part in forming the culture. To clarify, organisational culture is developed through authentic and consistent behaviours rather than policies or press releases – though a well-written employee handbook is always a key tool to establishing culture.

To get an idea of a company’s culture, you can watch how the CEO responds in times of crisis, how employees work together when changes are needed, or how line managers deal with employee mistakes.

It’s not just the company leaders who have a role to play (though they are usually the ones setting the tone); organisational culture is also developed by employees and their attitudes, habits and language. Furthermore, the culture of a company also extends to how it deals with outsiders and so extends to customer interactions and even advertising and marketing practices.

Why is organisational culture important?

Organisational culture, or workplace culture, matters because it means employees understand the organisation, can be heard and can develop common purpose and connections.

The culture of a company affects everything: from tone and punctuality to employee benefits and contract terms. When the company culture aligns with the employees, they will likely feel valued, supported and comfortable in the workplace. When a company prioritises culture, it means they’re more prepared for difficult times like changes and will come out stronger.

Another reason why a positive organisational culture is an advantage is for recruitment. If companies want to attract talent (like T-shaped employees), they need to outperform their competition in terms of what they offer their employees. According to Glassdoor’s Mission & Culture Survey 2019, 77% of people will look into the organisational culture of a company before submitting an application.

Real-life examples

When Steve Balmer was CEO of Microsoft, a cartoonist drew an image to illustrate the company culture at the time. It showed three gangs of different colours that were assembled in a hierarchical pyramid with guns pointing at each other. It clearly defined what was going on in Microsoft in terms of organisational culture. It was this 2011 cartoon that spurred the new CEO, Satya Nadella, to prioritise changing the company culture when he took over in 2014.

Nadella made it a priority for employees to improve themselves rather than prove themselves – and it worked. Today, the company is once again up there among the world’s most valuable companies with Amazon and Apple.

Another example of how culture works well is with Salesforce. This company puts its organisational culture at the helm of the company and, as a result, has experienced substantial growth.

Salesforce’s CEO and founder, Marc Benioff, has established cultural norms over the last twenty years and, according to Fortune, has made the company one of the best workplaces in the United States. You can see this if you look at the statistics: a huge 52% of new recruits come from current employee referrals.

The influences of organisational culture

As we’ve seen, company culture is vital in retaining and attracting talent. It’s a huge part of employee experience, and the ‘vibe’ that employees get when they’re part of the company determines how they approach their work and how they feel about the company. Essentially, a company’s organisational culture directly determines whether employees feel drained or energised, and demotivated or motivated. It affects absenteeism/presenteeism, performance and productivity.

Here are some other areas where organisational culture has an impact (either directly or indirectly):

• Morale.
• Achievement of goals.
• Cohesiveness in the team.
• Turnover.
• Performance (individual and team).
• Innovation and creativity.
• Competitive edge.
• Economic performance over the long term.
• Customer experience.
• Succession planning.

Continual assessment

As well as creating a great organisational culture, it’s also important for employers to assess the culture continually. A great culture will only remain great if it is consistently renewed and doesn’t become stale.

How is organisational culture measured?

There are different ways of measuring organisational culture. One way is to survey employees. This can be very precise and informative, especially if done anonymously. Another precise way is to use a Business Needs Scorecard (BNS).

Surveying employees

No one knows the company better than those who work there. Surveying the employees is an excellent way of measuring the organisational culture. It also helps engage employees in being a part of a cultural shift.

A typical employee survey is a satisfaction survey. It would usually cover where employees see themselves in the organisational culture, the employee position in defining the culture, employee motivation, and employee insights.

Business Needs Scorecard

This is a precise method to measure the values in an organisation. It can be used to identify positives as well as finding the potential pitfalls. There are six sections that categorise the positive values and potentially limiting ones.

These are:

• Finance – Things that impact the company’s growth and performance financially
• Fitness – Things that impact employee performance and productivity
• External relationships – Things that affect the relationship with customers and partners
• Evolution – Things that impact innovation and creativity
• Culture – Things that influence trust and communication between employees and leaders
• Societal contribution – How the corporate values align with societal values.

What are the different types of organisational culture?

Business culture can be defined in four ways. The University of Michigan’s business professors Kim S. Cameron and Robert E. Quinn came up with a model to determine the type of organisational culture.

Here are the four different types:

Clan culture

A clan culture is a family-like culture. You see people being respectful and friendly with leaders being mentors or coaches instead of authoritarians. There is an emphasis on team building, cohesion, tradition, loyalty and employee involvement. This type of culture relies on a lot of the HR department who work hard to create long-term ways of keeping employees motivated, engaged and unified whilst also respecting their wellbeing and wellness.

An example of a big company with this type of culture is Google.

Adhocracy culture

The adhocracy culture is about innovation and autonomy. It is creative and dynamic and encourages employees to be innovative and respect new ideas. There is a lot of freedom and employees are encouraged to take risks and experiment.

With this type of culture, the aim is to develop exciting, new products. The success is measured on anticipating market needs successfully while developing suitable solutions to meet demands.

An example of a big company with this type of culture is Apple.

Market culture

The market culture is all about getting the job done. There’s a big emphasis on goal completion and numbers, which means the environment is competitive. There is a lot of rivalry and success is measured against stock and market penetration.

An example of a big company with this type of culture is Oracle.

Hierarchy culture

Hierarchy culture, as its name implies, means adhering to strict procedures and a command chain. The leader has the responsibility of ensuring his/her employees are following procedures and instructions correctly. There is also a big emphasis on uniformity and efficiency.

An example of a big company with this type of culture is Ford Motor Company. Ford has seventeen management levels!

What are the qualities of a great organisational culture?

Every company’s culture will be different and that’s important in itself. After all, companies need to retain their individuality to be competitive. However, high-performing companies have cultures that reflect specific qualities that all organisations should try to cultivate.

Alignment

This happens when both employee motivation and the objectives of the company are heading the same way. Excellent organisations will work on their alignment for their goals, vision and purpose.

Appreciation

This can come in different forms: promotions, thanks, public kudos. An appreciative culture is one where all members of a team will recognise one another and thank one another.

Trust

Trust is essential to all companies and organisations. When there is a culture of trust, employees are free to express themselves and can rely on their colleagues should they need support, especially when trying something new.

Performance

This is essential to success, of course. Companies rely on talented employees who can motivate one another to achieve and excel. The results are improved productivity and profitability.

Resilience

This is an essential quality that produces a dynamic environment with continuous change. When a company has a resilient culture, the leaders are adept at spotting and responding to change.

Teamwork

This characteristic encompasses respect, communication and collaboration between all members of the team. When all team members support one another, workers achieve more and feel happier.

Integrity

Just like trust, integrity is essential to every team. Teams need integrity to form partnerships, interpret results and make decisions. Transparency and honesty are vital to integrity.

Innovation

When you have innovation, you make the most out of markets, resources and technologies. An innovative culture means that employees and employers are creative thinkers in all business areas.

Psychological safety

With psychological safety, employees get the support they need to be risk-takers and feel safe when receiving honest feedback. This has to be a wide-scale safety net and not just individual. Line managers should take a lead to create an environment where all people feel safe and comfortable to contribute.

What is culture change?

When a company or organisation recognises that its culture isn’t what it should be, a culture change is needed. This can’t happen overnight. An organisational culture develops without input from above but when guidance isn’t there, the culture might not be productive or healthy.

Organisational culture isn’t something that is measured per se. Rather, it is felt. If the culture isn’t working then all aspects of the business can be a challenge. Culture change isn’t easy. This is because it encompasses so many different things, including goals, values, processes, roles, practices, attitudes and communications.

A culture change is large-scale. It needs careful planning and strategy. There is a unique requirement of being a process that starts at the top but also affects the entire organisation at all levels. But how do you know if a culture change is needed?

How to know if you need an organisational culture change?

Organisational culture isn’t set in stone. Even if you’ve achieved a good culture, you need to work at it and revisit it for it to remain. Over time, companies can learn what works for them and what gets the best outcomes. They also learn what things result in a lack of productivity and disengagement. Sometimes, organisations need to adapt to external influences and changes and this can impact their culture.

Let’s look at a few ways to recognise that an organisation needs a culture change.

The business strategy is changing

If a business strategy changes, so do people’s expectations. As companies compete for clients and customers, change is normal.

If a significant change is needed, then companies need to expect that this won’t happen overnight. Employees and leaders alike need guiding, motivating and supporting through learning the new working behaviours and practices.

There is a high staff turnover

A high staff turnover is not a good sign of positive company culture. It is a sign that the company is mismanaged or too stressful for employees to want to stay there. It could be that they’re feeling under-appreciated, disengaged and unfulfilled. Whatever the reasons, if a company starts experiencing high turnover, it should consider doing an employee survey to find out the cause. This will help determine what needs to change.

Outdated technology

In order to be competitive as an employer, companies need to keep up with new technological trends. This doesn’t have to mean spending a fortune on the most complicated or most high-tech platforms. Generally speaking, the best tech is user-friendly and simple. It’s important to remain relevant.

Employee and company performance is plummeting

When performance is heading downhill, you need to find out why. It’s most likely to be due to needing to change something (or lots of things) in the organisational culture.

Final thoughts on organisational culture

Overall, organisational culture is an important part of an organisation’s social and psychological environment. The environment itself impacts employees’ experience and thus their engagement levels. A company’s culture is expressed in its branding and reputation, which has an impact on staffing and recruitment. It also determines the process of developing new ideas for business development.

All companies have unique cultures that develop and change over time. Though a great organisational culture is a solid foundation, it is fluid rather than permanent and needs to change and adapt.

It isn’t easy to go about organisational change and employees might be resistant. However, if it is implemented correctly, employees can be encouraged to support (and perhaps be excited about) cultural change. If allowed to develop, an organisation can stay relevant and compete in times of challenge.

Though organisational culture change is often necessary, it is probably the hardest thing to change in a company. According to the Institute for Corporate Productivity (i4cp), only 15% of organisations succeed in transforming their cultures, which is a rather stark reality! It can be done, though, just look at Microsoft as an example.