The Importance and Impact of Company Culture on Your Business

In business, we usually want things to be grounded in numbers. Data, metrics, pretty much anything that is tangible and preferably quantitative. Company culture doesn’t fit into this ideal at all, yet it’s widely agreed to be one of the most important parts of a business. It’s the foundation of everything a company does, it dictates almost everything about a business. It affects how employees feel and how they work, how leaders lead and managers manage. Proving its  importance is a bit of a problem, however, when it’s so hard to figure out what is the meaning of company culture and how to cultivate it in the first place.

What is Company Culture?

Let’s start with the basics. Understanding what company culture is, is the first step to cultivating a successful one, but even the basic definition can be a point of contention. The fact is there are hundreds, if not more, definitions of company culture. Businesses and individuals interpret the concept differently, but there is a general understanding of what company culture actually is.

Wikipedia states that company culture “encompasses values and behaviours that contribute to the unique social and psychological environment of a business”. For others, culture is the shared traditions, rituals and beliefs that drive what a business and its employees do. There is a whole range of different ways to say the same or similar, but essentially a company culture underpins the business and its employees. It may be intangible, but it’s extremely powerful.

Why is Company Culture so Important?

The fact that company culture is so powerful is what makes it so important. It can affect almost everything a business does, and as such, it can have a very real and tangible impact on business performance. Let’s look at some of the benefits of an ideal company culture:

Workforce Wellbeing

Every business should know by now that happy workers make far  more productive workers. In fact, research from the University of Warwick found that happy workers are 12% more productive than the average worker. But how exactly do you make employees happy?

While a good wage and bonuses certainly help, money is often not enough to make employees stay by itself. Even when it is, company culture often lays the foundation for wage and bonus policies anyway, like a true pay-for-performance culture. What really makes employees happy is simply being in a place that they feel they belong. Your culture is vital for not only making it clear what type of company you are but also communicating this to employees. This helps to ensure you can recruit and retain a compatible workforce that is, ultimately, happy.

Increased Returns

There are plenty of ways investing in company culture can give you better returns. Happier employees, for example, are much less likely to leave. That helps to significantly reduce turnover costs including recruitment. We already know that happier employees are also more productive, so expect productivity to grow at no extra cost to the business. There’s also a good chance that the right company culture will mean employees do their jobs better, with less human error and more accuracy. Depending on your business, this could have a significant cost saving with time saved, less waste, better customer service with less time spent dealing with complaints plus much more.

Attractive Environment

Having a strong and successful culture is usually much more appealing to potential candidates. This is why industry leaders work so hard at cultivating and communicating their culture, and why these companies have their pick from a much wider talent pool. Good company culture can attract and keep better talent which is ultimately good for company performance and growth.

Types of Company Culture

There are four main types of company culture widely accepted as the main styles and based on how internal versus external a company is, and how flexible compared to stable they are. They are sometimes given different names but each one remains essentially the same. Companies rarely fall completely into one of these cultures and many adopt a mixture of two or more. Each has its pros and cons, so taking parts of more than one is usually the best approach.

Take a look at the main types of company culture below and how you could start to cultivate it for yourself:

Hierarchy/ Bureaucratic

This  is pretty self-explanatory. A hierarchical  company culture is one that has many layers of employees and tiers of managers. These types of cultures value processes and procedures which are essential to their success and therefore dictate how employees work and what they do. Efficiency and reliability are very important.  A deep understanding and respect for each employee’s role and responsibilities prevails. Leaders here are seen as experts in their field with complete autonomy.

This type of culture is great for companies operating in highly regulated industries and need to meet strict compliance standards. If the work your business needs to do is predictable and has a clear format, then chances are you’ll want to lean more towards this culture.

To cultivate it yourself, you’ll want an HRMS that can help with compliance and consistency. As well as completing training to meet compliance needs, employees in this type of culture want and need to be experts in what they do to ensure they meet strict regulations and produce accurate work as efficiently as possible. A learning management system, then, with the ability to create a wide range of courses so employees can skill up is essential. Look for an LMS that is highly configurable so you can plan compliance training and provide clear training policies.

Market/ Competitive

Competitive or market company cultures are results based environments. They’re all about gettings things done quickly. . They favour stability just like a hierarchical culture, but their focus is external rather than internal. Industry leaders that need to bring products or solutions to market quickly yet need to produce high-quality results to remain successful are suited to this type of culture. Leaders often demand high standards and efficient work.

To cultivate it yourself, you’ll need an HRMS that can closely monitor employee performance and set clear goals to help your workforce stay motivated and on track. SuccessFactors Performance & Goals, for example, can help you set goals at individual, team, department and business level with thousands of SMART goals to choose from plus customisable options as well. Track employee progress so you can reward achievements straight away to keep them motivated or identify problems early and implement an improvement plan.

Clan/ Community

This type of culture goes back to being internally focused, but instead, it’s founded in flexibility. Unsurprisingly, it’s all about the employees and their community. Open communication and loyalty are core values, with employees usually having similar interests and getting very involved with the company both in and out of work. Participation and teamwork are a must, and leadership here often takes the form of mentorship.

This type of culture is great for companies whose product or service is also about communicating a certain culture and therefore has a singular and distinctive goal. For example, fashion brands who are often selling a lifestyle and usually have a distinctive consumer base.

To cultivate this culture you’ll want an HRMS that promotes open communication as much as possible. As a superior cloud solution, SuccessFactors enables companies to make use of internal social networks and employee portals to connect individuals and groups together. This can be used at every stage of the employee experience, from connecting new hires to mentors during the onboarding process to promoting continual feedback between managers and team members via online updates. You’ll need to implement a strong onboarding process to help employees find their place in the community.

Adhocracy/ Entrepreneurial

It may sound weird to call a collective workforce entrepreneurial, but that’s a pretty good word for companies with this culture. They value innovation and creativity which are both needed for them to remain competitive and successful. To achieve this, individual freedom is encouraged along with a proactive outlook so employees can take their own initiative.

Growth is vital, which means creating new products and services is also essential. Leaders here are typically seen as visionaries and risk takers. This culture really suits tech companies that are under pressure to bring new things to market and need to stay ahead of the curve. In fact, one of the biggest companies in the world adopts this culture the best: Google.

To cultivate it yourself you’ll really want an HRMS that can take your recruitment to the next level. Adhocracy environments are extremely innovative and creative, but such a flexible and almost laissez-faire environment isn’t suitable for everyone. Some can even see it as unstable, so it’s not for the faint-hearted. This culture only works if everyone has the same passion for innovation and creativity. A superior recruitment system that can give you unparalleled choice from a huge talent pool plus a way to manage even the longest and most complex recruitment processes is essential to get this culture going.

Cultivating the Right Culture for your Business

The type of culture that is best for the performance of your business depends on the business itself, including the industry you operate in and the goals you want to achieve. This sometimes means the culture you want isn’t always the one that’s best. While the idea of a creative and innovative company culture like Google might sound most appealing to you, it might not be the best fit for what your company needs to achieve. A finance company with strict regulations, for example, may need a more hierarchical culture that prioritises compliance and professionalism to avoid fines and remain successful.

Ready to start cultivating the culture that could lead your company to success? Contact us today to find out how SuccessFactors could help transform your culture today.