Figuring out how to improve company culture is a major undertaking. Indeed, management consultant and writer Peter Drucker once famously said, “Culture eats strategy for breakfast.” While a solid business strategy can drive company success, it can’t be replaced by a company culture that empowers employees to do their best.
That’s why here at Business2Community, we’ve dug into lengthy surveys and convoluted academic papers to bring you the most effective industry insights and help you improve your company culture in the process.
What is Company Culture?
According to the late Edgar H. Schein, a notable academic and former professor at the MIT Sloan School of Management, company culture is “a pattern of shared basic assumptions that the group [has] learned as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems.”
Put simply,company culture, also known as organizational culture, refers to the shared beliefs, values, practices, and behaviors within an organization.
Schein believed company culture develops as a result of a top-down approach. It’s company leaders who build company culture in the first place. It’s also company leaders who continue to shape culture through their:
- Reactions to crises
- Criteria for rewards and recruitment
- Role modeling
As such, company culture isn’t inherent; rather, it’s a learned behavior.
4 Ways to Improve Company Culture
Not all company cultures are created equal. A toxic workplace culture can mean high turnover, fewer applicants, and a general lack of morale.
In fact, in 2021, in the midst of the Great Resignation, toxic company culture was 10 times more likely to contribute to attrition than compensation. Toxic company culture was the most important predictor of attrition across all industries. It was judged more important than:
- Job insecurity
- Lack of innovation
- Lack of employee recognition
- Companies’ responses to COVID-19
A few things contribute to a toxic company culture. These include:
- Failure to promote diversity and inclusion
- Employees feeling disrespected
- Unethical behavior
In 2022, lack of diversity, representation, and inclusivity was by far the biggest predictor of a toxic culture, according to the MIT Sloan Management Review. Inclusivity can be measured across five demographic groups. These include:
- Sexual identity and orientation
But, nepotism and general noninclusive cultures where “cliquey” attitudes are reported can also contribute to a toxic culture.
Toxic company cultures are a lot more widespread than you might think.
Between 2016 and 2020, 10% of American workers in large companies left a Glassdoor review mentioning at least one element of a toxic culture. This is in line with other similar data. For instance, in a 2021 Gallup poll, 6% of employees in the US and Canada reported they’d been disrespected at work in the last 24 hours.
A 2016 study involving more than 1,300 North American executives found that 84% of respondents believed their company needed to improve its culture.
And 92% believed improving company culture would increase the firm’s overall value.
There are ways to improve workplace culture and improve employee retention rates as a result. Shaping a healthy company culture isn’t a guessing game. It involves strategizing and listening. Here are a few proven tactics to achieve success.
1. Carry Out a Company-Wide Culture Audit
A culture audit is a great first step when it comes to identifying potential areas of improvement within a corporate culture.
Even if a business has a strong corporate culture with well-defined core values and highly engaged employees, as a company develops and changes trajectory, certain company initiatives may become obsolete.
This is where a company culture audit can help improve your company culture and potentially save the company time and money as a result.
Even with this, in 2021, the Institute of Internal Auditors in the US found that only 4% of audit effort was allocated to governance and culture. The vast majority of auditing time was spent on operations, finances, IT, and fraud, with culture being an afterthought.
Bear in mind that according to the Institute of Chartered Accountants of England and Wales, it can take two to three years to implement an effective company culture audit, even if you already have internal audit processes in place.
A successful company culture audit looks to answer several questions, including whether it:
- Exemplifies ethical behavior
- Acts in ways consistent with its corporate values
- Champions a fair, diverse, and inclusive work environment
It might not be possible to audit every aspect of your culture in one go.
Culture affects everything within an organization, and as such, you may consider exploring certain problem areas first. For instance, if there is high leadership team turnover, this may warrant some investigation.
Once you’ve identified the scope and resources available to you, you’ll need to gather your audit team. This can include hiring external specialists or providing training for your existing auditors.
Then, you’ll need to gather your data. This can be achieved through qualitative and quantitative methods such as:
- Employee surveys
- Data gathering team meetings and focus groups
- KPI analysis
- General monitoring of the entire organization
Once you’ve gathered your data, you’ll need to write your report. Within it, you’ll need to identify learnings based on employee feedback and other analyses you’ve carried out.
While these learnings will improve your own company culture strategy moving forward, there are some general steps that most companies can take to foster a strong company culture.
2. Make Diversity and Inclusion a Core Value
It should come as no surprise that inclusivity plays a key role in creating a strong company culture. And fostering diversity and inclusion comes with a whole host of benefits.
In a 2022 Gartner report, 75% of organizations with diverse decision-making teams exceeded their financial targets. Also, inclusive, gender-diverse teams outperformed less inclusive teams by 50%, on average.
In a 2019 Canadian study, companies that reported high levels of gender diversity, as well as an engaged Human Resources team focusing on gender diversity, reported lower levels of employee turnover.
Diverse management teams were found to be more innovative, too.
A 2017 study from Boston Consulting Group looking at companies over a three-year period found that businesses with more diverse management teams earned 38% more of their revenues from innovative products and services as compared to more homogenous teams.
Several diversity factors among managers were highly linked to innovation. These included:
- Gender diversity
- Different countries of origin
- Different career paths
- Different industry backgrounds
Also, a 2013 Deloitte report found that a 10% increase in inclusivity results in work attendance increasing by one day per year per employee.
This means that if 10% more employees feel more included, absenteeism drops across the board on average.
Making diversity and inclusion a core value is a key way to improve company culture.
The Chartered Institute of Personal Development suggests some ways to make this happen:
- Taking time to understand the barriers to inclusion for different groups within the company context, there isn’t a “one-size fits all” solution.
- Ensuring strategies address inclusion and diversity as separate concepts; different strategies are needed to address both.
- Measuring diversity and inclusion efforts through bespoke surveys, focus groups, and assessments of existing policies and practices.
- Making inclusion a core component of talent management, appraisals, and skills development, employees could, for instance, receive feedback on their inclusion efforts during performance reviews.
3. Guard Against Toxic Culture
A 2019 study found that one in five employees has left a job as a result of a toxic work culture. Company cultures aren’t static. They change all the time. As such, even if a company has a healthy culture, the leadership team should take active steps to guard against toxicity.
Here are some evidence-based interventions that can nip toxic culture in the bud:
- The buck stops with leadership; model the inclusive behavior you want to see; leaders acting consistently in line with core values is one of the strongest predictors of a healthy company culture, according to MIT’s Sloan Management School.
- Don’t promote people solely based on work performance; someone who delivers results but promotes toxic subcultures may need training rather than a promotion. Sales teams led by toxic managers booked 30% fewer sales than teams led by collaborative managers, noted a paper in the Social Science Research Network.
- Quantify the benefits of a cultural detox to get executive buy-in and make it a priority; tie cultural issues to the bottom line by linking them to employee attrition, for instance.
4. Get Your Employees Involved with CREW
Improving a malleable company culture can’t happen in the C-Suite alone. And company culture drives employee performance, so it’s only right that employees are involved from the start.
One way to achieve this is through an initiative modeling the CREW program, initially devised by academics for the US government.
CREW stands for Civility, Respect, and Engagement in the Workplace.
In 2005, it was used effectively to change social norms and improve company culture within the Veterans Health Administration in the US.
The program began after an internal audit revealed abusive and disrespectful behavior was the norm; this resulted in stress, poor employee satisfaction, and high turnover.
Here’s how to employ the CREW method.
- Gather groups of 10 to 15 volunteers who will then meet weekly over a six-month period.
- The volunteers discuss and establish new social norms designed to improve respect and civility within their specific work context
- The team members identify the root causes of poor company culture, brainstorm solutions, and take responsibility for developing new ways of communicating that are in line with a more positive culture and tailored to their context.
Studies into this intervention technique have found that CREW successfully improved social values at intervention sites, as evidenced by pre and post-intervention surveys at the VHA.
Participants reported they had a greater understanding of the importance of civil workplace interactions and how they tied into better job outcomes. As of 2022, over 1,200 work groups across the VHA have used this program to improve work culture by tackling social values.
The program was trialed in a Canadian hospital, as well. Groups that implemented CREW successfully reaped benefits such as increased job satisfaction, trust in management, and decreased absenteeism and burnout.
Developing a Company Culture
It usually isn’t too difficult to avoid the most glaring issues that contribute to a toxic company culture but many companies don’t know how to build a positive culture.
Developing a great company culture could result in highly engaged employees. It could help attract and retain top talent. Listening to what employees want is key to making this happen.
In 2023, 45% of employees around the world said impactful work was the most important organizational attribute when choosing a job. Beyond meaningful work, other important factors included:
- Career advancement opportunities (43%)
- Compensation relative to performance (38%)
- Autonomy (38%)
- Flexible work hours and other flexible working arrangements (38%)
A good company culture, therefore, focuses on empowering workers to do meaningful work without micromanagement tactics, as well as providing the work-life balance and compensation that workers deserve.
Incorporating these attributes into your company’s core values is one way to begin building a company culture. And while building company culture often begins as a top-down exercise, it’s a good idea to involve employees in the process, too.
Only 41% of employees understand what makes their workplace unique, according to a 2019 Gallup survey. Having a neat company mission statement that ties in with your vision and values may look good, but it’s not enough to have a living, breathing corporate culture that empowers employees to do their best work.
Instead, Gallup experts suggested that codifying your ideal culture is just the beginning. Other steps that can help create a strong work culture include:
- Encouraging leadership to set an example by embodying the core values in their actions.
- Hiring the right managers: according to Gallup, managers account for 70% of employee engagement.
- Adopting metrics that measure specific work culture outcomes appropriately.
- Creating and reiterating key messages to empower employees.
Building Corporate Culture and Remote Work
COVID-19 brought with it the remote work revolution. And, in the midst of the pandemic, 133 executives across the US were asked how often employees should be in the office to maintain a strong culture if COVID-19 was not a concern.
In 2020, 29% of US executives believed workers should be in the office at least three days a week to maintain company culture.
Another 18% answered four days a week, and 21% said five days per week. Only 5% said employees don’t need to come to the office at all to maintain company culture.
By 2022, 35% of US workers said they could work remotely full-time, while 23% said they could do so part-time, said a McKinsey study. And 21% of job seekers in 2022 said they were mainly looking for a new job because they wanted more autonomy over where and how they worked.
There’s no hiding from it; remote work is here to stay.
And a few years post-pandemic, the debate rages on. Importantly, the question remains: Can we build a strong company culture if we work remotely? The answer is absolutely yes but that doesn’t mean it’s easy.
Certain companies manage it just fine. However, they understand remote work requires a specific set of core values. Productivity app developer Doist is one example.
The company has 68 employees across 25 countries and has been remote from its inception. Yet, it has a strong organizational culture and engaged employees.
Head of People Allen Christensen shared how the company managed this feat. Here are some key takeaways to consider if you’re building a remote-first company:
- Hire for culture-fit; this means people who share the company’s core values about ways of working and communication, and not necessarily people who think and act in exactly the same ways.
- Hire people you can trust; micromanagement does not work in a remote setting for obvious reasons.
- Hire proactive people; remote work requires people who can get on with the work without waiting for instructions.
- Make communication a core value; whether you opt for asynchronous working or not, an effective remote-first company must have effective communication at its heart.
Why is Company Culture Important?
A landmark 2019 Oxford study involving 1,000 employees and executives in the US found that a strong company culture was critical to business performance, as well as:
- Customer satisfaction
- Employee engagement
- Employee retention
A positive culture comes with benefits across all parts of the organization.
The Management Perspective
A positive company culture can play a significant role in a business’s success. In fact, companies with healthy cultures were 2.5x more likely to report significant stock price increases in 2019.
They were also 1.5x more likely to report over 15% in average revenue growth over a three-year period.
Engaged employees are 125% more productive than workers who are merely satisfied. Yet, 85% of employees worldwide did not feel actively engaged in 2017.
The employee experience matters.
Employees who believe their company culture is healthy are 1.3x more likely to say their company wins repeat business effectively. They are also 1.7x more likely to say they work well as a team.
The average S&P500 company could save $156 million per year in turnover costs if employees describe its culture as healthy. A good company culture can, therefore, result in substantial financial savings.
A 2022 survey of job seekers found that 63% said work-life balance was one of their top priorities in looking for a new job. By contrast, 60% listed compensation as a priority.
Six in 10 employees who changed jobs in 2021 said they were looking for a better fit between their own values and those of their employer. Employees looking for a better fit said they wanted:
- Jobs where they felt more valued
- More socially engaged companies
- More inclusive cultures
People aged between 18 to 34 are most likely to choose a job based on their beliefs and values, with 67% saying they’d choose, leave, avoid, or consider employers on that basis. By contrast, 49% of those aged 55+ were most likely to choose a job based on their beliefs and values.
The Employee’s Perspective
A 2021 study published by the American Psychological Association found that 79% of employees in the US had experienced work-related stress in the previous month. And 3 in 5 reported negative impacts of work-related stress, including lack of interest and motivation (26%) and lack of effort (19%).
Culture can play a role in tackling this pervasive issue.
A 2022 study involving more than 6,000 employees across 16 companies found that a strong workplace culture of health is associated with lower employee stress and depression, regardless of individual health status.
A workplace culture of health can be defined as an inclusive, supportive culture that is focused on helping employees stay healthy through interpersonal relationships between coworkers and managers, as well as access to healthy food and exercise spaces.