Organizational Culture: Definition, Impact, and How to Build It

When describing organizational culture, what words come to mind? Maybe…respect, engagement, diversity, or appreciation?

The importance of organizational culture is rarely disputed, yet there are mixed messages regarding its definition. And without defining culture, we can't implement strategies to improve company culture! Let’s explore this a bit further. 🔎

Defining organizational culture

Michael D Watkins of the Harvard Business Review writes:

“There is little consensus on what organizational culture actually is, never mind how it influences behavior and whether it is something leaders can change. This is a problem, because without a reasonable definition (or definitions) of culture, we cannot hope to understand its connections to other key elements of the organization, such as structure and incentive systems. Nor can we develop good approaches to analyzing, preserving, and transforming cultures.”

Ask people what their views on organizational culture are, and you’ll likely get endless variations. Let’s see if we can find a common ground.

SHRM explains that organizational culture sets the context for everything a company does. Because industries and situations vary significantly, there is not a one-size-fits-all culture template that meets the needs of all organizations.

Further, organizational culture can be defined based on values from assumptions of these common societal attributes:

• Human nature. Are people inherently good or bad, mutable or immutable, proactive or reactive? These basic assumptions lead to beliefs about how employees, customers, and suppliers should interact and how they should be managed.
• The organization's relationship to its environment. How does the organization define its business and its constituencies?
• Appropriate emotions. Which emotions should people be encouraged to express, and which ones should be suppressed?
• Effectiveness. What metrics show whether the organization and its individual components are doing well? An organization will be effective only when the culture is supported by an appropriate business strategy and a structure that is appropriate for both the business and the desired culture.

If we’re getting technical, here is another definition straight from a textbook: Organizational culture refers to a system of shared assumptions, values, and beliefs that show people what is appropriate and inappropriate behavior.

An organization’s culture provides a roadmap and guide for employees to know how to behave, and communicates the values the company aims to embody and emphasize. How easy are you making this orientation process for employees? Are there ways you can look closer at how organizational culture is impacting your team?

Ways organizational culture impacts your business

Syncing your culture and brand

Businesses that have a strong organizational culture typically have reputable and positive brand identities as well. Why? Because these organizations are taking the time to define their reasons for existence, discuss the values they strive for, and explain how they operate.

Recognizable and memorable brands communicate the driving forces behind their efforts, including all employees who make them great. Having consistency and clarity in your organizational culture lays the foundation for creating a brand story you’ll be proud to tell.

Denise Lee Yohn explains, “You have to make your company’s core values your own and then operationalize them. You should apply them to your organization by fleshing them out into a full set of core values that fit your organization and your specific brand identity."

Finding top talent 

It’s no secret that one of the top recruiting tools these days is leveraging your organizational culture. In a competitive hiring market, the places where employees feel valued, accepted, and appreciated will be some of the most sought after. Organizational culture should be at the forefront of how you are describing your ways of working to job candidates as well during the onboarding process.

A good organizational culture can be your best recruiting tool, as word of mouth and reviews become even more valuable for job seekers. On the other hand, not prioritizing your organization’s culture framework and communication can have a detrimental effect on recruiting and retention strategies. Companies with a reputation for healthy cultures like Southwest Airlines, Johnson & Johnson, and LinkedIn, experienced lower-than-average turnover during the Great Resignation.

Improving work performance

A common challenge for HR and People Ops teams is motivating employees to perform at the highest level while consistently providing support and meaning each day. It has to be a balanced system between how the employee feels and the quality of work they can produce. When your organizational culture is aligned with employees’ motivation and expectations, higher work performance will generally be the outcome.

There are many tools for developing and sustaining a high-performance organizational culture, including hiring practices, onboarding efforts, recognition programs, and performance management programs. Getting the right mix for these tools is very important. Nearly one in three newly hired employees' leaves voluntarily or involuntarily within a year of hiring (a number that continues to rise).

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The 4 types of organizational culture

There are four main types of organizational culture, although many businesses exhibit hybrid strategies that combine a few elements from other frameworks to complement their primary cultural strategy. The types of cultures you may opt to cultivate within your company include: 

Clan culture: Fostering collaboration and teamwork

Clan culture emphasizes teamwork and a family-like atmosphere. Businesses with these relationships place a high emphasis on employee involvement and consensus. 

With this type of culture, your leadership team will need to function as mentors and facilitators that put workers in a position to thrive. Clan structures foster a strong sense of loyalty and commitment. 

Adhocracy culture: Embracing innovation and risk-taking

If you operate in a field that values innovation, the adhocracy approach may be the best fit. Organizations with this culture prioritize flexibility and risk-taking. They encourage employees to think creatively and challenge the status quo. 

Before you adopt this framework, make sure you put stop gaps in place to keep decision-makers from exceeding your company’s risk tolerance. 

Market culture: Emphasizing structure and stability

Market culture is all about the results. With this culture, you give your team concrete, measurable goals to hit and maintain a results-oriented approach to hitting those milestones. 

While market culture can lead to long-term financial success, it can also place lots of stress on your team. Make sure to balance your high expectations with team-building activities that give everyone a breather from the daily grind. 

Hierarchy culture: Emphasizing structure and stability

The hierarchy approach values order and consistency. You’ll need a formal structure and detailed policies to guide day-to-day operations with this culture. A clear chain of command and well-defined roles help promote stability and efficiency within this framework. 

Deciding which culture is the best fit for your workplace involves evaluating your business at all levels. Each of the four types of organizational cultures has a different focus, so it’s important to choose the strategy that encourages the kinds of behaviors your business values. 

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What a strong organizational culture looks like

A strong organizational culture is known to be decisive, customer-oriented, empowering, and people-oriented. In general, three things will be fairly evident to spot a healthy and positive organizational culture:

1. Employees know how top management wants them to respond to a situation.
2. Employees believe that the expected response is the proper one.
3. Employees know that they will be rewarded for demonstrating the organization's values.

Your company’s leaders must embody and live out your organizational culture to their best ability. It’s important to reemphasize company core values, internal processes, and communication styles throughout the company. Consistency is essential when implementing new ideas or policies and addressing concerns.

A strong organizational culture helps build trust between leadership teams and each employee. Trust among your teams can reduce disagreements or unnecessary conflict and create better decision-making company-wide.  

Here's a closer look at what a great company culture looks like:

Shared values and purpose

To build your  culture, focus on values that your team members can get behind. For example, you might choose principles like integrity, trust, and transparency. 

You also need to give team members a clear purpose within the business. Make sure that members at every level of the organizational hierarchy understand how their contributions impact the business as a whole. Clearly articulating these values and purpose helps guide decision-making, ensuring that everyone is working toward the same vision. 

Open communication and trust

Open communication and trust are essential to the development of a healthy corporate environment. You can cultivate trust through consistent and honest communication from leadership and between peers. Read company updates to the entire team, be open about the state of the company, and share leadership’s vision.

You’ll also need to proactively promote teamwork. Team building activities are an effective tool for promoting greater trust and collaboration within the workplace. For example, you could break departments down into small teams and have each person read three fun facts about themselves. This simple exercise helps everyone get to know one another better and may lead to the development of new friendships. 

Recognition and appreciation

Everyone likes being congratulated on a job well done. Acknowledging individual and team achievements fosters a positive work environment and reinforces desired behaviors. Simple gestures of appreciation like verbal praise or public recognition can be a huge morale booster. 

Innovation and adaptability

A great culture will promote innovation. If your team is consistently encouraged to push the limits of what's possible and do their best, they will be able to flex their creativity to solve business challenges.

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How to identify and adapt your organizational culture

Where do you start to identify your culture? It’s best to understand three concepts that make up your organizational culture. Here are some examples from SHRM on how to sustain a culture. Having an understanding of how these affect each individual and are aligned with business outcomes and principles can make defining and managing your organizational culture much more effective.

1. Social culture: group members' roles and responsibilities.
2. Material culture: examine everything that people in a group make or achieve and the ways people work with and support one another in exchanging required goods and services.
3. Ideological culture: group values, beliefs, and ideals—the things people view as fundamental. It includes the emotional and intellectual guidelines that govern people's daily existence and interactions.

Each organization is unique and there are endless ways for you to choose the kind of culture that fits you. Just know that over time, your culture will most likely change and adapt to your workforce.

Say you undergo a recent merger or acquisition. This is definitely a time when organizational culture evaluations come into play. Be sure to have regular ways of identifying how your culture might be shifting or needs to evolve. No company culture is perfect and you may experience some peaks and valleys along the way.

Be sure to get regular feedback from your workforce. Put together an instrument like a survey or rating system that’s designed around your company’s values, goals, and assumed cultural impact. It’s important to get a pulse from everyone on the team to uphold a strong and healthy organizational culture and be empathetic to each individual's experience. This practice can also help you identify areas of improvement or communication breakdowns that need a closer look.

Your People Ops or Human Resource teams should conduct routine audits as well to identify where your organizational culture is thriving…and where it could use some adjustment. Stay consistent with the ways and timing of when you collect information to have better evaluation metrics and historical value to measure your improvement over time.

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8 steps to building a high-performing organizational culture

Ready to reinvent organizational culture within your business? Here are eight impactful steps to help you do exactly that: 

1. Prioritize employee recognition

You’ve got to make sure your workers feel valued and appreciated. If you aren’t regularly recognizing top performers for the great work they do, it’s time for a change. Get started with Bonusly and see your culture skyrocket.

2. Encourage employee voice and feedback

A great company culture permeates every level of the business. To truly gauge the quality of your culture, you need to speak with employees and obtain open, honest feedback. Make sure you're having regular one-on-one meetings with all of your employees and consider a regular employee engagement survey.

3. Lead by example: Make leaders culture advocates

Change starts at the top. If your leadership team begins embracing the company’s values and beliefs, everyone else will, too. But embracing these values means much more than simply sending out motivational emails. The team must live their beliefs and exhibit unwavering values during day-to-day interactions. 

4. Live and breathe your company values

After you’ve aligned leadership with the company’s stated beliefs, it’s time to get everyone else on board, too. Encourage your employees to live and breathe the company’s values. 

They need to let these concepts influence everything they do while representing your business. Whether workers are collaborating with teammates or talking to customers, they should conduct themselves according to your values. 

5. Foster connections between team members

The best work environments encourage team members to connect with one another. They should find common ground with the people they work with every day. These relationships can promote loyalty and productivity, as employees won’t want to let their friends down. 

6. Invest in learning and development

If you want your employees to pour their talents and energy into your business, the company needs to do the same. Prioritize learning and development to teach your staff new skills and show them that you care about their professional journey, which can improve retention. 

7. Integrate culture from day one

You need to immerse new hires into the company culture during onboarding. Members of the leadership team should participate in onboarding to show support for the company’s mission and vision. Set clear expectations while also outlining how the business will support the new workers. 

8. Personalize the employee experience

The work experience should be shaped around the needs of your team. Personalize processes, technology, and workflows to make life easier for your staff. This shows that you are committed to cultivating an awesome workplace culture. 

Measuring and adapting your organizational culture 

Organizational culture can be difficult to quantify. You’ll need to rely heavily on feedback from team members so that you can obtain a better understanding of how they view the company. Look at metrics like turnover, absenteeism, and productivity to establish a baseline for the state of your business.

After you’ve implemented major cultural changes, continually measure those same metrics. Gather additional feedback from your staff to find out what changes they like and what else you can do better, and above all, never stop working to improve. 

Takeaway

Organizational culture serves as the through-line of the employee experience at your organization, from an employee’s first interview to their exit interview—and can make a profound difference between a highly engaged workforce and a disengaged one.

--> Recognition-rich cultures build a company culture where people stay. Schedule a demo with one of our product specialists today.

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FAQs

What are the 4 types of organizational culture? 

The four types of organizational culture are clan (collaborative), adhocracy (innovative), market (results-oriented), and hierarchy (structured). Each type shapes how employees interact, make decisions, and achieve goals. 

What describes organizational culture? 

Your organizational culture encompasses the shared values, beliefs, and behaviors that define how team members interact and work together within the company. It influences every aspect of your work environment. 

What's the importance of organizational culture for my business?

A strong organizational culture can help you boost employee engagement, improve customer perception, and fuel the development of top talent. You want a business that’s guided by sound principles so that you can create an inclusive environment that attracts the types of personalities conducive to your long-term growth goals and overall mission.

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