The academic literature on the subject is vast. Our review of it revealed many formal definitions of organizational culture and a variety of models and methods for assessing it. Numerous processes exist for creating and changing it. Agreement on specifics is sparse across these definitions, models, and methods, but through a synthesis of seminal work by Edgar Schein, Shalom Schwartz, Geert Hofstede, and other leading scholars, we have identified four generally accepted attributes:
Understanding Corporate Culture
Alphabet (GOOGL), the parent of Google, is well known for its employee-friendly corporate culture. It explicitly defines itself as unconventional and offers perks such as telecommuting, flextime, tuition reimbursement, free employee lunches, and on-site doctors. At its corporate headquarters in Mountain View, Calif., the company offers on-site services such as oil changes, car washes, massages, fitness classes, and a hairstylist. Its corporate culture helped it to consistently earn a high ranking on Fortune magazine’s list of “100 Best Companies to Work For.”
Awareness of corporate or organizational culture in businesses and other organizations such as universities emerged in the 1960s. The term corporate culture developed in the early 1980s and became widely known by the 1990s. Corporate culture was used during those periods by managers, sociologists, and other academics to describe the character of a company.
This included generalized beliefs and behaviors, company-wide value systems, management strategies, employee communication, and relations, work environment, and attitude. Corporate culture would go on to include company origin myths via charismatic chief executive officers (CEOs), as well as visual symbols such as logos and trademarks.
By 2015, corporate culture was not only created by the founders, management, and employees of a company, but was also influenced by national cultures and traditions, economic trends, international trade, company size, and products.
There are a variety of terms that relate to companies affected by multiple cultures, especially in the wake of globalization and the increased international interaction of today’s business environment. As such, the term cross-culture refers to “the interaction of people from different backgrounds in the business world”; culture shock refers to the confusion or anxiety people experience when conducting business in a society other than their own; and reverse culture shock is often experienced by people who spend lengthy times abroad for business and have difficulty readjusting upon their return.
To create positive cross-culture experiences and facilitate a more cohesive and productive corporate culture, companies often devote in-depth resources, including specialized training, that improves cross-culture business interactions.
Examples of Contemporary Corporate Cultures
Just as national cultures can influence and shape corporate culture, so can a company’s management strategy. In top companies of the 21st century, such as Google, Apple Inc. (AAPL), and Netflix Inc. (NFLX), less traditional management strategies such as fostering creativity, collective problem solving, and greater employee freedom have been the norm and thought to contribute to their business success.
Progressive policies such as comprehensive employee benefits and alternatives to hierarchical leadership—even doing away with closed offices and cubicles—are a trend that reflects a more tech-conscious, modern generation. This trend marks a change from aggressive, individualistic, and high-risk corporate cultures such as that of former energy company Enron.
High-profile examples of alternative management strategies that significantly affect corporate culture include holacracy, which has been put to use at shoe company Zappos (AMZN), and agile management techniques applied at music streaming company Spotify.
Holacracy is an open management philosophy that, among other traits, eliminates job titles and other such traditional hierarchies. Employees have flexible roles and self-organization, and collaboration is highly valued. Zappos instituted this new program in 2014 and has met the challenge of the transition with varying success and criticism.
Similarly, Spotify, a music-streaming service, uses the principles of agile management as part of its unique corporate culture. Agile management, in essence, focuses on deliverables with a flexible, trial-and-error strategy that often groups employees in a start-up environment approach to creatively tackle the company’s issues at hand.
What is Company Culture?
Company culture can more simply be described as the shared ethos of an organization. It’s the way people feel about the work they do, the values they believe in, where they see the company going and what they’re doing to get it there. Collectively, these traits represent the personality — or culture — of an organization.
The environment in which they spend that time will largely dictate the quality of an employee’s professional life. If they work for a company with a strong culture that aligns with their own beliefs and attitudes, they’ll be more likely to work hard and remain with the company for the long haul. If, on the other hand, the company’s culture does not reflect their own personal feelings, they’re much more likely to leave — or worse, remain with the company but underperform.
Your core values – Core values are certainly part of your culture, but until you put them into action they’re just words on paper. In fact, core values can negatively impact culture if they aren’t adhered to. Employees will see this as the company paying lip service and failing to live up to its own standards.
Your perks and benefits – Ping pong tables and beer on tap can be great, assuming they represent what your employees really care about, but perks and benefits are not a substitute for strong company culture.
The yardstick by which all candidates should be measured – Hiring for cultural fit has become a hot topic over the past few years, but we’re already seeing companies shift away from this line of thought. Hiring people that align with your culture makes sense on the surface, but too many companies use this “metric” as a crutch. Many companies have pivoted to a “cultural add” model, wherein they look for candidates that align with the most important elements of their culture, but will also bring their own unique traits to the table.
A successful company culture is one that is bought into by everyone from the newest intern to the CEO. It’s living and breathing your core values. The job of the company is to make sure that every employee understands the expectations and acts accordingly. A truly great company culture is one that inherently promotes curiosity, respect, teamwork and employee health.
A way to really boost your company’s culture is to put a concerted emphasis on diversity and inclusion. In simplified terms, diversity and inclusion in the workplace is making a group of individuals, with completely different backgrounds and experiences, feel safe and accepted in expressing their uniqueness while at work. Allowing employees to express their differences, learn from each other and feel safe while doing it creates a strong cultural bond that breeds employee happiness and productivity.
Building a strong company culture should be at the forefront of every company agenda.
Putting It All Together
All four levers came together at a traditional manufacturer that was trying to become a full solutions provider. The change started with reformulating the strategy and was reinforced by a major brand campaign. But the president understood that the company’s culture represented the biggest barrier to change and that the top leaders were the greatest lever for evolving the culture.
The culture was characterized by a drive for results followed by caring and purpose, the last of which was unusually strong for the industry. One employee described the company as “a talented and committed group of people focused on doing good for the planet, with genuine desire, support, and encouragement to make a difference in the community.” Whereas the broader culture was highly collaborative, with flat decision making, leaders were seen as top-down, hierarchical, and sometimes political, which discouraged risk taking.
The top leaders reviewed their culture’s strengths and the gaps in their own styles and discussed what was needed to achieve their strategic aspirations. They agreed that they needed more risk taking and autonomy and less hierarchy and centralized decision making. The president restructured the leadership team around strong business line leaders, freeing up time to become a better advocate for the culture and to focus more on customers.
About the Research
We undertook a comprehensive study of organizational culture and outcomes to explore the link between them. We analyzed the cultures of more than 230 companies along with the leadership styles and values of more than 1,300 executives across a range of industries (including consumer discretionary, consumer staples, energy and utilities, financial and professional services, health care, industrials, and IT and telecommunications), regions (Africa, Asia, Europe, the Middle East, North America, Oceania, and South America), and organizational types (public, private, and nonprofit). We diagnosed those cultures using online survey responses from approximately 25,000 employees together with interviews of company managers.
Our analysis highlighted how strongly each of the eight styles defined the organizations in our study. Results ranked first, and caring second. This pattern is consistent across company types, company sizes, regions, and industries. Order and learning ranked among the third and fourth most common styles in many cultures.
Culture appears to most directly affect employee engagement and motivation, followed by customer orientation. To model its relationship to organizational outcomes, we assessed employee engagement levels for all the companies using widely accepted survey questions and arrived at customer-orientation scores with an online questionnaire. In many cases we also documented top leaders’ individual styles and values.
We found that employee engagement is most strongly related to greater flexibility, in the form of enjoyment, learning, purpose, and caring. Similarly, we observed a positive relationship between customer orientation and those four styles plus results. These relationships, too, are surprisingly consistent across companies. We also found that engagement and customer orientation are stronger when employees are in close agreement about the culture’s characteristics.
Our research was influenced by the work of countless scholars in this field, many of whom are mentioned in this article. In addition, we stand on the shoulders of giants such as David Caldwell, Jennifer Chatman, James Heskett, John Kotter, Charles O’Reilly, and many, many others who have inspired our thinking.
The top team then invited a group of 100 middle managers into the conversation through a series of biannual leadership conferences. The first one established a platform for input, feedback, and the cocreation of an organizational change plan with clear cultural priorities. The president organized these managers into teams focused on critical business challenges. Each team was required to go outside the company to source ideas, to develop solutions, and to present its findings to the group for feedback. This initiative placed middle managers in change roles that would traditionally have been filled by vice presidents, giving them greater autonomy in fostering a learning-based culture. The intent was to create real benefits for the business while evolving the culture.
The president also initiated a program to identify employees who had positive disruptive ideas and working styles. These people were put on project teams that addressed key innovation priorities. The teams immediately began improving business results, both in core commercial metrics and in culture and engagement. After only one year employee engagement scores jumped a full 10 points, and customer Net Promoter Scores reached an all-time high—providing strong client references for the company’s new and innovative solutions.