Why Company Culture Is Important To Any Business Success

A lot is made of organizational culture in the business press, and business schools around the world go to great lengths to instil its importance in students, but it is far from just a theoretical concept. Anyone who has worked for multiple companies throughout their career understands the role that culture plays in shaping their workplace experience, what kinds of interactions they have with their coworkers, how they feel about and relate to management, and the pride they take in working for a particular company.

Organizational culture also has the ability to make or break a company’s fortunes. Below are the reasons why company culture is important to the success of any business, large or small.

Culture’s Impact On Employee Experience

Having a positive company culture improves the overall employee experience. Employees who feel they are part of a culture that respects their desire for professional development, camaraderie and that aligns with their values are more likely to want to perform to the best of their abilities and, importantly, remain at the company. Employee retention and company culture are highly correlated, which makes perfect sense since the workplace is where most people spend a significant portion of their lives.

Culture bleeds into how coworkers interact with one another, how management treats employees and the kinds of attitudes that predominate the workplace. A culture that values openness, inclusion, recognition, fun and family will make employees feel wanted, appreciated, and excited about coming into work and exerting themselves on behalf of their colleagues, managers, executives and owners.

Cultures that emphasize hyper-individualism, backstabbing, blaming, information hoarding and other antisocial behaviours will become places that employees hate to spend their time. These kinds of organizational cultures are often characterized by high rates of turnover, poor collaboration and poor performance.

Culture’s Impact On Customer Experience

Corporate culture also includes how a business treats its customers. Companies that are not customer-focused and dedicated to providing exceptional customer experience will find themselves out-competed by the competition. Around two-thirds of modern companies compete on customer experience, which means the entire corporate culture must be geared towards this end. What’s more, almost all of the stats show that companies that fully dedicate themselves to continuously improving customer experience enjoy revenue that is significantly higher than the industry average.

This can be attributed to a number of explanations. Companies that have superior customer service tend to have more engaged employees. Customers are several times more likely to do repeat business with a company that prioritizes and exemplifies customer-centric service and more willing to pay extra for goods and services from companies that take customer experience as sacrosanct. People are also, unsurprisingly, more likely to recommend such a company to friends and family.

Culture’s Impact On Innovation

Culture can also have a marked impact on a company’s ability to innovate, as a culture that enshrines continuous learning, problem-solving, and creativity produces better solutions to problems and better answers to both internal and external questions. In order for innovation to take hold, it must be prioritized and encouraged at the top level. Employees need to be given autonomy, time, and positive reinforcement to engage their creativity. Furthermore, creative efforts and solutions must be recognized by the company and properly incentivized and rewarded with social capital.

The opposite of innovation is reactivity and stagnation. Companies that are hierarchically too rigid and where micromanagement reigns are unlikely to take the kinds of chances and exhibit the type of outside the box thinking necessary to revolutionize industries or stand out among the competition as exceptional. Companies that do not foster innovation and the attitudes that allow for it will find themselves chasing the competition, reacting to industry trends rather than driving or preempting them and, consequently, in a worse financial situation than companies with an innovative culture.

Culture’s Impact On Adaptability 

Adaptability and innovation are closely related and are both highly affected by an organization’s cultural milieu. The global economy is in the midst of humanity’s fourth industrial revolution. Automation, AI and digitization are upending industries and business models around the world–sometimes overnight. One of the most valuable attributes of a person or business in this economic climate is adaptability. The 2020 pandemic provided many great examples of businesses that were able to react quickly to the unprecedented threats and make changes (sometimes systemic ones) to how they did business, reached their customers, and even up to and including the core products and services they offered, in order to remain profitable and competitive.

Corporate cultures that punish creative thinking and encourage intellectual lethargy and complacency end up leaving themselves vulnerable to industry and (in the case of 2020) industry shattering events. If a business does not have the desire or the cultural environment necessary to make quick, decisive changes in the face of threats (or opportunities), they will fall by the wayside of ones that do. The market is highly Darwinian, and companies, like living organisms that fail to adapt to changing times, will inevitably go extinct.

Culture’s Impact On Agility

Agility is another term and skill that is highly applicable in the modern, highly fluid economy. Agility refers to a company’s ability to continuously apply entrepreneurial innovation in order to keep and increase its competitive advantage. Agility is not only necessary to help companies brace for and successfully navigate market changes, but it is an important element of responding to internal changes as well. Organizational behavioural literature often talks about agile management principles, and they are closely linked to all of the other cultural qualities and variables mentioned throughout this article.

A culture of agility starts at the top and is characterized by an obsession with customer satisfaction, comfort adjusting to changing project requirements and realities, a commitment to value, eliminating silos, motivated employees, face-to-face communication, a commitment to excellence, a sustainable pace of work, self-organizing teams, and the belief that simplicity is ideal.

Agility is an almost non-negotiable cultural trait for modern organizations because of how unpredictable and unforgiving the economy is. Companies that manage to enshrine and live up to agile management ideals will find themselves much better positioned to absorb economic shocks and respond quickly to both internal and external threats and opportunities than their competitors.

Culture’s Impact On Ethics 

Culture can impact a business’ success by influencing ethicality and the kinds of decisions employees are willing to or feel compelled to make. There are numerous examples of this relationship throughout recent history, but perhaps the one that most stands out as a warning to companies that fail to cultivate strong values and ethics is Enron. In the year 2000, Enron was the 7th largest company in the United States–a wildly successful energy company that was the darling of the U.S. stock exchange that posted quarter after quarter of record profits and had been named “America’s Most Innovative Company” six years in a row.

What ended up happening to Enron was one of the most dramatic and scandalous falls from grace in corporate history, culminating in the largest stock collapse (at the time) in history and bankruptcy. What investigators ended up finding out, after the interviews with former employees and combing over internal documents, was that Enron was brought down by its culture.

Corruption, greed and deception were Enron’s core values, and leadership functioned as an unquestionable and heavy-handed dictatorship that fired and humiliated at will. This bled into everything the company did and ultimately resulted in the ignominious collapse of what turned out to be a giant fraud.

Culture’s Impact On Growth

Management consultants often talk about the “ROI of company culture”, and what they are really referring to here is the impact culture has on a company’s growth prospects. Done right, corporate culture can end up transforming company performance and maintaining growth over the long term. The primary way in which company culture affects growth is through the formation of guiding principles and values. These form the raw material for new products and services, company directions and how a business sees the opportunities and threats in front of it.

Culture’s Impact On Talent Acquisition 

Culture can also have an outsized impact on business success through the role it plays in attracting top talent. Top talent, because it is sought after, often has the luxury of choosing where it wants to work, at least more so than less talented workers. This means they more often consider company values and how they align with their own before making a decision to work somewhere. This is not to say that a company needs to be the noblest, altruistic company in the world, but that it needs to define its organizational culture and values in order to make it easier for top talent to decide whether it is a place they would like to work.

If a business establishes a clear, sincere, prosocial culture, those candidates that are in the process of evaluating various different workplaces and job offers are more likely to be attracted to the organization. To be able to recruit people successfully, a corporation must know how to brand and sell the business. Most organizations are not interested in what they have to offer employees and instead see the dynamic from the opposite perspective–what can I get from an employee–which is a big mistake in this day and age.

Culture’s Impact On Morale

Employee morale will either increase or decrease based on company culture. If a culture is unclear, overbearing, or cruel, it will end up causing stress for employees. People won’t feel good about what they do, they will not feel good about coming to work, and they will likely have negative attitudes towards leadership and management.

All of this adds up to a lack of engagement, a lack of pride in one’s work, and ultimately lost productivity. A company with unproductive, unengaged workers cannot hope to compete with organizations full of engaged, motivated and satisfied employees. Finding, instilling and emphasizing the right culture has a very noticeable impact on how much effort people want to expend doing their jobs and working toward company success.

Culture’s Impact On Brand Image

Your organizational culture is what you stand for as a business, which is how customers and the wider public sees you. Companies known for harsh and unfair treatment of their workers or that foster antisocial and psychologically unhealthy workplaces receive public backlash. A good example of how a brand intersects with culture is Amazon.

Amazon might not be the best example due to the fact that its profitability is at all-time highs and the 2020 pandemic has further entrenched its power and business model. However, if you ask most of the informed public, a significant number of people now associate Amazon with inhumanity.

A litany of stories have broken in recent years of drivers sleeping in their cars, a culture that would rather see high turnover than help people advance in their careers to avoid paying them more, and employees scared to take bathroom breaks. When many people think of Amazon, they think of a ruthless monopoly with little respect for the human beings working for it.

Culture’s Impact On Resilience

The 2020 year highlighted many of the qualities necessary to weather unexpected economic storms, and chief among them was undoubtedly resilience. Resilience refers to a person or institution’s ability to handle and bounce back from personal or economic setbacks. Resilience can make or break individual or business success, and it is a quality that is cultivated over time through experience but also culture.

In the context of the corporation, culture informs resilience through the ways in which leadership deals with hardship and tumult. Companies that emphasize perseverance, optimism, thrift, and solidarity make themselves more resistant to and resilient in the face of uncertainty and turmoil.

Culture’s Impact On Capital Raising 

Companies need to raise money throughout the business lifecycle. The ability to raise capital when necessary allows for successful expansions, takeovers, mergers and forays into new markets. The ability to raise these funds comes down to a variety of factors, one of which is the faith that investors have in a company’s culture. The market is acutely aware of the role organizational culture plays in success and failure (see the Enron example previously mentioned).

If investors and analysts believe a company is likely to be brought down by toxic culture, and particularly toxic management, many, though certainly not all, will be reluctant to put money into a venture. A company is composed of, among other things, its people, at the end of the day, and people create and enforce cultural norms and values. If the market believes those norms and values are antithetical to good business and profit, it won’t allocate capital to a company.

Culture’s Impact On Longevity 

The primary way by which organizational culture impacts a business’ longevity is through its impact on the company’s ability and willingness to change or reinvent its business model. It is not uncommon for business models to change, either incrementally or wholesale, throughout the business life cycle. New elements are added and old ones jettisoned, often by pure happenstance, but sometimes out of necessity. Being able to change tack and adjust operations in the face of threats and opportunities requires an organizational culture that looks ahead to the future.

Just as it is with national cultures, corporations can be characterized by short-term and long-term thinking. Longevity is influenced by many things, and sometimes things outside a company’s control, but it is certainly impacted by the extent to which it sees itself as something that will be around indefinitely. Some organizations view themselves as entities with expiration dates.

Culture’s Impact On Lawsuits

A company’s culture can become a legal liability. While having a well-funded legal department on deck to handle issues when they arise is certainly a nice insurance policy, the best way for a company to insulate itself against legal troubles (potentially catastrophic ones) is to commit to doing things right. Companies that enshrine corner-cutting and unscrupulousness in the name of profit-seeking end up exposing themselves to lawsuits.

The pharmaceutical industry is full of companies that have suffered massive financial penalties because of class action lawsuits. Companies that turn a blind eye to improper dumping of hazardous waste or that put their workers’ safety in jeopardy also risk more than just their reputation when they do so.

Conclusion 

It should be clear from the above sections that culture has a large influence on the success of an organization. It determines not only the internal reality for people working at a particular company but how capable that business is of surviving in a given market. Cultural elements can be harmful or beneficial, depending on the kind of market a company is in, what kind of competition is being faced, the expectations and demands of their stakeholders, and even out of pure happenstance. What is indisputable is the idea that culture informs the attitudes that a company, its officers and eventually its employees take towards their jobs, and the business itself, and these attitudes are either conducive or detrimental to success.