People & Leadership

What is company culture?

The culture of your company has a profound effect on how successful it is. Here are 10 ways to develop a great company culture.

The culture of your company has a profound effect on how successful it is.

Not easily understood and often overlooked, this essential aspect of running a successful business is becoming increasingly important.

More people are working from home (WFH) where they might feel a bit more disconnected and undervalued.

Concerns about the cost of living, rising prices and the worldwide economic situation can hit company morale.

An organisation that appears to recognise these worries and provides a supportive environment where people feel valued is one that is more likely to thrive, even in these difficult economic times.

According to the State of Employee Engagement Report 2022, published by Workbuzz, a provider of employee engagement surveys, almost half (45%) of UK employees rank “a great culture” as the most important consideration when they’re looking for a new job.

In this article, we highlight what company culture is and how to improve it at your business.

Here’s what we cover:

Definition of company culture

There are various different definitions of company culture but it’s essentially how you run your business, how you and your teams do what you do and how you go about your daily office routine.

This covers the formal management techniques and practices you employ such as appraisals, feedback, rewards, and disciplinary hearings.

But it also includes the informal things, such as:

  • How you run meetings
  • The way staff interact with each other
  • The style of writing emails and messages to colleagues.

It could even come down to whether people clear up kitchens and communal areas after themselves and say hi to others when they get into a lift.

It includes how managers communicate with their teams and how decisions are made.

Are they based on consultation and discussion, taking people’s views and experiences into account?

Or are they top-down, decreed by email and intranet, using corporate language and discouraging feedback and comments?

It’s reflected in how team members celebrate each other’s successes and to what extent, when things go wrong, they practice a blame or a learning culture.

How new people are welcomed – or not – into the office and how others are let go is another important indication.

In its broadest sense, good company culture is what brings a group of individuals together and makes them a team.

Creating company culture might require a focus on serious people management issues but when it comes to observing and living it, then it plays out in a hundred little ways.

One thing that is for sure, though, is that this way of working comes from the top.

The company’s management can and must set the tone.

Why company culture matters

Make no mistake, company culture affects your bottom line.

It can improve productivity for one thing.

Research by Oxford University’s Saïd Business School, in collaboration with BT found that, not surprisingly, workers are 13% more productive when they’re happy.

Staff will put in extra hours and are more likely to be innovative, coming up with new ideas to make your company more successful.

Engagement and enthusiasm increase as staff feel that they have more of an emotional attachment and a stronger bond with your business.

If they feel that they can try something new and risk failing in an environment that won’t necessarily blame them but will help them to learn from their mistakes and praise them for trying they’re more likely to be creative and help you to stay ahead of the competition.

Good company culture fosters better cooperation and teamwork.

There’s less suspicion, office politics and unhealthy competition. People are more likely to work together without being told to do so and collaborations are more likely to succeed.

They can benefit from feedback and appraisals that are honest but encourage and nurture them rather than leaving them feeling bullied, disheartened, and resentful.

Your staff are more likely to stay with you.

This is particularly important given that almost two-thirds (64%) of small and medium-sized enterprises (SMEs) are finding it difficult to hold on to valued staff in the current economic climate, according to a recent survey by Direct Line business insurance.

The situation is more acute for directors, with three-quarters finding valuable staff members harder to retain.

You can also reduce your rates of absenteeism.

Results showed 85% of those surveyed by health and wellbeing solutions provider Westfield Health say there’s a link between workplace culture and wellbeing, while 86% said they’re more productive at work if there’s a good culture.

How to improve your company culture

1. Listen to your staff and be open to feedback

This is the bedrock of good company culture because, as they say, you can’t manage what you can’t measure.

You’ll need to start this process by having honest conversations with your teams about how they feel about working for you and about which issues are most important to them.

This will enable you to make changes to your management techniques, company procedure and structures where necessary.

But good communication isn’t a one-off exercise. It’s a way of working.

Managers will need to be ready to hear from their staff. Establishing an “information haven” in other words, a safe space, will allow those team members to be honest about how they feel and what challenges they face.

Rather than a voice from on-high telling your employees how it’s going to be, line managers are best placed to relay information from senior management in a manner that invites a two-way response.

2. Share your business’s purpose

You might make tin cans or sell holidays, but your business should also have a greater purpose – something that will inspire your teams.

You might have a company mission or vision statement – but can your employees really relate to it?

Vague concepts and corporate gobbledygook won’t create a sense of purpose and direction.

You need something simple, direct and tangible.

For example, here’s Google’s mission statement: “To organize the world’s information and make it universally accessible and useful.”

3. Make new hires feel welcomed

HR software can help here as technology makes onboarding smoother and easier and takes care of the manual, repetitive tasks, so your teams can focus on the human element of welcoming new hires, supporting them and ensuring that they understand the company’s vision and culture.

Encouraging your staff to show new colleagues where the kitchen is and to have lunch with them might sound like small things, but they make a big difference, especially to more junior people in their first few days with you.

4. Provide training and upskilling

Research shows that 70% of us are interested in upskilling with nearly the same number (67%) believing that new skills will help us to achieve our goals.

As well as ensuring that they’re able to do their jobs, training your people shows that you care about them and that you’re investing in them.

Related to training and skills development is learning about your teams’ career goals and identifying how you can work together to help them to reach these goals.

“Employees who do not feel they can achieve their career goals at their current organization are 12 times more likely to consider leaving than employees who do feel they can achieve their career goals. Even worse, this number skyrockets to about 30 times for new employees,” according to a survey by IBM.

5. Avoid micromanaging

Nobody likes having their manager breathing down their necks, watching their every move.

Giving your teams autonomy and allowing them to get on with the job does require a leap of faith but it can pay off generously.

This means setting them clear, achievable goals and targets and making it clear that you’ll support them and be available for guidance and advice – but then letting them get on with the job.

They might be working from home, or they do things in a way that’s different to your approach – this shouldn’t matter.

The important point is that they deliver what you’ve asked them to deliver on time and on budget.

6. Allow flexible working

Although some business leaders have made it clear that they want their staff back in the office full time, many workers aren’t so keen.

In fact, research published in 2023 by the Chartered Institute of Personnel and Development (CIPD) has found that an estimated four million people in the UK have changed careers due to a lack of flexibility at work, while an estimated two million left a job in the past year for the same reason.

The CIPD has warned that “businesses may face a talent exodus if they fail to offer flexible working options”.

As well as hybrid working, this flexibility might include compressed hours, term-time working, job shares and other ways of improving work-life balance.

7. Encourage collaboration and break down silos

Encouraging your staff to get to know people from other departments and making it clear that sharing knowledge isn’t a threat to their value within the company, but rather than an opportunity to grow, will improve your company culture.

Group meetings and cross-department training sessions can help but again, it comes down to communication – getting people to communicate with each other clearly, honestly, and regularly.

8. Avoid a blame culture and allow people to fail

“Failing fast” or “failing forward” means allowing your people to innovate and test new ideas without feeling penalised and shamed when they go wrong.

Obviously, you need to encourage people to do their homework before they put something into practice, to allow to them experiment safely and then to accept responsibility.

But moving away from a blame culture and allowing them to learn from their mistakes and to share those learnings without embarrassment is another step along the road to a good company culture.

9. Improve your diversity and inclusion

Applying diversity, equity and inclusion (DEI) regulations in workplace is one thing but embedding these principles in your organisation is another.

According to research by management consultancy McKinsey & Company, inclusion in the workplace is about equality, openness, and belonging.

Equality refers to fairness and transparency in pay and promotion, openness is about a workplace that’s without discrimination, while belonging allows everyone to feel able to contribute.

10. Lead by example

Everyone knows managers whose approach is “Do as I say, not as I do.”

As a business leader, to really instil a great company culture you need to act as a role model and showcase what this mindset and way of working with your colleagues means in practice.

Final thoughts on company culture

Creating a great company culture is not a one off, tick box exercise. It’s a process of constant improvement.

It involves listening to your teams and being the manager that you would want to have yourself.

It takes an investment of time, effort, and money, but the benefits that it will bring to your teams and your company mean that this is one investment that’s well worth making.