What is Organizational Culture? How To Understand & Develop It

The most crucial part of any company or organization is its people. A strong core of enthusiastic, self-starting employees will carry you further than a fantastic product or loyal customers.

The best way to cultivate your workforce is by focusing on your organizational culture.

Transforming organizational culture is no easy task. The employees at a company collectively create their organizational culture as much as it influences them. The nature of organizational culture is complex and symbiotic, so it takes some deep thought and hard work to change it.

But if you want to improve your business from the top-down, there’s no better way. Here is a complete guide to understanding and developing organizational culture.

What Is Organizational Culture?

“Organizational culture” is the term for the collection of values, principles, and goals that all the members of a company share. Crucially, organizational culture is not the same as a company or organization’s mission statement.

Founders and executives draw up mission statements to give dimension to their ambitions. Mission statements will often define how the leaders want the company to grow, what they want it to grow into, and how they will do that.

If a mission statement describes what a company wants to be, organizational culture describes what it actually is.

Organizational cultures aren’t inherently positive. If none of the company employees are on the same page about broader goals, that’s a toxic organizational culture. The goal is to develop an environment that promotes productivity, communication, and honesty.

Leaders play a significant role in defining organizational culture. It doesn’t come through the constant restatement of hopes and plans for the company. It comes from consistent and reliable execution of clearly stated policies, plans, and guidelines.

A strong mission statement does play a part as it acts as a directive. First, executives will draw up values that the whole company can rally around. Second, they visualize goals that everyone can work toward as a collective. Third, top-down approaches consistently enforce policies conducive to realizing these goals.

If you can do those three things, you’re well on your way to creating a great organizational culture.

Why Is Organizational Culture Important?

If the heart of an organization is its people, then organizational culture is the most critical element of a workplace. That’s because it doesn’t just reflect how a workforce feels—it influences how they feel.

When leadership says jump, your employees say how high, and when you say sell, they sell. Your employees will carry out your orders, no matter how sensible or nonsensical.

However, this can also be to your detriment. You may not be fully aware if you’re leading the company in a disorganized or dispiriting way because your employees are going to carry out your directives no matter what.

That’s why when you deeply consider the efficacy of your goals before you have them implemented, your employees take notice. It’s a sign of respect for their time and labor.

A strong, cohesive organizational culture means you’ll retain employees longer, attract higher-performing new hires, and become the beneficiary of great referrals from your existing staff. Healthy organizational culture really is the backbone of business success.

What Happens When an Organization Lacks a Solid Organizational Culture?

A weak or unhealthy organizational culture can lead to large-scale problems down the road. It’s crucial to promote honesty within the workplace so that you can conduct accurate, regular check-ins with your employees.

If the same issues come up in conversation after conversation with employees, you know where you need to start working on improving organizational culture. Here are three primary sites where organizational culture can begin to break down.

Breakdown of Trust

An unhealthy organizational culture can manifest in trust issues. If coworkers don’t trust each other with projects, leaders don’t trust their employees with their responsibilities.

The toxicity scales up, as executives don’t trust leaders with delegation, the toxicity scales up, leaving the company doomed to break down.

Reduced Productivity

If a company’s culture is poor, you’re likely to see drastically reduced productivity. Employees who don’t feel supported aren’t going to give it 100%. That’s a problem with leadership, not employee commitment.

Increased Likelihood of Burnout

When employees feel they must work demanding hours without receiving any support or guidance, the conditions are ripe for burnout.

A Deloitte survey found that 77% of surveyed employees have experienced burnout in their current jobs. Avoiding burnout altogether is difficult, but if you want to foster a productive organizational culture, it’s best to prioritize tactics for mitigating burnout.

How To Improve Organizational Culture

You can improve organizational culture. Every company leader has the time and resources at their disposal. All it takes is the will to see your workplace change for the better.

Here are the three things you can do immediately to improve yours:

Promote Honesty

Employees need to be able to confide in their superiors about everything from grievances to personal goals. If you want everyone on the same page about shared company values, make sure to respect each employee’s values in an honest way.

Practice Fairness

It’s not enough to state fairness and inclusivity as core values. Fairness is something you must exercise at every stage of the process, from hiring to day-to-day management, review, and severance.

Encourage Communication

Research has shown that open communication is vital to a positive organizational culture. Maintaining good communication practices improves everything from job satisfaction, to productivity, to the development of relationships.

Work Smarter

When you work smarter, you work better. Rather than focusing on how you can drive spread and increase productivity, focus on your employees.

The people who work at a company are its lifeblood. If they aren’t healthy, nothing about the company is. Positive organizational culture means clear messaging around shared values and strict fairness in implementation.

Determine your shared values, communicate them honestly to your workforce, and practice fairness when implementing them. If you do these three things, you’re already on the path to improving your organizational culture.

David Garcia

David Garcia, co-founder and CEO of Scout Logic, is an industry leader in the bulk background check world. With his strategic acumen and expertise in the HR sphere, specifically in hiring, recruiting, legal compliance, background checks, and resume screening, he’s an invaluable asset and consultant.

David's counsel extends across the boards of ScoutLogic, YipitData, and Supplier.io, drawing from his impactful stints on the boards of Infutor and Avetta. With an extensive 25-year journey, he champions unparalleled B2B commercial leadership within data & analytics, significantly shaping the HR landscape.