- What is organizational culture, and why does it matter?
- 5 key factors that shape organizational culture
- When is organizational culture change necessary?
- 4 effective strategies for changing organizational culture
- Changing organizational culture for the better
Your company culture is a key driver of workforce happiness and business success. But what if your culture isn’t what you want it to be? Changing organizational culture can be one of the most important challenges HR leaders will ever face. You’ll need to identify current cultural norms, understand how they affect your organization, and create a plan for achieving a culture that supports the business.
Why does this work matter? Companies with healthy, intentional cultures are 12 times more likely to have a strong community than those without, according to O.C. Tanner’s 2023 Global Culture Study. Strong community correlates with 43% higher retention, a 20% increase in excellent work, and a 38% decrease in burnout.
If your workforce isn’t as happy, engaged, and purpose-driven as you’d like, this article is for you. Get started on your change journey by learning more about organizational culture and how (and when) to change it.
What is organizational culture, and why does it matter?
Organizational culture is the shared values, beliefs, and norms that guide people’s behavior within a company. Culture matters because workforce attitudes and behaviors directly affect key people outcomes such as employee engagement, productivity, and retention.
Employee engagement is a key element of company culture. When employees feel connected to the mission and values of the organization, they’re more likely to be motivated to do their best work. An organization with a strong culture results in employees taking on meaningful work and feeling a sense of belonging. The resulting outcomes include higher morale, increased job satisfaction, and better performance.
Culture also influences productivity. Successful organizational cultures reflect an environment where employees are free to be creative, productive, and efficient. Employees are often more productive when they understand the company’s goals, know their role in success, and feel like they’re part of a team.
Organizational culture also plays an important role in employee retention. When employees feel valued and aligned with the culture, they’re more likely to stay rather than look for other opportunities.
5 key factors that shape organizational culture
Culture doesn’t happen by accident. There are key factors that influence your culture, and savvy HR leaders use this knowledge to influence day-to-day activities, processes, and norms.
Here are five important factors that shape company culture.
Values and beliefs
Your company’s core values and beliefs inform decision-making and have a powerful influence on an organization’s culture. Culture is reinforced by your workforce’s actions and by what leaders, managers, and peers choose to recognize and reward. The challenge for HR leaders is to have people practice and reward behaviors that align with company values.
For example, if a company values going the extra mile, the culture will likely reflect this through performance management processes and by managers who encourage team members to be determined and persistent at work. Too much of this value can create problems, however. Employees might feel pressured to work extra hours or to be always available, which can ultimately lead to burnout. Or they might miss deadlines because “go the extra mile” is prioritized over completing deliverables on time.
Leadership attitudes and behaviors
Company leaders’ attitudes and behaviors have a big impact on culture. They set the standards for how employees should act, communicate, and interact. Leadership behaviors can be contagious, for good or bad.
Leaders who are open-minded, supportive, and encouraging will create a culture of inclusion, trust, and collaboration. This manifests in something as simple as a vice president asking a front-line employee for their opinion, listening closely, and following up on what they hear. That behavior signals an innovative culture where every perspective matters.
Leaders who are closed-minded, unsupportive, or overly critical, on the other hand, create a culture of fear and mistrust. In this environment, employees are more likely to disengage and less likely to take risks or attempt to innovate.
The physical workplace itself can affect company culture — shaping how employees interact with each other and how they view the company. A well-designed office space can create a productive atmosphere that encourages collaboration and innovation. On the other hand, a poorly designed office space can make employees feel uncomfortable and unproductive.
The environment’s influence over company culture is even more complicated in remote and hybrid workplaces. You have less control over the look and feel of a team member’s home office than a shared space. But remote work engagement is no less important. Consider what your organization can do to reinforce the culture and support a productive home workspace. This could include covering the cost of ergonomic office furniture or ensuring that everyone uses inclusive communication technology.
Every company, even those that work entirely on-site, also experiences a digital environment that influences norms and expectations. For example, providing a company intranet with organizational policies, procedures, and other key information can show that HR values transparency about company rules and norms.
Good communication leads to open and honest dialogue, strong relationships, and alignment with the company’s goals and objectives. Customers and other stakeholders also benefit from clear, consistent, and engaging communication from employees.
A positive company culture relies on open communication and respect. This can take many forms, such as regular “town hall” meetings where employees can share ideas, questions, and concerns with management. This is just one way companies can help employees feel heard and respected. Done well, your workforce feels more engaged and is eager to contribute ideas, seize opportunities, and work through difficult problems.
However, poor communication creates a negative environment with more conflict and lower morale. One way this manifests is when senior management is known for withholding key information and surprising the workforce with bad news. Team members will naturally begin to fear the unknown, which can harm engagement and productivity, not to mention retention.
Your organization’s structure determines each employee’s level of autonomy and how bureaucratic you are — both of which influence culture. Companies with strong hierarchies and limited autonomy will restrict most decision-making and input to executives, creating a top-down culture. A more flexible and decentralized organizational structure will give teams and employees more autonomy and decision-making power, which can lead to a more collaborative and inclusive culture. While there are many ways to organize your business, each has trade-offs for culture.
The type of structure an organization chooses will also affect communication within the organization. A hierarchical structure will emphasize formal, top-down communication channels, and a decentralized structure will be more open and free-flowing in communication between employees and management.
When is organizational culture change necessary?
Knowing when to shift cultural norms and expectations isn’t easy. Generally, you should engage in organizational culture change when your current culture no longer serves its purpose for the business. For example, if the company’s goals have shifted out of alignment with the culture, then you’ll need to examine what culture changes are needed.
Culture change is also required when the company’s competitive landscape has shifted — for example, shifting from prioritizing stability to emphasizing flexibility and agility in the face of a rapidly changing environment.
Of course, deciding to change your culture is more difficult when you aren’t sure of your current state. This is where organizational culture assessment instruments can help you analyze your organization and what changes are needed to realign culture with business goals.
Tools such as the competing values framework can help you assess what’s most valued within the company culture. Other ways to assess organizational culture include employee surveys, interviews, and focus groups, which provide qualitative data you can use to define your culture’s dominant characteristics.
Long-term indicators that a change in organizational culture is needed include declining employee engagement, lower productivity, and higher turnover. Additionally, if customer feedback is negative or customer loyalty is declining, then you may need to invest in a culture change to transform employee attitudes and behaviors for the better.
4 effective strategies for changing organizational culture
There are several approaches you can take to transform organizational culture, and you can combine some or all of them to customize your change plan. Here are four ways to get the ball rolling.
Model desired behaviors
Leaders serve as cultural architects of their organizations. They lay the foundation for a positive and thriving work environment by modeling the behaviors and values they wish to see in their teams. Their words and actions inspire employees to follow suit, fostering a strong sense of shared purpose and identity within the organization.
Employees are motivated by witnessing their leaders displaying desired behaviors and values. They will seek to emulate such leadership, creating a positive ripple effect throughout the organization.
Create processes for behaviors you want to see
One of the most effective ways to instigate lasting change is by embedding it within daily processes. This helps managers and their teams build better habits. Your employees make progress without having to consciously think about culture. A powerful example of this in action is when HR leaders shift from a traditional performance management model to a performance enablement model.
Performance enablement is characterized by ongoing coaching conversations between managers and their team members. These conversations can have a net positive effect on culture, as we document in our 2023 State of Performance Enablement report. Well-coached employees are more likely to say they’re always engaged, very productive, always feel they belong and are valued, and like working at their company.
Recognize and reward employees
Rewarding and recognizing employees for exhibiting the desired behaviors and values within the organization can create a positive reinforcement loop that integrates and reinforces the culture change.
Make sure you call out and reward employees for actions that align with the company’s business goals and values. Doing so encourages them to repeat such positive actions while communicating the organization’s commitment to those values. These rewards can take many forms, including bonuses, promotions, public recognition, or opportunities for professional development.
By linking rewards to specific behaviors and values, leaders amplify these qualities and their impact on the organization’s overall success.
The right technology, used in the right way, unlocks new ways to deliver and amplify your culture change initiatives. Communication platforms such as intranets, performance management software, and social collaboration tools can inform employees about desired cultural shifts and facilitate meaningful discussions.
Online learning and training platforms can deliver targeted educational programs on the new cultural values and behaviors. Employees will understand the transformation and how to put it into practice.
Data analytics and sentiment analysis tools, meanwhile, allow organizations to monitor the progress of culture change efforts and track employee sentiment and engagement. A comprehensive technology strategy helps companies foster — and measure — a culture that’s adaptable, forward-thinking, and responsive to evolving challenges.
Changing organizational culture for the better
Culture change can feel daunting, but the results are powerful — and attainable. HR leaders have a unique opportunity to empower managers to model desired behaviors, foster open communication, and leverage technology to facilitate change. The result? Companies that create positive work environments that inspire and engage employees at every level.
Embrace this cultural evolution with optimism and determination. Changing organizational culture can unlock your workforce’s untapped potential, create a workplace where employees thrive, and power the business to new heights.
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