What is organisational culture? Why does it matter to a business and how do you know when you need to shake things up?
Most people in the world of business agree organisational culture (also known as company culture, corporate culture or workplace culture) exists and is hugely influential in shaping a company. However, a degree of confusion still exists in this area. There is no universally-accepted definition for “organisational culture”, which poses a bit of a problem. After all, if we can’t adequately define organisational culture, we can’t fully explore and understand how it influences employee behaviour, the employee experience and company productivity.
Below, we’ll share our preferred definition of organisational culture. We’ll also cover why it is so important and the different types. We’ll then go on to explore red flags that indicate you need to undergo an organisational culture change.
How We like to Define Organisational Culture at People Insight
One way of defining organisational culture is by its shared beliefs, expectations, language, customs, habits and attitudes of its employees, as well as the company’s underlying values, norms and standards. Organisational culture also dictates how the company interacts with the outside world, how it treats its employees and how it conducts business. Organisational culture even extends to marketing and advertising practices.
Organisational culture contributes to a company’s psychological and social environment. In turn, this environment profoundly impacts the overall employee experience and employee engagement levels. Organisational culture expresses itself in the company’s reputation and branding, and this can have a huge effect on recruitment efforts. The company culture will also determine how new ideas develop in a business and how information flows through its hierarchy.
Every company has a unique organisational culture. But it is developed over time and is usually evolving in one way or another. While all organisational cultures should have a solid foundation, they should be able to adapt and change. Change helps the company advance and compete in challenging times. However, although organisational change is necessary at times, it is also one of the hardest things to alter in an organisation.
To perhaps oversimplify the concept, we define organisational culture as “the way things are done around here.”
Why Is Organisational Culture Important? What Does It Impact?
HubSpot has suggested organisational culture is paramount when it comes to attracting and retaining talented people. Company culture is a huge factor when it comes to the employee experience. You could describe it as the “vibe” employees get when they are part of your organisation. Organisational culture can either energise or drain employees. It can be either inspirational — or demotivational. Organisational culture affects presenteeism, absenteeism, productivity and performance.
Research suggests organisational culture has a direct or indirect bearing on the following:
- Organisational alignment
- Employee morale
- Goal achievement
- Team cohesiveness
- Voluntary turnover
- Employee performance
- Creativity and innovation
- Competitive edge
- Long-term economic performance
- Customer service
Different Types of Organisational Culture
According to business professors Robert E. Quinn and Kim S. Cameron of the University of Michigan, there are four types of organisational culture. Organisations can be a combination of these cultures.
- Clan Culture — Cultures like this offer a very family-like environment. People are friendly and respectful towards one another. Leaders are coaches or mentors, rather than authoritarians. Clan cultures have an emphasis on employee involvement, cohesion, team-building, loyalty and tradition. Clan culture heavily relies upon the Human Resource department. In this culture, HR works to create long-term approaches to keep employees engaged, unified and motivated, while respecting the wellness and wellbeing of its employees. Google is an example of a company with a clan culture.
- Adhocracy Culture — This culture is all about autonomy and innovation. Such a culture is dynamic and creative, encouraging individual innovation and respecting new ideas. Employees receive a lot of freedom to experiment and take risks. Adhocracy cultures aim to create new and exciting products. They measure their success based on successfully anticipating market needs and developing appropriate solutions to meet those demands. Apple would be a famous example of this type of company culture.
- Market Culture — This culture has an emphasis on getting things done. There is an emphasis on numbers and goal completion, resulting in a hugely competitive environment for its employees and even between leaders. There is a focus on rivalry and winning, with success measured against market penetration and stock. As an example of a company with a market culture, we can look to Oracle, whose executive chairman and co-founder Larry Ellison once said, “I’m addicted to winning. The more you win, the more you want to win.”
- Hierarchy Culture — In a hierarchy culture, everyone adheres to strict institutional procedures and a chain of command. A leader is responsible for making sure his or her employees follow instructions and procedures correctly. There’s a significant emphasis on efficiency and uniformity. One famous example of an organisation with a hierarchical culture is Ford Motor Company, a business with seventeen levels of management.
How to Know When You Need an Organisational Culture Change
As we mentioned before, organisational culture is fluid. Over time, you will get a better grasp of what works for your company, what yield the best results — and what organisational processes, traditions or beliefs have resulted in disengagement and a lack of productivity. At times, companies will also need to adapt as a result of changes in their industry beyond their control. We can see this in the way the financial sector has had to navigate transformational change.
Below are just a few signs that it’s time your company implements organisational culture change:
- You are changing your business strategy and therefore the expectations of your people – Change is the new normal as organisations compete for customers. When your business needs to significantly change focus or ways of operating, you can’t expect your people to embrace this overnight. They will need guiding, supporting and motivating to new ways of working and behaviours. We can see this at Nottingham Building Society, where their culture programme supported strategic change
- You are experiencing high turnover — This is a sign your company is either too stressful or too mismanaged for employees to remain for an extended period. Perhaps they are feeling unfulfilled, disengaged or underappreciated. Whatever the case, when you are beginning to experience higher than average levels of turnover, you should consider carrying out an employee engagement survey to uncover the root cause. These surveys will help you determine the best course of action going forward.
- Your technology is outdated — To keep competitive in your industry, you’ll have to stay up-to-date with the latest technology. This doesn’t always mean investing in the most high-tech or most complicated platforms. Generally, the best platforms are those that are simple and user-friendly. Make sure you stay relevant and adapt when required.
- Company and employee performance is suffering — If you notice plummeting levels of employee engagement or morale, or that productivity is suffering, you should address the reasons why. More than likely, something (or several things) in your organisation need to change.
- Your company isn’t performing well — Is your product or service not selling? This could be a result of an issue with company culture or organisational structure.
Of course, organisational change is never an easy undertaking. Your employees might resist the change. But if implemented properly, leaders can encourage employees to support (and even get excited about) change. The results could yield success.
At People Insight, our experts can help you assess your company’s employee experience and organisational culture, to help you achieve measurable and meaningful business change. Get in touch today about our employee survey programmes.
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