Culture Crash Course Lesson 2: The Importance of Corporate Culture

The Importance of Company Culture in Your Business

Company culture is on almost every leader’s mind: 79% of leaders rate it the most important issue they’re facing. What is the importance of corporate culture? And why does it deserve a seat at the C-suite table?

As it turns out, corporate culture is an integral driver of your company’s performance. It’s deeply embedded in every company process, from recruitment and retention to employee engagement and financial success. Because culture impacts every corner of your business, it’s more than just an HR issue — it’s a top-level business issue. Even if you know this, you might need to nudge others along in understanding that corporate culture is more important than ever for businesses that want to thrive. Here are is L some studies to help you make the business case for culture.

Read on for Lesson 2 in our Culture Crash Course: Why culture is important. For a broader understanding of culture, check out the rest of our Crash Courses:

Studies Outlining the Importance of Corporate Culture

Improved Financial Performance

A study by Great Places to Work reveals that the 13 companies that have appeared on Fortune’s annual 100 Best Companies to Work For list every year have also seen higher average annual returns. These companies are seeing cumulative returns as high as 495%, instead of 170% (Russell 3000) and 156% (S&P 500).

Glassdoor further confirms that company culture impacts financial performance. They found that being named a Best Place to Work is associated with a modest .75% stock jump.

A Competitive Advantage

In the 2016 Global Human Capital Trends survey, 82% of respondents believe that culture is a potential competitive advantage. The report concludes that company culture is decidedly a business issue, not just an HR issue. Human resources professionals have a clear invitation to step into shaping and implementing a company culture that will positively impact business processes and achievements.  

Improved Employee Performance

In a longitudinal study by the Journal of Organizational Behavior, researchers found that “culture comes first” in the give and take between positive culture and positive company performance.

A company’s positive culture can help boost productivity and sales. But simply being productive and successful won’t boost culture by itself. The importance of corporate culture, then, is that it represents a powerful and nuanced way to influence company performance.  

Better Customer Service

Bain & Company surveys show that customer service is more important to customers than price, brand, or product features. Furthermore, over a period of seven years, companies with more engaged workers grew revenue 2.5X as much as companies with less engaged workers.

The International Journal of Hospitality Management reached a similar conclusion. It found that employee satisfaction directly impacts customer satisfaction and therefore indirectly impacts financial performance.

Increased Retention, Decreased Turnover

A study by Limeade and Quantum Workplace shows 72% of employees surveyed find their support within an organization from the company culture. When that company culture supports the wellbeing of its employees, it also sees increased loyalty and engagement: 88% percent of employees with higher wellbeing feel engaged at work, 83% enjoy their work, and 84% describe themselves as very loyal to their teams.

SHRM considers these linking factors to be key reasons employees become “embedded” in their jobs and communities and choose to stay with a company. And in an environment in which 44% of Millennials would like to leave their current employers within the next two years, a positive company culture plays a vital role in encouraging current employees to build their career where they are.

Simplified Recruiting

Company culture influences how your organization is perceived from the outside — this is otherwise known as your employer brand. A positive company culture can help shape your employer brand, making your recruiting efforts more effective.

According to a LinkedIn study, compared to companies with poor or no employer brands, companies with strong employer brands cut their cost per hire by as much as half. SHRM cites that 74% of surveyed HR professionals say that a company’s reputation is critical for successful recruiting. SHRM also cites that “being known as an employer of choice” and “the organization’s culture” are the #2 and #3 factors that best attract talent, following compensation and benefits.

A Direct Impact on Engagement

According to Gallup, only 13% of employees are considered “highly engaged,” and almost a third of employees are “actively disengaged.”

When employees are checked out of the work they do, the quality of their work suffers. ,The employees’ relationships with other team members suffer. And your company’s  ability to function as a whole suffers. Culture is the root cause that supports engagement and enables employees to feel connected and supported by the work they do.

When you look at culture’s impact across your organization, it’s easy to understand its importance. So, where to get started? Head to Lesson 3, where we dive into how to measure company culture.

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