Business owners often feel one of two ways about building company culture: Ambivalent or helpless. The former because to some, culture feels like something that arises naturally—if you hire the right people and give them the right tools, their success will drive the culture without any real input otherwise.
The latter—feeling helpless—comes from not knowing how to define culture, and thus not knowing how to invest in it. Unlike other aspects of a business, such as product or sales, you can’t easily measure what you put in and what you get out. Culture is incorporeal, and seems like it hinges more on each hire’s mindset rather than anything you can do from up top.
Culture, however, is a very real thing. It’s a product of real decisions, and investments, that your company makes. And your culture can have a huge impact on your business’s bottom line.
What culture does for your business
To paraphrase the Harvard Business Review, culture is what happens when the CEO leaves the room. How do people interact with each other? How do they respond to new challenges? Do people feel comfortable expressing themselves, whether it means speaking up in meetings or calling out harassment?
Culture is the driver of discretionary behavior around the office, and that extends to how employees work, interact, and attract others. All of these behaviors can have a direct, positive impact on the bottom line. Here’s how:
Increased productivity and profitability
Good company culture makes employees happier and more engaged, and happy, engaged employees are more productive. According to the numbers:
- Studies show that companies with happy employees outperform their competition by 20% and earn 1.2%-1.7% more than peer firms.
- Happiness makes people 12% more productive, and unhappiness makes them 10% less productive.
- Companies with strong corporate cultures saw a 4x increase in revenue over companies without
And if that’s not enough, know that according to Deloitte, 94% of executives believe a “distinct workplace culture” is important to company success—and that there is a correlation between “clearly articulated and lived culture” and “strong business performance.”
Your culture is your brand, which means it’s not just for your current employees, but also for your customers and potential future employees as well.
A positive, well-regarded culture distinguishes your company, helping you stand out among competitors when recruiting talent in this increasingly competitive economy. When given the opportunity to choose between similar offers, you can bet that a prospective employee will gravitate towards the company with the defined vision and values.
Interestingly, a strong company culture goes both ways when it comes to recruiting: It can help your company better identify strong fits that mesh with your existing team. Culture informs hiring criteria, which can steer your decision-making when choosing between qualified applicants. This even helps drive down the cost of hiring as well.
Once you hire good employees, your culture is what keeps them there—or doesn’t. And considering how large an investment of time and resources it is to recruit and hire someone (and how expensive it can be to replace them) it’s best interest to encourage people to stay.
Good culture makes people want to come to work in the morning, and makes it hard (well, harder) for them to leave in the evening. It keeps them engaged and productive, even in slow times or slumps, because they believe in the mission of the company.
On the other hand, a poor company culture sends makes people more likely to look for a new job. Not only does this affect the bottom line significantly in the form of further recruiting costs, but it hurts company morale and engagement as well.
Fewer HR issues
If you’ve hired well, people will resonate with your culture and, in turn, contribute to it—creating a virtuous circle that feeds on and produces positivity.
But vague, unfocused culture and vision can lead to hires who don’t get along with existing employees. It can mean failing to codify procedures and modes of communication, meaning people may feel uncomfortable reaching out to peers and managers for feedback or to report an issue. And it can create a vicious cycle of undermining that costs companies billions of dollars in health-related costs, employee turnover, and productivity loss.
Why culture is more important than ever
Culture has always been important, but it’s even more on people’s minds today for a simple reason: Younger workers—who will soon be the majority of the workforce—demand it.
Millennials and Generation Z workers, according to the 2018 Deloitte Millennial Survey, increasingly view corporations as acting unethically, and business leaders as not working to improve society. They are “eager” for businesses to aggressively make a tangible impact on society—otherwise, they are prepared to move and find a better workplace.
Company culture includes standing up for causes, demonstrating leadership, and investing in the well-being of employees and those affected by the business. If businesses want to attract and retain the talent of the future, they’ll need to take a hard look whether they are living and working by the values they espouse.
How to start investing in culture
We’ve established that investing in company culture is important, not just to ensure success in the present, but going forward. The question is, how do you start investing in culture? Here are some places to start:
- Communication: Start by emphasizing the need for communication and transparency throughout your organization. Provide people the means to express themselves publicly—one-to-one meetings with managers, town hall-style meetings of the whole company—as well as privately, through human resources or HR software.
- Office aesthetics: Your office space should be well-designed and inviting. If you have some or a mostly remote workforce, invest in the workflow and communications tools to keep your employees engaged and excited.
- Activities: An investment in the occasional office outing—be it a holiday party with gifts, field trip, or happy hour—can do wonders for team-bonding and showing your employees that you value them as people as well as workers.
- Clarity of values: Codify everything and take the lead in living what you’ve written down. If you make commitments to have a social component to your business model, or to give your employees paid time off—essentially, any “sacrifices” your company might make in the name of culture—don’t renege on them. As a business owner, your word means more than you know.
Culture isn’t just a buzzword, or an ideal that your company might reach if you push the right buttons blindly. An investment in culture is real way to boost revenue, improve your branding, and establish yourself as an important and, perhaps, fun place to work. Your future as a business may depend on your culture, so don’t be afraid to invest in it.