In order to be successful in today’s competitive market, companies can no longer ignore the significance of culture. Whether immediately apparent or not, culture permeates into every aspect of how a company operates and can play a critical role in a company’s success or failure. Specifically, research shows us that culture has an impact on efficiency, effectiveness, and commitment.
Unfortunately, culture isn’t always easy to see and define since it relates to behavior, values, and assumptions – all of which are fluid and intangible. To better understand company culture, Edgar Schein provides us with the following definition:
“Organizational culture is a pattern of shared basic assumptions that the group learned as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems.”
Understood this way, you can see how culture really encompasses all the ways that people within the same company commonly interact, feel, and behave. From this understanding, you can then see specific, key ways that culture affects the success of a company.
Culture leads to effective problem solving
At the core of most, if not all, business objectives is problem solving. How can we create our product in the most cost effective way? How can we convince potential customers to buy our services? The values and processes that a company establishes and then continues to use over time to address these problems becomes a part of that company’s culture. Rather than having to figure out how to face common problems, employees are taught these established values and processes.
The benefit to this is twofold: 1) Employees can dedicate their time and attention towards the solving on new and more complex problems, which will help the company to progress. 2) Since a value is often at the core of common behaviors within the company, that means employees will be able to apply that value effectively to new, but similar situations. Culture in this case becomes the ‘compass’ that guides behaviors and decisions. Leaders of a company with a strong and effective culture can thus have more faith that their employees will act in a way that is in line with the values that they have established and perpetuated. This allows for an autonomous, yet still interconnected staff since they have been given what they need to act on their own.
Culture as a recruiting and training tool
In a job market where unemployment is low, employees have the bargaining power to choose to work for the company that offers them what they deem to be of most value to them. And research has shown that 95% of candidates believe that culture is more important than the offered compensation when deciding where to work. In a time when candidates can gain insight into a company’s culture instantly via the internet, it becomes increasingly obvious why a focus on culture is necessary. The employees are the holder of a company’s culture; the ones who will contribute directly either the company’s success or its failure. A company can only grow so much without the ability to recruit good people.
After an employee has been hired on, the values and processes that make up a company’s culture should be suffused into their training. As previously mentioned, once an employee learns the core values that drive processes, new employees will know how to approach situations that may be new to them without having to be specifically trained on those items. This minimizes the amount of training time required while also increasing its overall effectiveness. Training with its roots in company culture will help develop employees who are quickly inculcated into the company as a whole. And if a company suffers from high turnover rates but still maintains a stable leadership team, the culture will not only survive but will also help mitigate the cost of the high turnover rates since new employees will be onboarded quickly and efficiently.
Culture Assists Employee Retention
In a job market where the employees have the bargaining power, it’s not only difficult to recruit good people but it can also be difficult to keep good people. Once again, culture has been found to have a huge impact on employee retention rates. A study that sampled the effects of culture on employee retention over the period of six years found that “the cultural effects are estimated to have resulted in over six million dollars’ difference in human resource costs between firms with different cultural values.” Further, companies with cultural values that emphasized interpersonal relationship values maintained employees for an average of 45 months vs the 31 months at companies with a strong work task culture.
While only a subset of the workforce, it’s valuable to examine the importance of retaining Millennial employees. Millennials currently make up the largest generational group in the United States workforce, and keeping these workers for long periods of time is a global concern with only 18% saying they plan to stay with their current employers for long. A culture that promotes the values that are important to Millennials will be able to hold on to this generational subset more easily than companies that don’t. In addition to flexibility, one can deduce that promoting strong relationships in the workplace will help keep Millennial employees since Millennials have been found to openly prioritize relationships over career.
With the ability to help recruit and keep good people and to then help those people to operate efficiently and effectively, it is quickly apparent that a strong culture can be a company’s best asset. Once you understand some of the specific ways culture can impact your company, you can begin to evaluate and then reinvent or strengthen your culture to optimize success.