What precisely is corporate culture? Simply put, it’s the values, norms, and behaviors of an organization.
That said, it isn’t always clear which factors have a positive or negative influence on corporate culture. With that in mind, a company’s culture should be specific and tangible.
After all, it can have a direct impact on employee performance and corporate success. This article explains which factors influence organizational culture and how HR can contribute to shaping and even changing culture over time.
What Is Corporate Culture?
Corporate Culture and Corporate Success
Factors That Shape Your Culture
How to Observe Your Culture
Corporate Culture Best-Practices
Models for Corporate Culture
Implications on Management
How to Map Your Company’s Culture
The Role of HR in Corporate Culture
Changes To Corporate Culture
What Is Corporate Culture?
Corporate culture is an organizational system of shared values, social norms, symbols, and attitudes that shape how employees make decisions, act, and generally feel about where they work. It can include examples of lived leadership, relationships (with colleagues, customers, etc.), and how decisions are approached and made. All these are grounded in a company’s culture, which extends across all levels of an organization.
That includes senior management, all the way through to each and every employee. It can also include clients or customers when it comes to their shared relationship with employees.
In order to understand organizational culture, it helps to start with the following questions:
- What does our organization stand for?
- What is important to our organization?
- How are those two things related?
What Does A Successful Corporate Culture Achieve?
If you have a positive corporate culture, it can help work to ensure that:
- Employees feel supported in times of crisis
- Companies achieve their set goals
- Employees feel good as part of the company, actively contributing to it and staying with it
Employees are not your company’s most important resource. They are your company.
Adam Grant – organisational psychologist, Wharton professor, and bestselling author
How Does Corporate Culture Contribute To Overall Success?
Values shape behaviors and behaviors shape outcomes.
According to a study by the German Federal Ministry of Labour, a third of a company’s profit (before tax) can be attributed to an employee-focused corporate culture.
A positive corporate culture has a distinct effect on employees: Ideally, they will be more satisfied, which conversely means that they will perform better and be more motivated.
Moreover, if employees feel good about their workplaces, they are less likely to resign. This results in lower recruitment costs and supports the company’s long-term operational planning processes.
A Step-by-Step Guide To Corporate Culture
A healthy corporate culture ensures greater productivity, efficient hiring, and more revenue. This guide can help provide you with the necessary tools to establish, boost, and ultimately leverage corporate culture in your organization.
Four Factors That Shape & Define Corporate Culture
Obviously, market conditions impact a company’s daily operations. That said, there are other, external social, and socio-political factors that also deserve consideration.
Twenty-first-century companies are presented with the following challenges:
- Globalization – Market players act globally, sometimes as part of complex networks and at high speeds. Both market speed and complexity are likely to intensify rather than ease in the future.
- Performance-Driven Societies – More is expected to be achieved within shorter timeframes. This results in performance pressure, which can cause mental stress and affects not only employees’ health, but their motivation and performance.
- Demographics – People work until later in life than they used to. This creates new challenges for workplaces and healthcare systems. At the same time, younger generations (Gen Y, Z) expect to have a positive work-life balance and flexible working hours.
- Equal Opportunity – Whether this is implemented through quotas or otherwise, most companies need to change their structures and take different HR decisions. This is true both in the medium and long term.
These factors demand that companies rethink and reshape their processes and structures. This, in turn, can initiate a change in culture, as any change in behaviors also means a change in values.
How Companies Can Respond
- By developing their own identities which employees are made aware of and are able to express in words.
- Helping employees learn their company’s strategic goals and align their behaviors accordingly.
- Allowing employees to flourish by using their full potential to support the company’s strategic goals.
- Offering professional development to help employees meet new challenges successfully.
- By valuing the ability to innovate and having a positive approach to employees’ mistakes.
- Ensuring that communication within the company is as transparent as possible.
- Relying on cooperation, within management, rather than competition.
- Engaging all stakeholders, from investors through to customers, the media, and the public.
- By ensuring that the company’s overall conduct is in line with its own vision.
The Unique Ways Companies ‘Express’ Their Culture
An interesting way to think about corporate culture is to understand it as a company’s character.
In that sense, corporate culture is the way in which a company acts. How it thinks, how it feels, and even how it expresses those opinions. Thinking about it further, it can be expressed in various ways, including:
- Handling conflict and mistakes
- Optimizing employee identification within the company
- Communicative behaviors
- Appreciation of commitment and performance
- Engagement with stakeholders
- Willingness to take risks
- A culture based on feedback
- Committed to family-friendliness
It especially comes across in the ways in which employees interact with customers. A key example would be if a customer makes a purchase, but doesn’t hear back from the company afterward. This lack of communication is systematic and is a standard that is (for better or worse) set by the corporate culture.
Let’s consider another example: ‘Employee Y’ is working on a difficult task and discusses it with colleagues over lunch. These colleagues immediately volunteer to help, even though it will require them to work overtime. This, too, is an example of organizational culture in practice.
Given the above, it doesn’t really make a lot of sense to ask applications about specific values (e.g. “are you proactive?”) during an interview. It is far more productive to ask them about behaviors, where they can demonstrate that they act in line with particular values rather than agreeing to them.
Corporate Culture Examples In Practice
An organization can be perceived as being service-oriented and innovative, just as easily as it can be seen as backward or unapproachable. Corporate culture is real, tangible, and has a concrete effect on employees (click here to read more about the cultural web model and how it can shape corporate culture).
The following corporate culture examples can serve as best practices for when culture is successfully implemented…
Granini: Employees Sharing Management Responsibilities
Granini neither regulates nor imposes corporate culture. Rather, it has focused on employees’ lived, day-to-day reality. For them, this is the only way for an organization to reap the full benefits of what we might call corporate culture.
“Employees are a lot smarter than many executives and board members believe”, said Heribert Gathof as he took over as managing director of Granini, a fruit juice producer. What did he do differently? He involved employees closely in strategic questions, including in investment decisions worth millions.
To do so, Gathof created an interdisciplinary team with members from all levels of the company’s hierarchy. They were then tasked with developing a five-year strategy. This team generated ideas that management had never thought of, and it ensured that all employees fully supported the new strategy.
The results spoke for themselves: Eckes-Granini increased its sales by 70%. The company’s self-organization model means that employees take on responsibility not by title, but through daily practice.
Schmalz: A Small Company With a Google-Sized, Feel-Good Atmosphere
Schmalz, a vacuum technology specialist, promotes itself as an employer that truly takes care of all aspects of its employees’ wellbeing.
To start, there is a crèche and daycare center for employees’ children close by; life coaches provide support in the event of private or professional issues, and the company’s internal academy offers a program of 200 professional development and leisure-oriented courses.
The company’s management team is also currently exploring options for providing better support to employees with relatives who require care.
In sum, Schmalz is emulating large corporations like Google. But, there is one big difference: Keeping work clearly separated from employees’ private lives is priority number one for this company.
“We do that so we can keep up with competitors, who are mostly located in cities’, says Daniel Just, Schmalz’s head of HR. ‘We, in contrast, are located in the Black Forest town of Glatten, and we are very different from what other companies do, including Google, in that we want the leisure time of our 850 employees to be precisely that, without work encroaching. When they clock off, their time is entirely theirs to spend as they wish.”
That in mind, Just believes that this holistic support is only one piece in the bigger puzzle that makes up an ideal corporate culture. ‘Corporate culture is decisively shaped by the executive’, he says. ‘Only when a company’s managers are exemplary in their conduct and dealings with employees can a sustainable, thriving corporate culture develop.’
4 Simple Steps To A Powerful Corporate Culture
Learn from companies like Personio, Statista, and teambay how to set up a strategy and get tips on how to strengthen your overall corporate culture today.
Corporate Culture Models
Digging deeper into the topic of corporate culture reveals some very interesting models. These are models that, when properly implemented, can help optimize your culture and grow your business.
The following three are not the only models, simply some of the best known…
The McKinsey 7S Framework
Tom Peters and Robert Waterman developed the 7S framework, which is sometimes also referred to as the McKinsey 7S Framework, in the 1970s, when they were working with McKinsey as consultants.
They focused on the company as a whole system whose ultimate success depended on seven hard and soft elements.
While hard elements can be clearly mapped, for example to charts, plans, etc., soft elements are more difficult to grasp. This is because they describe values, skills, and working styles, which are in constant flux.
Source: Tom Peters and Robert Waterman
All elements – hard and soft – are interdependent. While soft elements are less concrete, they have a stronger effect on corporate culture than hard ones. After all, they form the basis for employees’ day-to-day work, which in turn has an impact on the organization’s performance.
According to Peters and Waterman, a company will be successful if it manages to balance all of these elements. If, however, a company only focuses on hard elements and, for example, creates a new department without considering the decision in the context of the other elements – how will departments cooperate? what support measures will be necessary? – it will most likely destabilize rather than improve the organization.
The Cultural Iceberg Model
Edward T. Hall visualized corporate culture in the shape of an iceberg. He understood corporate culture as a pattern of fundamental assumptions used to solve internal and external problems.
The pattern included both visible and invisible aspects, which resulted in outsiders not always being able to understand it to its fullest extent.
The tip of the iceberg, i.e. its visible portion, stands for the observable aspects of an organization’s culture. Beneath it, there are hidden structures of corporate culture. These make up the larger and therefore more important part.
These underlying structures determine which elements ultimately reach the surface.
Source: Edward T. Hall
An organization can only shape its culture by addressing its invisible aspects.
If it wants a behavioral or cultural change, it needs to recognize the hidden aspects at work:
- What are the employees’ needs?
- How does the company manage?
- How do people cooperate?
It is at this deeper level where change can be initiated that ultimately rises to the top.
Hofstede conceived of culture as a kind of ‘software of the mind.’ This entailed shared mental programming that provides differentiation. Different people with different identities, experiences, and values come together and ‘develop culture’.
Hofstede chose the image of an onion to distinguish between four layers of cultural manifestation:
Cultures share an environment and therefore undergo a similar socialization process. This not only provides guidance and stabilizes the system, but also differentiates one group from the next.
What Role Does Management Play In Corporate Culture?
Management = culture. That’s it. Short and sweet.
If employees are managed well, they have a positive perception of their company’s culture and are therefore more likely to commit to it.
Good managers convey the idea that everyone is necessary to reach a greater goal. They motivate, promote identification, and generate a sense of belonging. All of these are critical factors for an organization’s success.
Culture eats strategy for breakfast.
Management and corporate culture are expressed in the form of general environmental conditions such as:
- Working hours
- Greetings – at Swedish retail chain, IKEA, for example, everybody is on a first-name basis internally, and people are addressed casually in all communications. This showcases IKEA as a friendly place to work.
- Dress codes
- Health care
- Child care
Good management culture is therefore expressed in many small, potentially invisible gestures and initiatives. It is something that can be experienced. Customers feel that they have received good advice; employees feel appreciated.
It also impacts the company’s image. Customers recommend the company; employees recommend their employer. While culture is a soft element, it ultimately determines whether somebody will buy a product or service, or if somebody is happy to work for a company and performs well. Nothing more, nothing less.
How To Map Your Company’s Culture
The following framework of eight different cultural styles can give us some guidance.
Originally developed by the HR consultancy SpencerStuart and the Harvard Business School, the below is based on a global study of 230 companies and 1300 managers…
- Caring: Managers consider honesty, teamwork, and good relationships to be important. Employees are connected through loyalty.
- Purpose: At this level, employees work towards doing good in the long term. They are tolerant and have empathy. Managers emphasize shared ideals.
- Learning: Employees enjoy trying out new things if they work in an environment with little restriction. Supervisors promote a desire to innovate and increase knowledge.
- Enjoyment: There is joy and a positive attitude throughout the work environment. Managers create an environment that allows for spontaneity and fun at work.
- Results: Oriented toward outcomes and profit. Employees want the business to succeed, and managers are focused on achieving targets, above all.
- Authority: The working environment is characterized by competition, with employees predominantly pursuing their personal advantage. Managers lead with courage and confidence, but also through dominance.
- Safety: Employees are aware of risks and only make decisions after long, detailed analyses. Supervisors lead with a sense of reality.
- Order: Respect, structure and shared norms. People generally want to fit in at their workplace. Supervisors emphasize proven traditions and processes.
The Ultimate Role Of HR In Corporate Culture
Firstly, HR, just like managers, can be role models for a positive corporate culture.
This means that they have internalized the organization’s values to such an extent that they translate them into behaviors. Additionally, HR can help employees understand the organization’s culture.
How? By having an HR strategy that promotes professional development, ensures managers are trained regularly (whether internally or externally), and is built on the timely communication of management decisions.
HR can support corporate culture by:
- Formulating and communicating a mission statement (in cooperation with management)
- Taking initiatives to develop teams
- Offering professional development opportunities
- Organizing events
- Promoting the exchange of knowledge
- Sharing information and keeping messages consistent
Moreover, HR can support the organization’s culture as early as the recruitment process by ensuring that there is a good cultural fit between applicants and the company. To do so, HR should have a standardized process and ask candidates about their values and norms in a behaviouristic manner.
Another task is to convey the company’s culture in external relationships to strengthen its employer branding.
Adapting the Environment
Corporate culture needs to adapt continually to keep up with our rapidly evolving world. A world in which technologies, work methods, and goals change all the time.
For HR, this means that it needs to recognize and respond to change early on. What sort of environment will employees need to embark on new challenges with confidence and motivation? That becomes the core question.
Gain an overview of your company, its goals, and its market to establish a basis for creating an appropriate environment. Ideally, you will also gather information on how much overlap there is between individual employees and your corporate culture, i.e. to what extent employees’ actions are in line with the company’s values.
This can be done by performance analyses or through discussions with managers. Understand who is not aligned with your corporate culture, and why. Learn how to enable managers to have a positive influence.
How Do You Change Your Corporate Culture?
Hardly any company can afford to resist change, meaning it is all the more important to not only control change processes but also to evaluate them. After all, studies have shown that over half of all change projects fail completely or fail to deliver the results aimed for. HR can control and support change processes.
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5 Steps To Take To Inspire A Change In Corporate Culture
1. The Fundamental Question
Before you establish anything else, you need to ask yourself: What goal are we trying to achieve by changing our culture? To do this, your company will ideally have internalized the insight that the best corporate cultures are firmly rooted in both a broad alignment with the company’s strategies and a deep engagement with the challenges of its business environment.
2. Analysing The Status Quo
What is your current corporate culture like? To understand where your corporate culture is currently at, you will need to have a solid grasp of the company’s history, environment, and tradition. These are the elements that have shaped its management styles, team dynamics, subcultures, and values to date.
3. Discussions Featuring Decision Makers
Work together to identify the strengths and weaknesses of the old corporate culture, how the latter can be or could have been addressed, or to what extent they were influenced by external circumstances.
4. Charting A Course
Next, evaluate your company’s and its competitors’ current and future business environment and challenges. In this step, it is essential that you also consider your strategic corporate orientation so that you can define which cultural styles should be emphasized or played down respectively.
5. Formulating A Bigger Goal
An example could be: “We will work together to create a feedback-oriented corporate culture that promotes innovation”. Once this is done, set aside the status quo and focus exclusively on the future.
The only relevant decision that comes next is, which cultural style will optimally support the intended change? From there, it’s best to focus on management principles, the style of communication within your company, and the overall organizational structure. This makes it easier to guide cultural change in the right direction.