How Does Organisational Culture Impact Business Performance?

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A positive organisational culture can be key in hiring, engaging, and retaining top talent in a company. It’s essential for a business to perform at its best, and we want to explore why that is the case.

For today’s discussion, we will hone in on organisational culture as a competitive advantage for businesses. It’s not simply something you talk about, because a business’ lived culture shares a direct and complex relationship with overall performance (click here if you are interested in learning more about organizational development).

This article will explain what organisational culture is, how it differs from corporate culture (which you can read more about by clicking this link), and the varying principles of organisational culture that can have a real impact on success.

Interested in corporate culture? Click here to download our practical guide today.

What Is Organisational Culture?

Organisational culture is best understood as the shared values, norms, and routines within any given organisation. Together, these are the things that define one’s working life at a company, both what happens inside and outside of working hours (and, potentially, what constitutes “working hours,” too).

Whether defined or not, every business has a culture. In this way, it’s especially important, because culture will form on its own even when it is not defined by management or by the guiding vision of a company. This can be positive, but it can also be very negative (click here to learn about the cultural web model for organisational culture).

A strong organisational culture, and a strategy that invests in it, essentially means ensuring that every employee (from interns to executives) identifies with the company and understands what the company stands for and against.

How Does Organisational Culture Differ From Corporate Culture?

They are essentially two sides of the same coin! While often used interchangeably, organisational culture is often used as a catch-all term that can also be applied to not-for-profit businesses.

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What are the Benefits of a Strong Organisational Culture?

So, why does it benefit a business to have a sound organisational culture? There are a variety of reasons why it helps, which we’ll dive into right now…

1. Lower Rates of Turnover

According to a study by Columbia University, there is a direct correlation between staff turnover rates and what are rated as strong organisational cultures (48.4% versus 13.9%).

The fact is that attrition rates can tell you a lot about the state of your organisational culture (click here to read our comprehensive guide to attrition rates). The main takeaway, though, is that a toxic culture can force people out the door in greater numbers and at greater speeds.

When you have a strong culture, though, employees feel validated, engaged, and motivated to be their best. Therefore, they become more attached to your company and want to stay longer. Not only are people more satisfied with their work, but they are also satisfied with their workplace.

2. Seamless Hiring

Building on lower rates of turnover, hiring talent becomes even easier for companies who have a strong organisational culture.

That’s not only because your employer brand becomes stronger (read more about employer branding right here), but employees are more likely to refer your workplace for having a strong culture.

It also makes the recruitment process seamless, too, as having a defined culture can make it easier to vet and hire talent for just about any role. You not only have more talent, but you’re better able to keep them around for longer, too.

3. Better Atmosphere

According to CultureIQ, employees who work in companies with a strong organisational culture feel like their atmosphere and overall mission is more clear (and, therefore, stronger).

This is an imperative element of organisational culture when it comes to impacting business performance. After all, employees need to enjoy where they work and feel a tangible connection to their day-to-day tasks. If they lost this, they lost motivation, which ultimately costs the company.

A better work atmosphere ensures that employees are happy to come to work each day, and are motivated to do their best. Which leads us to our next point…

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4. An Increase In Revenue

When it comes to the bottom line, a strong organisational culture is simply better for business. According to Gallup, they have shown that selecting high-talent managers (a byproduct of a strong culture) can lead to 27% increased revenue per employee.

On top of that, individual contributors can add 6% in their own work. That results in a 33% increase in revenue by focusing on a culture that attracts and engages talent.

This reveals itself in multiple ways, whether you want a culture driven by feedback, performance, or a combination of multiple approaches. In general, when you make a positive organisational culture a priority, it increases revenue.

5. More Growth

Building on revenue, and according to Forbes, 50% of executives in various companies have stated that positive organisational culture has a direct influence on growth rates.

Culture is something that builds on itself. Once you spend the time to craft a vision, goals, and ways to get there, it lays the foundation for growth in various ways. Whether attracting more talent, retaining, or getting the most out of them.

Therefore, companies that devise a cultural strategy are better able to grow because they have a clear idea of who they are and what they want to achieve across the organisation.

6. Saving Time

Last, but not least, there are the time savings that come from a strong organisational culture. As per the Engagement Institute, employees who identify with their company are more motivated to work harder and cost their companies less.

That’s because the more you ratchet up the connection an employee feels with the company, by way of the culture, the more likely they are to do the right thing for the company every time. In fact, they will view their own interests as the company’s interests.

When these two go hand in hand, it has a cascading effect on everything we just mentioned. Employees feel more connected, work harder, save time, drive revenue, and the business benefits no matter what it is trying to do.

How Do You Build A Strong Organisational Culture?

When it comes down to it, you need to put together an action plan that can help build a strong organisational culture for your organisation. How do you do it?

Setting Your Goals

The first thing is to do a ‘hard reset’ of your culture. Think about where it is now (even employing the cultural web model to help), and where you want to take it. Envision the ideal culture, what it stands for, and how it will help increase performance.

Think about answering questions like these:

  • Where are we currently and where do we want to go in 2, 4, or 5 years?
  • What routines are we currently unconsciously encouraging or discouraging?
  • How do we currently evidence collaboration with other team members?

Defining Clear & Unique Values

Values are an intrinsic part of a positive corporate culture. When you have them and address them regularly, employees have a clear connection between their work and what the company values or how the company addresses problems.

One piece of advice, though: try to avoid values that are overly generic, and go for something that is unique to your company and your mission. Make it specific, because it will help develop real, actionable ways to ‘live your values.’

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Living Those Values

It’s not enough to simply talk about your values, you need to live them and communicate them! You can read our full guide to communicating corporate values by following this link, but the main thing you need to know is that values need to be shown (and not just talked about).

Measuring Values

In the same vein as living your values, you also need to find a way to measure them. While it can be done with data, it helps to think about ways that you can get feedback or get employees to identify values in their own work. Rather than having to spell it out for them, this can lead to proactive identification while developing stronger connections.

Your Organisational Culture Matters For Business

Today, we discussed organisational culture, why it matters, and some of the actionable steps you can take to put it in place or refine it for your goals. Not only is it essential for your employees, but for business, too.

Ready to launch into your company’s culture? Don’t forget to download our guide to Corporate Culture, first, as it can help you roadmap the next steps to make a real difference, both for your culture and your bottom line.

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