What is Organisational Culture? (And 5 Red Flags You Need an Organisational Change)

What is organisational culture? Why does it matter to a business and how do you know when you need to shake things up?

Most people in the world of business agree organisational culture (what is also known as company culture, corporate culture or workplace culture) exists and is hugely influential in shaping a company. However, a degree of confusion still exists in this area. There is no universally-accepted definition for “organisational culture,” which poses a bit of a problem. After all, if we can’t adequately define organisational culture, we can’t fully explore and understand how it influences employee behaviour, the employee experience and company productivity.

Below, we’ll share our preferred definition of what organisational culture is. We’ll also cover why it is so important and the different types. We’ll then go on to explore five red flags that indicate you need to undergo an organisational culture change.

What is Organisational Culture?

One way of defining organisational culture is by its shared beliefs, expectations, language, customs, habits and attitudes of its employees, as well as the company’s underlying values, norms and standards. Organisational culture also dictates how the company interacts with the outside world, how it treats its employees and how it conducts business. Organisational culture even extends to marketing and advertising practices.

Organisational culture contributes to a company’s psychological and social environment. In turn, this environment profoundly impacts the overall employee experience and employee engagement levels. Organisational culture expresses itself in the company’s reputation and branding, and this can have a huge effect on recruitment efforts. The corporate culture will also determine how new ideas develop in a business and how information flows through its hierarchy.

Every company has a unique corporate culture, although it is developed over time and is usually evolving in one way or another. While all organisational cultures should have a solid foundation, they should be able to adapt and change. Change helps the company advance and compete in challenging times. However, although organisational change is necessary at times, it is also one of the hardest things to manage in an organisation – for many businesses, it’s difficult to get employees to accept change while providing them the continual support and encouragement they need.

To perhaps oversimplify the concept, we can define organisational culture as “the way things are done around here.”

Check out our post on how to implement your organisation’s values

Why Is Organisational Culture Important? What Does It Impact?

HubSpot has suggested workplace culture is paramount when it comes to attracting and retaining talented people. Corporate culture is a huge factor when it comes to the employee experience. You could describe it as the “vibe” employees get when they are part of your organisation. Organisational culture can either energise or drain employees. It can be either inspirational — or demotivational.  Organisational culture affects presenteeism, absenteeism, employee engagement, productivity and performance.

Research suggests workplace culture has a direct or indirect bearing on the following:

• Organisational alignment
• Employee morale
• Goal achievement
• Team cohesiveness
• Voluntary turnover
• Employee engagement
• Employee performance
• Creativity and innovation
• Competitive edge
• Long-term economic performance
• Customer service
• The ultimate success of a business

Different Types of Organisational Culture

According to business professors Robert E. Quinn and Kim S. Cameron of the University of Michigan, there are four types of organisational culture. Handy’s model of organisational culture is another popular approach used to consider types of workplace cultures. Importantly,  organisations can be a combination of these cultures.

1. Clan Culture — Cultures like this offer a very family-like environment. People are friendly and respectful towards one another. Leaders are coaches or mentors, rather than authoritarians. Clan cultures have an emphasis on employee involvement, cohesion, team-building, loyalty and tradition. Clan culture heavily relies upon the Human Resource department. In this culture,  HR works to create long-term approaches to keep employees engaged, unified and motivated, while respecting the wellness and wellbeing of its employees. Google is an example of a company with a clan culture.
2. Adhocracy Culture — This culture is all about autonomy and innovation. Such a culture is dynamic and creative, encouraging individual innovation and respecting new ideas. Employees receive a lot of freedom to experiment and take risks. Adhocracy cultures aim to create new and exciting products. They measure their success based on successfully anticipating market needs and developing appropriate solutions to meet those demands. Apple would be a famous example of this type of company culture.
3. Market Culture — This culture has an emphasis on getting things done. There is an emphasis on numbers and goal completion, resulting in a hugely competitive environment for its employees and even between leaders. There is a focus on rivalry and winning, with success measured against market penetration and stock. As an example of a company with a market culture, we can look to Oracle, whose executive chairman and co-founder Larry Ellison once said, “I’m addicted to winning. The more you win, the more you want to win.”
4. Hierarchical Culture — In a hierarchy culture, everyone adheres to strict institutional procedures and a chain of command. A leader is responsible for making sure his or her employees follow instructions and procedures correctly. There’s a significant emphasis on efficiency and uniformity. One famous example of an organisation with a hierarchical culture is Ford Motor Company, a business with seventeen levels of management.

If you’re looking for guidance, we have a guide on defining your company culture.

Statistics About Organisational Culture

To give you a more comprehensive understanding as to why company culture is such an important topic, consider the following facts and statistics:

• Millennials prioritise culture fit above almost everything else when deciding on job offers
• In fact, 77% of employees consider a company’s culture before applying
• Companies with a good culture generally see 33% higher revenue – likely because they’re attracting the best talent!
• 69% of senior leaders attribute their business’ ability to survive through the COVID pandemic to a strong organisational culture
• 87% of highly engaged employees say their company has a strong culture
• Companies with a positive company culture have up to 72% higher employee engagement rate
• 86% of employees won’t apply for a job if the company has a reputation for having a bad culture
• For nearly 65% of employees, corporate culture is a leading reason to stick with a job
• Culture can trump money for employees, with nearly half saying they would leave their current job for a lower-paying alternative at a company with a better culture
• Only 31% of HR leaders feel their company’s have the culture they need to drive success
• When it comes to organisational change, 85% of businesses fail to manage the change successfully

You might also be interested in our motivating workplace culture quotes

Indicators of a Great Organisational Culture

While every successful organisation is different in nature, there are a few well-accepted indicators of good company cultures, including:

• High levels of psychological safety – Companies with good cultures allow employees to take risks safely, while providing honest feedback

• Resilience – Strong corporate cultures allow leaders and employees to whether storms and roadblocks

• Recognition and reward – When employees feel appreciated, they thrive, and companies with good cultures prioritise appreciation in its many forms

• High trust levels – Without trust, cultures become toxic fast. Teams need to be able to express themselves and rely on fellow employees as well as their leaders

• Integrity – The best company cultures are transparent and honest

• Teamwork – To follow on from the point above, companies with good cultures have excellent levels of teamwork and collaboration

• Innovation – This teamwork and psychological safety often results in high levels of creativity and innovation for the company

• Overall alignment – Companies with great organisational cultures have alignment throughout the business, with everyone working together to a common vision or purpose

5 Signs You Need an Organisational Culture Change

As we mentioned before, company culture is fluid. Over time, you will get a better grasp of what works for your company, what yield the best results — and what organisational processes, traditions or beliefs have resulted in disengagement and a lack of productivity. At times, companies will also need to adapt as a result of changes in their industry beyond their control. We can see this in the way the financial sector has had to navigate transformational change.

Below are five red flags that it’s time your company implements workplace culture change:

1. You are changing your business strategy and therefore the expectations of your people – Change is the new normal as organisations compete for customers. When your business needs to significantly change focus or ways of operating, you can’t expect your people to embrace this overnight. They will need guiding, supporting and motivating to new ways of working and behaviours. We can see this at Nottingham Building Society, where their organisational culture programme supported strategic change
2. You are experiencing high turnover — This is a sign your company is either too stressful or too mismanaged for employees to remain for an extended period. Perhaps they are feeling unfulfilled, disengaged or under-appreciated. Whatever the case, when you are beginning to experience higher than average levels of turnover, you should consider carrying out an employee engagement survey to uncover the root cause. These surveys will help you determine the best course of action going forward.
3. Your technology is outdated — To keep competitive in your industry, you’ll have to stay up-to-date with the latest technology. This doesn’t always mean investing in the most high-tech or most complicated platforms. Generally, the best platforms are those that are simple and user-friendly. Make sure you stay relevant and adapt when required. Find out how Croydon College transformed their culture with a new, modern employee survey.
4. Company and employee performance is suffering — If you notice plummeting levels of employee engagement or morale, or that productivity is suffering, you should address the reasons why. More than likely, something (or several things) in your organisation need to change.
5. Your company isn’t performing well — Is your product or service not selling? This could be a result of an issue with company culture or organisational structure.

Of course, organisational change is never an easy undertaking. Your employees might resist the change. But if implemented properly, leaders can encourage employees to support (and even get excited about) change. The results could yield great, long-term success.

At People Insight, our experts can help you understand how to assess organisational culture and achieve measurable and meaningful business change. Contact us today about our employee survey programmes.