One of the biggest topics leaders should be talking about today is organizational culture. Still, I find so many companies that completely disregard it, not realizing that a healthy organizational culture is one of the elements that lead to strong positive business outcomes and, frankly, in this market, being able to recruit and retain top-tier talent. With the Great Resignation (which I’ve been calling the Great Shift since I started seeing my own clients looking for a change in early-2020), we’re finding that so many people have left and are leaving their positions because of culture. So let’s talk about that. Let’s talk about where culture comes from, why it matters, and how to become more intentional about it.
What Is Organizational Culture?
Organizational culture is the set of norms, values, and behaviors associated with a particular organization. It’s embodied by the people who work in that organization, how they behave, how they treat each other, and how they treat clients and customers. It typically shows up “behind the scenes” and may not be known to anyone outside the organization. It’s also quite different from branding, which is more often experienced by clients and customers but may be entirely different from the culture that exists for employees and leaders of that organization. Entrepreneur.com defines company culture as “a blend of the values, beliefs, taboos, symbols, rituals, and myths all companies develop over time.”
Why Does Organizational Culture Matter?
We know that organizational culture matters because it can turn your employees into your greatest advocates or your worst (and most outspoken) critics. In this world where everyone has a voice, that can either boost your company or destroy it.
Organizational culture is related to business metrics and key performance indicators: employee morale and productivity, including customer service and product quality, are hugely influenced by organizational culture. If you have a healthier organizational culture, you’ll get far more out of your team than if you have a poor culture: healthier cultures result in a higher level of engagement. Companies with a high level of engaged employees (meaning your culture is healthy) have a 19% increase in operating income and a 28% increase in earnings growth, while companies with low levels of engagement (meaning unhealthy culture) see a 33 percent decrease in operating income and an 11 percent decrease in earnings growth. Which do you prefer?
Organizational culture is related to retention and turnover. A Columbia University study showed that the likelihood of job turnover at an organization with high (healthy) company culture is a mere 13.9%, while the probability of job turnover in low (unhealthy) company cultures is 48.4%.
So…it matters. A lot.
How Is Organizational Culture Created?
Organizational culture typically starts with leadership. Founders’ values and vision and goals often provide the foundation of a culture. And, more often than not (unfortunately), organizational culture is frequently created unintentionally. For example, a scrappy startup begins with everyone focused on growth, but then as the startup matures into a full-fledged company, the organization still maintains its startup culture, rather than giving way to a more mature culture.
Culture evolves as more players enter the organization, but when culture is not well-tended, just like with a garden, weeds can be introduced and flourish. Organizations that hire purely on skillset, rather than factoring in an intentional cultural fit, tend to have pretty messy cultures and low retention rates.
Leaders evolve culture by setting clear expectations for how people are treated, but also ensuring that these expectations are translated appropriately down the line.
Culture, however, can go terribly wrong in the most unexpected ways.
How Does Organizational Culture Go Wrong?
Primarily, organizational culture goes sideways when you have poor leadership. That’s the most simple and basic explanation. It’s not as simple as, “that person is a bad leader.” It’s more that, often, leaders don’t attend to culture, seeing it as a by-product, rather than a crucial element to an organization’s success. Or they’re so focused on strategic work that they neglect culture, not recognizing its importance to the big picture.
If a leader isn’t attending to culture, then the culture can go wrong with a bad hire. Oftentimes, bad hires are such a poor cultural fit that they self-select out as soon as they can manage it. But if a top-level (or near top-level) leader is a problem, then an organizational problem can start in that leader’s department, as solid employees who functioned well within the existing cultural framework find themselves suddenly at odds with the new regime. Longtime, loyal employees may leave in search of a healthier environment in which to operate, and before you know it, that leader has hired a new crop of team members who fit into their framework, rather than the pre-existing culture. Now you have a problem.
Another place where culture can go wrong is a little unexpected: process. That is, when there are no processes or only bad or inconsistent processes within an organization, people start to become angry and resentful and behave poorly. Particularly in challenging times (I’m looking at you, COVID), people need seamless processes to operate with ease. If processes are clunky or difficult to navigate, or worse, don’t exist, you’ll find team members creating their own processes, which others will struggle to follow. Worse, things can completely fall apart.
I’ve worked with organizations where nothing gets done because there’s no process in place and no one knows how to move forward. I’ve worked with organizations where team members hoard information in a power grab, leaving other team members completely oblivious to process and leadership unaware of what’s going on behind the scenes. I’ve had clients where team members treat each other horribly while top-level leadership remains blissfully unaware of the true reasons why their retention rates are so low and turnover rates so high.
How Can You Fix A Bad or Toxic Organizational Culture?
You Need Data.
The first step in fixing any problematic organizational culture is assessment. You might think, “I know what the problem is.” And you might. But there could be additional “pricklies” that you don’t know about that are contributing to some of your problems. Assessments will ensure that no stone is left unturned.
Oftentimes, clients think that the problem is an individual. If they know who the “bad apple” is, they can fire that person and the problem will go away, right? Not always. Sometimes you let that person go and…big surprise…another one or two spring up in their place, like a hydra with heads that just keep coming back. “I thought I fixed the problem,” the leader bemoans, not realizing that it’s something else like process that’s causing the real problem.
That’s why we start any culture or team engagement with assessments. We want to know the facts, and only data can tell us the truth about where your organizational culture challenges emerge from.
The data will tell us if vision, values, goals, personality of the leader, process, or people are causing the culture problems in your organization.
Vision, Values, and Goals
If it’s vision (or lack of vision), then we can sort through whether it’s an unclear vision, if it’s a vision that isn’t being communicated well, or if the vision is problematic or misunderstood. We’ll work through how to clarify the vision and communicate it adequately to the team.
Your challenge could be the values of the organization. Certainly, we’re seeing more and more employees wanting a balanced life – not working overtime, not getting emails past 5 PM and over the weekends (with the expectation of a reply). We’re also seeing more employees leaving organizations where they don’t align with the values – not the stated values that you put on your website, but the lived values that you embody in the daily work life of your organization. When that’s the case, we do some deep-dive work with leadership to clarify the values you want to embody and that you want to show up in your organization and to ensure that those values actually do show up down the line.
If we learn the problem is goals, then the challenge might be competing goals, unclear goals, goals that aren’t realistic or attainable within a particular timeframe or budget, or your team might not understand the “why” behind the goals. Assessment data gives us clarity on which one of these might be plaguing your organization, so we can navigate toward a solution.
Sometimes we discover that the challenge is the personality of the leader. That is, sometimes we find that the leader of the organization has a way of interacting with their team that is counterproductive to creating a healthy organizational culture. If we understand that leadership is the problem, we can engage in high-level executive coaching, with a Leadership Circle 360 assessment at the heart of the work. This work has proven to be highly successful and a worthwhile effort.
Of course, sometimes people are the problem. You got a bad apple. To be clear, people and people alone are rarely the totality of the problem. Of course, there are a few people here or there that are quite toxic in any work environment. Somehow, there are still people who don’t know what it means to be professional. In this case, some coaching can be beneficial, or you may choose to just clean house (we recommend trying coaching first). Generally speaking, though, it’s often the case that when the problem is people, it’s also something else.
Finally, process is a huge contributing factor to toxic and unhealthy corporate culture, and it’s often overlooked. A lack of consistent, clear, efficient, and effective processes can lead to frustrated employees who can and will turn on each other or sometimes even just stop doing their work in protest. If you don’t give your team efficient and effective ways to do their work, you’ll almost certainly see it show up in the culture. In this case, we work with leadership and your teams to navigate the development of clear processes that work, as well as best practices, so that your team can be excited and motivated in their work, knowing that they’re supported by an organization that runs like a well-oiled machine.
Organizational culture is not an easy subject to address in a company or institution, but attending to it is a crucial part of the responsibility of leadership. And, while the journey back to a thriving and healthy organizational culture is rarely easy, the reward is tremendous and translates to valuable and favorable business outcomes. In short, heal your organizational culture, and you’ll see lowered operational expenses, higher net profits, higher levels of engagement, and higher retention rates. There’s honestly no downside to attending to your organizational culture, particularly if both business outcomes and having happier, healthier, and more engaged employees (which also translates to positive business outcomes) matter to you.