What is corporate culture?

Corporate culture can have a major impact on a company's success, especially with respect to employee recruitment, retention, and performance. Explore this important concept, compare examples of positive and negative corporate culture, and connect with education programs focused on organizational culture building.

Corporate culture defined

"Corporate culture refers to the intangible elements of a company, such as the shared values and norms, that influence employee attitudes and behavior," says Dr. Angélica S. Gutiérrez, associate professor of management at Loyola Marymount University.

A company expresses its culture through operational and administrative features, such as:

• Organizational mission and principles
• Customer and employee treatment standards
• Physical and aesthetic elements of the working environment

Some organizations formally define their culture and implement it in highly visible ways. Others may do so more subtly through elements like hierarchical structure and employee-management interactions.

Positive company culture characteristics

Employees tend to value cultural characteristics like:

• Open communication
• Proactive professional development and improvement
• Care for employee health and wellness
• Fair and accessible reward systems and advancement opportunities
• Social responsibility

Negative company culture characteristics

These cultural elements tend to impact the employee experience negatively:

• Unethical behavior and absence of values
• Adversarial forms of employee competition
• Lack of advancement opportunities
• Long hours without additional reward or recognition

Components of a corporate culture

Observable artifacts

Observable artifacts are the tangible, visible ways a company expresses its culture. Examples include:

• Aesthetic elements of operating facilities
• Employee dress codes
• Behavioral expectations
• Recognition and awards

Espoused values

A company espouses its values when it makes public statements about its principles, which sets internal standards about its culture. Consider the following examples:

• "We treat our customers the way we would want to be treated."
• "We have a role to play in building a more equitable world."
• "Our team members work together to create something bigger."

Underlying assumptions

Underlying assumptions refer to behaviors learned through experience. They often function on an implied or subconscious level and impact how employees think, act, feel, and perceive their peers.

Assumptions can be positive or negative:

• "I'll get a generous bonus if I hit my performance targets."
• "Creative solutions earn positive recognition."
• "Everyone will judge me if I make a mistake."
• "Management never listens to junior employees."

Why is corporate culture important?

As Dr. Gutiérrez says, "Corporate culture can significantly impact employees, including their performance, job satisfaction, engagement, and retention. In these ways, corporate culture may ultimately impact a company's bottom line."

• Recruitment and retention: Businesses with a strong, positive culture tend to attract higher-quality employees and keep those employees for longer.
• Employee engagement: Engaged employees participate more fully in their jobs, especially with respect to discretionary effort.
• Customer service: Employee happiness has a trickle-down effect that can positively impact customer service and customer loyalty.
• Innovation and organizational agility: Good ideas have an extended reach when employees feel included in decision-making processes. This can lead to organizational responsiveness and a culture of innovative thinking.

How to build a good company culture

"The behaviors that leaders engage in and the policies and practices that they implement will influence employees' beliefs, attitudes and behaviors, which ultimately reflect company culture," says Dr. Gutiérrez.

Corporate culture mainly functions at the level of underlying assumptions. To build a positive culture, employers must target those assumptions and create working conditions that organically improve them.

Here's how companies can achieve this:

• Codify and communicate the desired culture. As a first step, business leaders must define the culture they wish to build. Make the statement specific and tangible, and ensure its values are communicated consistently throughout the organization.
• Leaders must lead. Senior leaders must align their behaviors with the desired culture in visible, tangible ways.
• Trust employees. When employees feel trusted, they want to retain that trust and will often try harder. Managers and leaders should listen to their employees, make them feel valued, and give them growth opportunities.
• Recognize accomplishments. Financial rewards, like bonuses, are a strong motivator, but recognizing and appreciating everyday efforts and accomplishments reinforces positivity in small but significant ways.

Executive education programs offer a compact and efficient way to acquire culture-building insights. Explore executive education programs in relevant topics, including change management, human resource management, operations management, talent management, and leadership development.