How Does Company Culture Affect Business Performance?

Building and maintaining strong company culture is essential for businesses of all sizes. Companies with a positive culture are more enjoyable workplaces and, more importantly, tend to have better retention rates.

The type of culture you build can even affect your bottom line. Let’s look at how culture affects business performance and the role you play in influencing your business’s company culture.

What Is Company Culture?

Company culture is often poorly defined. To some, it sounds like another corporate buzzword. Although there are thousands of articles on the subject, there isn’t one agreed-upon definition for company culture.

Here’s how I define culture—the attitudes, behaviors and values of everyone working at your company. It shows up in interactions your employees have with each other and with your customers. It’s also evident in the decisions your employees make.

Every business has its own culture, and it’s either created deliberately or haphazardly. If you’re not intentional about your company culture from day one, you may not like what you end up with.

Five Ways Company Culture Affects Business Performance

As a business owner, company culture is too important to ignore. Let’s look at five ways company culture affects business performance.

1. Better Employee Retention

High employee turnover is costly, time-consuming and a sign of poor company culture, so remember—your company culture guides who you should hire. A talented individual might have all the qualifications you’re looking for, but if they’re a poor cultural fit, they can do more harm than good.

Employees who fit in well with the culture will be more engaged, have greater job satisfaction and will perform better. Those kinds of employees don’t typically want to leave.

Company culture is especially important during periods of uncertainty, like when the company is experiencing significant changes or economic difficulties. A company with a strong culture can adapt more quickly and weather these types of problems better, giving their employees more confidence in their future.

2. Greater Innovation

A strong company culture tends to lead to more significant innovation, especially for cultures that encourage experimentation and risk-taking. To promote this in your employees, let them know that failure is okay, and there’s always a certain amount of uncertainty when you’re innovating.

Companies with an innovative culture also encourage their employees to quickly take action on their ideas. Of course, not every idea will be worth moving forward on, but you want employees to explore their ideas, not just talk about them.

3. More Efficiency And Productivity

The data consistently shows that positive work cultures are also more productive. Engaged employees are more efficient because they’re more invested in the job they’re doing. Positive work cultures also tend to be less competitive, which improves productivity.

Businesses with competitive, cutthroat environments are typically less productive than collaborative work environments because individuals focus on their own performance at the expense of their team, which ends up hurting the company.

4. Creates A Better Customer Experience

Studies show that companies with engaged workforces also have higher rates of customer satisfaction. When employees are more enthusiastic about their work, they tend to go above and beyond what’s expected of them, which translates to better service for your customers. Treating your employees well can also improve your company’s image, making it a win-win for you and your employees.

5. Creates A Sense Of Community

Most employees aren’t interested in finding a job that can just pay the bills—they have too many options to settle for that. If they become bored or disinterested in their current job, it’s easy to move on and find something better.

When you have a strong company culture, you bring together like-minded individuals with a shared sense of purpose and, most importantly, create a community where they feel like they belong.

This attitude creates alignment among team members—they’re on the same page and are willing to work together. Companies with a strong culture understand their purpose and what they’re working toward.

This kind of alignment is especially important as your business grows. Without it, your teams can become unorganized and might begin to argue among each other.

Strong Culture Starts With You

Strong company culture starts with positive leadership—if your employees don’t trust your leadership, it will be hard to create a strong culture.
To build or maintain a positive culture, start by having one-on-one meetings with your team members to check in on how they’re doing. These meetings will give them a chance to ask questions and share their concerns/ideas with you.

Of course, as your company grows, it won’t be possible for you to have one-on-one meetings with everyone. It’s crucial that you continue to develop your leadership team so they can promote a positive culture as well.

And finally, if your company culture isn’t what you want it to be, it may be time to perform a culture audit. Take some time to understand where your company culture is currently at, and ask your employees for their feedback. Once you know where you are, you can devise a plan for where you want to go.