Organizational Culture: What It Is And Why It Matters

Hint: it’s about behaviors, not perks

Gustavo Razzetti
Dec 18, 2019 · 16 min read
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Photo by Shane Rounce on Unsplash

he power of a strong workplace culture is supported both by science and intuition.

A healthy environment is easy to observe. You can quickly determine how strong company culture by observing people’s faces, body language, and behaviors.

Research shows that organizations with healthy workplace cultures overperform those with weak or toxic ones.

So, what is culture, and what makes a great one? How can you design and build something that’s both intangible and soft?

Your workplace culture is a curious beast. As a leader, you can facilitate it, but you cannot control it. The more you try to tame it, the more it will rebel.

Each culture is unique, dynamic, and multi-layered. Just like families, company cultures have a life of their own. Leaders must create the right environment and then let the beast run free.

This in-depth post will help you reflect on what’s organizational culture and how to build a strong, healthy one.

What Is Organizational Culture?

“Culture is how organizations get things done.” — Paul Larkins

Culture is what people do and how they do it. Though most organizations define a purpose and values, what really matters is how their employees behave. A well-written Powerpoint doesn’t define a company culture — behaviors, not words, separate successful organizations from the rest.

High-performing organizations have a unique way of doing things. Consistent mindsets and behaviors determine their success.

The workplace culture is like an organizations’ soul. It’s invisible to most, but it encompasses both the good and evil within an organization

How Do You Define Workplace Culture?

Trying to define a curious beast is a daunting effort. There is no one answer, but many. Organizational culture is a complex thing. Here are various aspects to consider in order to understand your own workplace culture.

Culture is dynamic, not static

“Part of company culture is path-dependent — it’s the lessons you learn along the way.” — Jeff Bezos

The soul of your organization is fluid. It continually shifts in response to external and internal forces.

Workplace culture is not set in stone. It’s not black and white either. That’s one of the most difficult things for leaders to understand. Many cultural tensions are going on that continually shape the culture.

The culture of your organization is always growing and developing. Don’t try to control the beast; make space for it to thrive free.

Culture is multi-dimensional, not monolithic

“It over simplifies the situation in large organizations to assume there is only one culture… and it’s risky for new leaders to ignore the sub-cultures.” — Rolf Winkler

The cultures of organizations are never monolithic. There are several aspects that shape the various layers of the “culture onion.” There are variations between what senior managers see and what the rest of employees observe.

Organizational culture is the result of tension between old and new elements. Newcomers focus on what’s possible, while traditional employees value what the company used to be.

Depending on their roles or departments, employees experience different aspects of the culture. Organizational mindsets filter how people interpret different dimensions.

Culture is the glue that brings everyone together

“You need the right people with you, not the best people.” — Jack Ma

One of the most critical roles of workplace culture is the process of sense-making. It creates a sense of shared identity that creates both attraction and rejection.

The glue can also get people stuck. A strong culture can quickly become a barrier to innovation and growth. The “this is not how we do things here” mindset captures a cohesive, yet rigid culture.

The culture not only brings people together but protects the system from the “wrong people” and “wrong behaviors. It promotes and reinforces the “right” thinking and practices.

Culture is a dialogue, not a monologue

“Make sure everybody in the company has great opportunities, has a meaningful impact, and is contributing to the good of society.” — Larry Page

Culture is a two-way street. Leaders don’t own the culture; it’s co-created by everyone in the organization.

Leaders lead the company culture design but understand that it is critical to invite others. Managers are stewardships of the culture, but everyone contributes to building the workplace culture.

At Liberationist, we always encourage clients to create diverse teams when we are facilitating culture (re) design sessions. The richer the participants, the more interesting the outcome.

If you want to build a healthy, long-lasting culture, let the beast run free. The most successful cultures encourage autonomy; they trust people instead of controlling them.

Culture gives employees meaning

“Purpose in not an add-on, it’s not an initiative. It is a culture change and it never finishes.” — Richard Branson

The organizational purpose is like the North Star; together with the values, it provides guidance.

Culture is a carrier of meaning. It provides not only a shared view of “what is,” but also of “why.” Your organizational culture is the sum of values and rituals which serve as glue.

People want to be part of something bigger than themselves. The culture narrative connects people with the organizational purpose.

Culture is the North Star — it inspires and guides your people.

Culture is what we reward and punish

“It’s really important to come up with core values that you can commit to. And by commit, I mean that you’re willing to hire and fire based on them.” — Tony Hsieh

Most companies have incoherent behaviors. They preach one thing and reward another.

The culture of an organization is defined by the behaviors that are rewarded and punished. Most companies pay lip service to innovation and then punish those who make mistakes. Or they praise collaboration but then promote selfish, clueless managers.

How can people trust their organization when the values and behaviors are not aligned?

In month three, Zappos offers trainees a $ 2,000 bonus if they decide to quit. The online retailer tests people’s convictions. Those who stay are because they appreciate the culture more than the money.

Culture is both visible and invisible

According to Edgar Schein, organizations don’t adopt a culture overnight. Instead, it is built as employees go through various changes, adapt to external forces, and solve problems.

Past experiences plus everyday practices form the workplace culture. Schein believed that there are three levels in any culture — some more visible than others.

1. Artifacts: they are at the surface, such as dress-code, office furniture, or behavior. They can be easily discerned, yet are hard to understand.

2. Espoused Values: it includes conscious strategies, goals, and philosophies. The mindset and beliefs shape the overall culture.

3. Basic Assumptions and Values: the core or essence of the culture is represented by underlying assumptions. They are difficult to discern because they are invisible — they exist at an unconscious level. Yet, they provide the key to understand the way a company operates.

Both the invisible and visible elements evolve. As Schein said, “Culture is always something that’s been learned. It’s not something that just can be imposed, or that’s just there.

What Are the Benefits of A Company Culture?

The role of the culture is to provide more joy than the misery it creates.

“The stronger the culture, the less corporate process a company needs. When the culture is strong, you can trust everyone to do the right thing.” — Brian Chesky

Company culture is vital to employees because it makes work more enjoyable. When the values and purpose of people align with those of an organization, it’s more likely for them to enjoy working there.

Here are the key benefits of a strong, healthy workplace culture.

  1. It attracts or rejects the right talent

Not every organization is for everybody. A strong workplace culture sends a clear message of who belongs (or not). Just like Zappos’ tempting bonus offer to its trainees.

2. Culture amps up or annihilates employee motivation. According to Bersin by Deloitte, 95% of employees say that culture is more important than compensation. The science of intrinsic motivation has proved that money is not a primary motivator.

3. Your organizational culture is a competitive advantage.

It’s easier to copy a product or business model than to replicate a culture. The soul of a company is inherently difficult to copy.

Southwest’s use of humor is not only successful but hard to replicate. The airline turned into a powerful tool to build empathy with customers during tough events.

Workplace cultures are complex, multi-layered, and built through time.

4. Culture correlates with performance.

A workplace culture might be a soft element, but its impact is anything but weak.

Research by Prof. James L. Heskett shows that a strong culture can increase performance by 20–30 percent compared to “culturally unremarkable” competitors.

Companies with the strongest culture can perform 200 percent higher than those in the bottom quartile, according to the Organizational Health Index.

5. Healthy cultures facilitate change.

In a world where the one constant is change, culture becomes even more critical because organizations with high-performing cultures thrive on change. The opposite also holds true: Unhealthy cultures do not respond well to change.

Research by McKinsey shows that 70 percent of organizational transformations fail because of culture-related issues.

6. Strong culture requires fewer rules.

A mature workplace culture drives clarity: people know what’s expected of everyone. Transparency and accountability are key components of successful company cultures.

Netflix’s unlimited vacation policy or Wikipedia’s “Assume good faith” are based on trust. They want people to behave like grown-ups, so they treat them as such.

Culture is not a magical solution, but a powerful ingredient that inspires people to bring their best selves.

What about Toxic Cultures?

Unhealthy cultures lead to underperformance, or worse.

Over time, not only do toxic cultures harm collaboration and innovation, but they can ruin a business.

Toxic leadership and arrogant behaviors can bring fast-growing businesses to their knees as it happened to UBER and WeWork. Their scandals ended with their CEOs being ousted, and a sharp punch to corporate valuations and trust.

Organizations are not 100% positive or negative — each culture has some level of toxicity.

There’s a recurring theme I observe when helping organizations build a positive culture. Senior executives take credit for the positive aspects of their culture and blame employees for toxic behaviors. Conversely, employees feel ownership of everything that works and blame their managers for the toxicity.

Toxic work cultures make people feel miserable — they force high-performing people to leave. Leaders must stop unhealthy behaviors because they pile up and become toxic.

What Are the Four Types of Workplace Culture?

Note: I adapted this from Cameron’s and Quinn’s organizational culture model built upon the “Competing Values Framework.”

Organizations have to choose whether they have:

  • Internal focus and integration — or — External focus and differentiation
  • Stability and control — or — Flexibility and discretion

The intersection of both axes creates four types of organizational cultures: Tribe Culture, Controlled Culture, Creative Culture, and Competitive Culture.

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Source: Gustavo Razzetti/ Liberationist

Tribal Culture

This is a friendly working environment where cultural fit is crucial. People share a lot in common, and working together feels like being part of a family.

Leaders are like coaches who care that people belong and fit in.

The mindset of the organization embraces collaboration, participation, and affiliation.

Behaviors are about building social relationships. The culture is people-oriented: decision-making is democratic or by consensus. Tribal Cultures are culture-centric.

Controlled Culture

This is a top-down working environment where following the rules is crucial. Titles define People’s identity and authority.

Leaders focus on organizing and distributing work by providing clear instructions or marching orders.

The mindset of this organization is command-and-control.

The behaviors tend to be bureaucratic following rigid processes. The organization emphasizes efficiency over innovation. Decisions are made based on power and authority, not knowledge or facts necessarily. Controlled Cultures are authority-centric.

Creative Culture

This is an informal working environment where ideas rules. People are always looking for new solutions or new ways of doing things. They share the desire for the new, latest, and different.

Leaders are visionaries who shape the long-term dream with a focus on disruption and transformation.

The mindset of the organization encourages experimentation and innovation.

Experimental behaviors, taking risks, and thinking like an entrepreneur are welcomed. Creative Cultures are idea-centric.

Competitive Culture

This is a competitive working environment where results are everything that matters. People share clear goals and ambitions.

Leaders are strategic and set the pace of the organization.

The mindset of the organization is extremely competitive; everyone is challenging everybody.

Behaviors are mostly business-like and goal-oriented. Metrics play a crucial role; there’s an obsession with high-performance. Competitive Cultures are results-centric.

What Are the Six Elements of A Successful Company Culture?

1. Purpose:

A great culture is focused on the impact the organization wants to create. They define the ‘why’ that moves employees into action — it makes everyone be part of something bigger than themselves.

Patagonia doesn’t just want to “build the best product,” but to “cause no unnecessary harm.” The outdoor clothing company uses business to “inspire and implement solutions to the environmental crisis.”

A purpose is a simple but a foundational element of a culture. Google, for example, is dedicated to “Organize the world’s information and make it universally accessible and useful.”

2. Values:

Corporate values are like a code of conduct — they are fundamental beliefs that companies use to guide behavior. Core values need to be firm and practiced, not just stated.

Your corporate values are the core of its culture. They offer guidelines on the mindsets and behaviors need to achieve the company’s purpose.

Google’s values are best articulated by their famous phrase, “Don’t be evil.

American Express’ values include customer commitment, a will to win, and personal accountability. In the case of Four Seasons, some notable values are supporting sustainability, building communities, and advancing cancer research.

3. Rules:

Healthy cultures need fewer rules, as stated before. The more an organization tries to control their employees, the more suffocating the culture becomes.

Rules should enable, not limit, people. Unfortunately, companies are full of dumb rules that end frustrating high performers.

Netflix’s travel policy doesn’t tell people which decisions to make. It reminds people to make smart choices: treats people like adults: “Do what’s best for Netflix.”

Friendly cultures don’t need complicated rules. GM turned a dressing code manual into a two-word rule: “Dress accordingly.” Smart people don’t need to be told how to dress; they adapt to the occasion.

Successful organizations treat employees like grown-ups. Their rules are based on autonomy and maturity; they trust employees will behave accordingly.

4. People:

The most critical asset of any organization is its people. Recruiting the right talent is vital, not only to maintain the culture but also to make it grow.

Organizations don’t just need to hire for culture fit but cultural fitness, as I wrote here.

Successful organizations have rigorous hiring processes. Google, for example, has a lower acceptance rate than Harvard College. The tech giant hires as a team — everyone who will be working with the new recruit has a saying, not just the hiring manager.

5. Narrative:

Telling stories makes us more human. The power of storytelling lies in connecting us with our deep emotions.

The Walt Disney Company’s organizational culture involves excellent storytelling skills. The company’s history is a story to tell through movies, entertainment, and theme parks.

Disney’s culture encourages employees to use their personal experiences to tell stories. Storytelling is not just a product but a way of working.

Every organization is full of stories. Narratives can move people forward or get them stuck in the past.

One of the biggest challenges when driving change is the loss of narrative. The role of leaders is to replace or upgrades pasts narratives with fresher ones. Cultural narratives create a bridge that connects the past to the future.

6. Place:

Culture is defined by the way we think and feel, but also how we interact with each other.

Why does Pixar have a vast open atrium where employees run into each other throughout the day? It’s designed to promote interactions and collaboration in unplanned ways.

At LEGO, a continuous focus on wonder and imaginative play helps build the company’s culture. The work environment was formed to bring those values to life. This includes a space that resembles a play space more than a typical office.

Kids are usually wandering around, testing new products, and interacting with employees. Interestingly, there are no manuals or rule books at LEGO to frame what employees do.

Your place sends a message — and shapes your culture. Space design is more than just functionality — it’s an undervalued asset to bring the company value to life.

What Is a Fearless Culture?

Fear doesn’t promote innovation but silence.

The antidote to fear is psychological safety: the feeling that a culture is safe for interpersonal interactions. Fearlessness is not the absence of fear but feeling safe to confront our fears.

A Fearless Culture encourages people to speak up, express their candid opinions, and share their ideas without the fear of being criticized or judged.

Organizations have a silence problem: only three in 10 employees strongly agree that their opinions count at work. You either have a fearless culture or one of fear.

A Fearless Culture is one where people act as sensors — they speak up because their voices matter.

What’s the Difference Between Team Culture and Company Culture?

Why is it harder for two teams within the same company to collaborate than if you bring two from different organizations?

Team culture is so powerful that they can get in the way of positive collaboration. No one wants to share their secret sauce. Teams are afraid to lose their best talent too. When managers ask two teams to work together, each one is afraid of how this act could harm their culture.

Be mindful that people’s sense of belonging to their group is stronger than to the broader organization. People like to be part of a tribe — the smaller the group, the stronger the affiliation.

As Seth Godin explains in his book, Tribes are groups of people connected to one another, to a leader, or an idea.

As a leader, you must understand and respect individual team cultures. Rather than seeing them as conflicting with the overall workplace culture, create a system — let each feed off each other.

The culture of an organization is full of subcultures. Don’t underestimate the power of team cultures.

How Do You Design A Company Culture?

1. Start by defining a clear purpose and values: As stated before, the “why” the company exists is the foundation of any workplace culture. Defining a clear purpose and values should guide all other elements of your organizational culture.

2. Establish clear strategic priorities: A thriving culture has clarity. What are the top three strategic priorities? Use “even over” statements to establish clear priorities.

3. Design team rituals to drive behavioral change: Your culture shapes the way things get done. Team rituals are constant nudges that move people into action and create a sense of belonging. Organizations use rituals to kick-off new projects, welcome new hires, celebrate wins, to promote specific mindsets and behaviors, among many other things.

4. Establish a culture of ongoing feedback: Reflecting on collective mindsets, the emotional culture and behaviors are key for an organization to learn and grow. However, most companies limit feedback to formal, once, or twice-a-year practices. Focus on creating a culture that’s open and engages in regular, ongoing feedback.

5. Build Psychological Safety: Is risk-taking appreciated? Do people feel safe to speak up? Do team members respect each other? Are people rejected for thinking different?

6. Clarify the decision-making process: Who and how has the authority to make decisions? Which method/s do we use as an organization to decide? How is authority distributed?

7. Design interesting, collaborative meetings: Teams produce their best work together, working as one. How will the team meet? Meetings are how teams get things done, design them wisely. Which meetings should we have, and which should we get rid of? What works and not to have successful, productive meetings?

At Liberationist, we use a Culture Design Canvas to map the current culture of our clients as well as design their future state.

Can We Measure Workplace Culture?

Culture is such an intangible, soft thing that most people worry it cannot be measured.

Your company culture can definitely be measured. However, the most important aspect is not to obsess measuring the culture itself but rather the outcomes. Building a robust and healthy culture is a means to an end: to increase both people and business performance.

Workplace cultures are like families; they are all unique. The same applies to measurement: each company should measure what matters to its culture.

IDEO believes creativity is a group activity, not an individual one. When IDEO measures, the design firm wants to know that everyone, from accounting to ideation, feels they can contribute with ideas.

Didier Elzinga, founder & CEO CultureAmp, recommends the following approach to measuring culture:

  • Culture consistency: the issue is not having a “good” or “bad” culture, but ensuring it’s coherent across the organization. Elzinga summarizes this on a simple question, “Is our unique culture reflected everywhere from the mailroom to the C-suite?”
  • Alignment between culture and behavior: organizational values mean nothing if they are not lived every day. When you measure specific actions, people will care about them. Also, knowing what matters to the organization reinforces those behaviors.
  • Measuring culture is an ongoing process: traditionally, companies performed it once or twice a year. Not only the results were dependent on specific events that might happen right before the appraisal, but it created a reactive mindset. Culture suddenly became a top priority when results weren’t great.

Embed the way you measure culture into the business rhythm (i.e., once per quarter).

Here are some key things to measure:

1. Communication: Are people addressing issues openly? How well does your company manage conflict? Do people perceive your culture to be open and transparent?

You can measure how information is flowing across departments if teams are performing (and applying learnings) retrospectives, or management openness to share information.

2. Innovation: Does your company encourage and support experimentation? Do your employees feel safe to try new things and make mistakes?

You can measure management support to new ideas, incremental revenue streams, or how learning and curiosity are encouraged across the company.

3. Agility: How well does your company adapt? How fast does your company move and make decisions?

You can measure time to market, improved quality scores, reduced customer complaints, and ability to adapt and iterate.

4. Wellness: Workplace wellness encompasses both the mental and physical health of your employees. Increased wellness is directly correlated to productivity and overall engagement.

You can measure absenteeism levels, decrease in medical costs, and overall happiness and climate.

5. Environment: Are your employees comfortable? Does the office space adapt to the various needs? Does the physical environment drive collaboration or frustration?

You can measure how people use the space, what are the satisfaction levels, unmet needs, and frustrating issues.

6. Collaboration: Are leaders enabling or hindering teamwork? What are the issues that everybody’s thinking, but no one is saying? Are there clear rules to facilitate team collaboration?

You can measure both collaboration within teams, as well as between teams.

7. Alignment: Does the company share the same purpose across departments and roles? Are employees aware of your company values and what it stands for?

You can measure awareness, how people express the values on everyday activities, and identify behaviors that are enabled that don’t match what the company stands for.

Your workplace culture is a curious beast. The more you try to tame it, the more it will rebel. Create the right environment and then let the beast run free.

Gustavo Razzetti is a change facilitator who helps leaders and teams drive positive change. He advises, writes, and speaks on leadership, team development, and culture transformation.

The Startup

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Gustavo Razzetti

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I help teams and organizations build fearless cultures. Creator of the Culture Design Canvas. Insights →

The Startup

Medium's largest active publication, followed by +756K people. Follow to join our community.

Gustavo Razzetti

Written by

I help teams and organizations build fearless cultures. Creator of the Culture Design Canvas. Insights →

The Startup

Medium's largest active publication, followed by +756K people. Follow to join our community.

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