How Company Culture Impacts Your Bottom Line
What is Company Culture and Why Does it Matter?
Simply put, company culture is the personality of an organization. It is typically defined by its vision, values, behaviours, and practices. But while all companies have a culture, every company’s culture is uniquely distinct. A strong culture, in which there is a universal belief in the four aforementioned elements, can help to improve business. On the other hand, a weak culture, in which there is no shared belief, can hurt a business in the long run by decreasing its profitability.
The Link Between Company Culture and Profitability
According to a study by Columbia University, the probability of employee turnover in jobs with a low company culture is 48.4%. For jobs with a strong company culture, that number is a mere 13.9%. Not only is it costly to have to replace people, but the productivity amongst the remaining employees slows down. High turnover rates also lead to low employee morale, which leads to employee disengagement—which costs American business up to an estimated $550 billion a year.
And if that’s not enough to convince you that it pays to have a strong company culture, according to Forbes, it’s not unusual for it to cost 33% of an employee’s annual salary to find their replacement. This means that it can cost $16,500 for a company to replace an employee with a $50,000 annual salary. Don’t forget, they still have to fork out another $50,000 on top of that hiring expense! And that percentage can climb even higher for executive-level positions. Forbes also published an eye-opening statistic revealing that employee turnover costs US companies approximately $160 billion a year.
These statistics show that the happiness and engagement of a company’s employees is integral to its success. In fact, engaged teams shows 21% greater profitability than disengaged ones. At the end of the day, employees who work for a company culture that they believe in will show up to work everyday with a sense of passion, purpose, and energy—which will lead to better work and more company success overall.
How to Improve Company Culture
Now that you understand what company culture is and why it’s so important, you’re probably wondering what steps can be taken to improve it.
Establish a Vision
It all starts with a vision or mission statement that provides employees with a sense of purpose. Clarify your company’s vision to make sure that all employees are on the same page. Give them something to strive for. This will also ensure that everyone is keeping the company’s values in mind when making daily decisions.
Lead by Example
Having a clear vision is great and all, but it doesn’t mean anything if those at the top of the company are not leading by example. Employees want their leaders to be transparent with them. They want to feel like they’re holding themselves up to the same high standards that they hold their employees up to.
While perks don’t necessarily equal a strong company culture, offering certain wellness perks can encourage your employees to take better care of themselves. A healthy employee equals a happy employee.
Employees in today’s workforce are dealing with more stress and pressure than ever and a little empathy can go a long way. In fact, a 2018 study showed that 96% of employees feel that empathy from their leaders is important for employee retention. Offering employees the chance to work from home occasionally is an easy way to help lighten their load.
Give Employees a Voice
Employees are 4.6 times more likely to perform at their best if they feel like their voice is being heard. One of the easiest ways to improve company culture is to literally ask employees what they’d like to see change. There are even company pulse trackers, like Officevibe, that automate this step completely via timely questionnaires.
A prime example of a company who follows all of these steps and has a word-class company culture because of it is Google. Their strong culture is so perfectly embedded into their brand that other companies literally strive to “be more like Google.” And while being more like Google might not be at the top of your goal list, you should at least strive to have a company culture that sets an example for other companies in the industry.