Here’s why company culture is important & what CHROs can do about it.
If you don’t know why company culture is important to your CEO, look at some recent trend data. According to Gartner, a global research and tech advisory firm, today’s talent shortage ranks No. 1 on the list of CEOs’ top concerns – ranking ahead of inflation, interest rates, and supply chain issues. Most CEOs – with help from their CHROs – are more in tune with the importance of company culture today because of its distinct relationship to the scarcity of talent.
To summarize, the talent shortage is keeping your CEO up at night, and your company’s culture is important because it has a meaningful effect on your ability to (1) attract workers, (2) retain talent, (3) get employee buy-in, and (4) innovate.
In fact, culture is so important to CEOs that 83% of organizations report an objective to build a more people-centric culture, according to LinkedIn’s 2023 Workplace Learning Report.
The Growing Importance of a People-Centric Culture
Has culture always been this important to employees and job seekers? While people of all ages likely value a good company culture, it isn’t something older workers were able to consider years ago. That’s when jobs were in short supply and people had fewer opportunities to choose from. This led company culture to play a lesser role. In today’s tighter job market, skilled talent can afford to be more selective. So culture is a bigger factor, particularly among younger workers.
A survey conducted by Udemy reported that 62% of employees would accept a pay cut to work for a company with a mission that aligned with their values. And the number was even higher for millennials – nearly 80%.
Four reasons why company culture is important
Here are four reasons why company culture is important to the C-Suite:
(1) Better Culture Means More Success in Talent Acquisition
Many of today’s job seekers have more than one offer on the table. If the job duties and pay are relatively similar, company culture can seal the deal.
If one employer goes much farther in accentuating the company’s altruistic mission, explains how its services help society, emphasizes professional development, brags about its flexible work schedules, and offers wellbeing benefits such as paid time off for life transitions (adoption, childbirth, pregnancy loss, moving, marriage, or time to care for aging parents), that employer has a definite edge.
(2) Better Culture Improves Talent Retention & Lowers Cost
Culture is an important factor in why people stay or go. A recent survey by HRExecutive.com found that, of the employees who report being dissatisfied with their job, nearly 40% blamed company culture.
The high cost of employee turnover is another reason why company culture is important. It costs an average of $1,500 to replace each hourly worker who leaves, according to Builtin.com. For other positions, such as technical workers, the cost jumps to 100-150% of salary. For C-suite positions, turnover can cost 200% of salary. These hard-dollar cost estimates take in the cost of advertising open jobs, recruiting, training, and lost productivity during the time the job goes unfilled.
But these estimates may not include other costs such as the drop in morale when valued employees leave or the undocumented “tribal knowledge” that slips out the door with the employee.
(3) High Employee-Employer Trust is a Top Reason Why Company Culture is Important
Trust is both a measure of a great corporate culture and a value derived from a positive culture. At great-culture companies, employees feel trusted by their employer – and they return that trust.
Why is trust so important? It is the key to employee happiness. That’s the conclusion of the founders of Great Place To Work® who have studied workplace trust, compensation, industry, corporate ownership, and other variables. Trust is so profound that they recently developed a Trust Index™.
More lessons about why company culture is important come from Cisco, whose Chief People Officer Kelly Jones said trust is “the most valuable currency that we have with our employees.” Kelly suggests that, when employees trust their employer, employees are more likely to back leadership’s decisions and company initiatives.
While Cisco works to engender trust from its employees, it has also demonstrated trust in them as well by offering flexible work policies. According to Cisco CEO Chuck Robbins, “the office should be a magnet, not a mandate.”
See Also: CEOs Tap into an Executive Development Program to Address Trust Issues
Researchers are still studying how remote work affects culture.
Many studies support the idea that remote work can boost a positive culture and that remote work doesn’t detract from productivity.
A study conducted by Better Places to Work found that at a typical US workplace,
- 49% of hybrid workers reported giving extra effort at work.
- 53% of onsite employees reported giving extra effort.
- 60% of fully remote employees reported extra effort.
Perhaps some hybrid employees withhold effort because they resent a mandate to work onsite, or they felt their effort to commute to the office afforded them less time for extra effort. And perhaps fully remote workers give extra effort because they appreciate their flexibility and their employer’s trust.
Companies need to work toward a high-trust, high-accountability, and high-flexibility culture. It’s a tricky balance but they all amplify why company culture is important.
At Cisco, leadership believes the best outcomes come from choice.
(4) A Positive Culture Promotes Workplace Happiness & Innovation
If you’re looking for reasons that company culture is important, think about today’s competitive urgency to innovate and harness modern technologies such as AI, machine learning.
A study published by the US National Institute of Health offers scientific evidence that happiness at work (HAW) affects innovation. The study concludes that, to encourage employees’ creativity and innovation, employers should prioritize employee happiness and well-being, presumably by creating a favorable culture.
Other studies suggest that when employees are in high-stress mode, our biological “fight or flight” mode shuts off our brain’s ability to process creative thought. So those investments to create a harmonious workplace and thriving culture quite easily can pay off in innovation.
Employers Focused on Why Company Culture is Important Should Offer Leader Development
Culture starts at the top and is reinforced throughout the ranks of leadership. That’s why investing in executive and leadership coaching programs are essential to building and sustaining a positive culture.
People are often promoted into management roles because of their functional expertise and not because of innate people skills. That’s why leadership lessons must be taught, and great leaders must be coached to apply these lessons to actual workplace situations.
How Coaches Help Managers Build a Positive Work from Anywhere Culture
When employers monitor on-site attendance, on-camera presence, keystroke logging, and other activities, employees don’t feel they’re being trusted. This leads to stress. Employers need to switch gears and focus on output, not attendance. Sadly, when the managers have no idea the level of effort required to achieve desired output, they tend to default to surveilling activity.
Valuable employees bemoan the fact that they aren’t trusted to work remotely. Conversely, when managers are unable to visualize the remote team’s output, they fear that productivity is at risk.
Building a high-trust culture takes effort. Coaches can help leaders navigate the tension between location flexibility and accountability. Remote work involves trust. Unless trust can be established, your corporate culture and productivity will suffer.
As we noted above, building a high-trust culture in today’s world of remote and hybrid work is tricky business. It requires skillful leaders who can hold employees accountable for results. Managers who can do that are able to trust their employees to work from anywhere.
Keep reading on coaching:
- Rethink Your Talent Strategy: Why Employers Must Invest in Scalable Leadership
- 3 Ways Executive Career Coaches Improve Company Culture
How to Scale Leader Development Programs to Improve Culture
Some organizations may be investing in executive coaching for the C-Suite, but what about lower ranking leaders?
Front-line managers are often the most visible and powerful embodiment of culture. But too often, these leaders aren’t offered formal training in how to manage people. Ignoring front-line managers puts your culture at risk.
Organizations that only offer management training and professional development to a small population of leaders can’t expect to make sweeping improvements in corporate culture. However, organizations that combine cost-effective and highly scalable online learning platforms with micro-coaching programs can achieve significant results in culture change.
That’s because people have little time to learn, and online learning is a great way to offer microlearning – in easily consumable “chunks.” However, the drawback of online learning has been one of engagement. It’s difficult to sustain participation.
One way to boost engagement and learning hours is to combine online learning with a leadership coach. Coaches help learners stay engaged and apply what they’ve learned. Cost-effective programs might pair an online learner with a coach for 2-3 short sessions per course.
For more information about leadership and people development programs that scale, contact us today.
