A company is not defined only by its business interactions. The values, beliefs, and behaviors that determine the way that managers and employees interact and perform at work are huge defining characteristics of any organization. All these together represent what we call company culture.
Company culture can be difficult to describe explicitly. It develops organically over time as a cumulation of the traits of the people working for a company.
To get a good feel of a company’s culture, you must pay attention to how it’s reflected and communicated. To do this, you need to ask the right questions:
- What is the dress code in the company?
- What does the office setup look like?
- What are the organization’s business hours?
- How does the company treat the employees?
- What is the employees’ feedback on the management?
Company culture affects your hiring decisions, employee retention, productivity, employee motivation and performance, and your company’s longevity.
To develop an engaging and motivating company culture, you may need a cultural transformation. But how do you successfully transform something as tricky to define as company culture?
Table of contents
- ✅ Sign up for your free TestGorilla account and see how our tests can help you with your cultural transformation
What is cultural transformation?
Cultural transformation in the workplace is not as easy as it may sound. Setting a different dress code at the office is one thing but communicating values that continuously attract, motivate, and inspire your employees requires careful thought.
Transforming your company’s culture is a long-term commitment to building an environment in which your employees feel a sense of belonging, a task that is more urgent than ever.
As many as 40% of US respondents reported feeling emotionally and physically isolated at their workplace. It’s crucial for any organization to change that because, according to HBR, having workers who feel like they belong in the company they work for leads to:
- 56% increase in job performance
- 50% drop in turnover risk
- 75% reduction in sick days
- 167% increase in the employer promoter score (the employee’s willingness to promote their company to others)
As you can see, it’s a win-win situation: Keeping your employees happy and inspired makes them invest in the lasting success of your business.
Transforming culture requires structural changes on many levels in your company. To facilitate such a process, you must examine your organization and commit to making changes to policies and behaviors so they align more closely with your company’s and employees’ values.
Undergoing a successful cultural transformation leads to greater clarity about what your company stands for and what defines it, which will motivate employees to commit to the business’s success.
Each employee is an ambassador of your company, and their behavior should reflect your company’s values. This helps you attract loyal customers that support your mission.
Why does your company need cultural transformation?
So, why is cultural change important in an organization?
Before you commit to transforming your company’s culture, you must have a clear understanding of the benefits of such a change. Knowing what cultural transformation can do for your organization’s success will keep you and your employees committed to the process.
Without a strong grasp of which corporate objectives can be met with a good cultural transformation plan, you can’t build the necessary momentum for this crucial change.
Here is a list of some of the results that transforming your company’s culture can bring:
This shouldn’t come as a surprise but happy employees make for productive workers. The 13 companies that have appeared every year since 1997 in Forbes’ prestigious 100 Best Companies To Work For list have higher average annual returns. Being a good employer will result in increased employee dedication to the success of your company.
Making employees more satisfied and engaged
According to Forbes and Frederick Herzberg’s motivation theory, the five fundamentals of employee satisfaction are:
- What you do suits you
- You do it for the right reasons
- You do it with the right people
- There is an easy feedback flow
- Growth is encouraged
These motivating factors rely on a strong and engaging company culture, communicated clearly to any new employees welcomed onto the team.
People in leadership roles play a huge part in shaping your company’s culture. People often ask if culture creates leadership or if leadership creates culture. The answer is both, so you should think carefully about who occupies positions of influence in your organization.
Positive leadership can overcome negative company culture and play a huge part in transforming culture. Negative leadership, on the other hand, can keep you stuck in a rut despite your best efforts.
There are many examples of poor leadership running a successful company into the ground. An infamous case of a leader developing bad company culture is the story of WorldCom and its chief executive Bernie Ebbers. His poor decision-making and the fact that he pressured employees into working harder without any gratification just so he can profit personally led to the bankruptcy of a company that used to be a telecom leader.
A stronger company brand
Clearly communicating your organization’s values and beliefs helps you build a stronger company brand. This helps your business stand out amongst your competitors. It also encourages employees and clients to develop brand loyalty and feel connected to your products and mission.
The more people know what your company stands for, the higher the chances you will attract and retain the right employees and customers to build mutually beneficial professional relationships.
When does your company need cultural transformation?
You should keep an eye out for the negative and distressing signs that your company needs cultural transformation. To avoid underachieving, make sure to regularly perform a thorough evaluation of your organization’s culture and how it affects your revenue and company goals.
There’s no point in waiting for things to spiral out of control. Assess your company’s culture and how beneficial it is as soon as possible. Here are some indications that your company needs a cultural transformation now.
1. Low employee satisfaction
Unhappy employees are rarely productive. When you create a positive company culture that seeks to support and inspire people, employees are more likely to be engaged, think outside of the box, or go the extra mile to support your company. Employee dissatisfaction decreases productivity and negatively impacts your organization’s reputation.
That’s why it’s crucial to develop a positive company culture and to hire employees who are aligned with your company’s values and ethics. Use the Culture Add test to evaluate whether your candidates’ values and behaviors align with your company culture.
2. High new hire turnover
Proper onboarding and strong company culture play a big part in retaining your new hires. When people feel they belong in their workplace, they will want to stay and contribute to its development.
However, new employees find it difficult to build loyalty to an organization with unclear values and purpose. This results in high turnover rates among new hires. The likelihood of turnover at companies with a positive company culture is only 13.9% while the rate for companies with a negative culture it’s 48.4%.
It may not sound so bad that employees with less experience and motivation leave. But you also risk losing potential high performers. And, the cost of turnover is extremely high.
3. Consistently low company revenue
You don’t have to be a genius to understand the correlation between happiness and productivity, or between productivity and higher revenue. Companies with satisfied employees tend to earn more than the competition and above industry benchmarks.
Every organization has unexpected costs or may go through economic or industry crises which results in low company revenue. When this becomes consistent, it may be an indication of a larger problem. Low company revenue often points to low employee satisfaction and the need for cultural transformation in the workplace.
4. New markets or opportunities are available
When a good business opportunity lies ahead, it’s crucial to prepare your employees. Working with new partners or discovering new markets requires a shift in your company culture that can help you achieve your goals.
During the Covid-19 global pandemic, many businesses were forced to work remotely for the first time. As a result, many companies have now moved to a hybrid model and this requires transforming the company culture.
How to transform your company culture in 7 steps
Change is never easy – especially when you’re trying to change something like company culture, which is often implied rather than directly expressed.
Cultural transformation can’t be achieved by simply following top-down rules. You can try to impose it but you will have more success if you can inspire people to carry out the process of change themselves. This is especially true when you’re trying to make your organization more innovative and adaptable rather than more strict in following orders.
While transforming culture is a challenge that requires consistency and patience from everyone involved, certain things always make this process easier. To transform your company culture effectively and build a thriving workplace, follow our seven-step guide.
1. Make an accurate assessment of your present company culture
The first step to solving any problem is recognizing you have one. Learn more about your current company culture so you can diagnose it accurately. What cultural problems are your employees usually facing? How does your present culture obstruct you from achieving your company goals? Is your company culture turning toxic?
To assess your company culture more precisely, use a diagnostic tool that’s been developed for that purpose.
The Organizational Culture Assessment Tool (OCAI) was developed by Kim Cameron and Robert Quinn at the University of Michigan and is a validated research method for assessing company culture. It’s based on the Competing Values framework, which is one of the most used business tools.
Performing a culture diagnostic with OCAI is quite simple. There are four types of company culture, each corresponding to a different competing value, and you have to distribute 100 points between them to see the unique mixture of these types that represents your current company culture.
The four types are:
Create culture, also known as adhocracy culture
This is the kind of workplace where creativity is encouraged and employees are allowed to take risks and experiment for the sake of innovation. The company promotes freedom, as well as rewarding employees for taking initiative and creating new resources. These are organizations that focus on growth and developing new products or services. Entrepreneurs and innovators are strongly celebrated in companies with adhocracy culture. It’s common for startups and tech-driven businesses where innovations happen frequently.
Collaborate Culture, also known as clan culture
You know those companies where the employees say “We’re like one big family”? They all have strong clan culture. People there are friendly and have a lot in common. The leaders are often like father figures that take care of the employees while addressing the needs of clients is encouraged. Most employees have been in the company for a long time and are held together by loyalty. This is a people-oriented culture that values teamwork above all. It’s quite common in healthcare, education, and non-profit organizations.
Control Culture, also known as hierarchy culture
Here people value formalities and structure. There are strict procedures for everything and they must be followed. This is a workplace that values efficiency, policies, and firm rules. The smoother you execute your task, the better. Reliable and consistent delivery, effective long-term planning, and optimization will make you a leader in such a company. This type of company culture is usually seen in the military, medicine, government, banking, and insurance businesses.
Market Culture, also known as compete culture
Organizations with such a culture are results-oriented and focus on hitting their targets and meeting their deadlines. The employees are competitive and goal-oriented, rivalry is encouraged, and there are high expectations to meet. These companies usually emphasize high KPIs and meeting various objectives. Competitive prices are important. The environment is fast-paced and demanding. Market culture is common in businesses such as consultancy, accountancy, sales, and marketing services.
The four types of company culture are based on two organizational dimensions: internal/external orientation and stability/flexibility.
- Companies with a stronger internal orientation are focused on collaboration and coordination, while the organizations that are more externally oriented aim to conquer new markets and seek competition or more opportunities.
- Organizations with a more stability-oriented culture value clear structures and plans, encouraging reliability and consistency. Those with a flexible culture believe you can’t foresee and control everything so it’s more important to adapt quickly to shifting circumstances. Their focus is on the people rather than on procedures.
To diagnose your company culture with the help of OCAI, you have to divide 100 points over the four culture types for each of the following six aspects of culture:
- Dominant characteristics
- Organizational leadership
- Organization glue
- Employee management
- Strategic emphases
- Criteria of success
This will help you discover your company’s unique cultural mixture.
2. Be clear about your objectives
Define your goals clearly so you can direct your efforts efficiently to avoid wasting resources on unnecessary change.
You can use the results from your cultural diagnostic to identify what you need to change when you’re transforming your company culture. Maybe the rigid structures are holding you back from exploring new opportunities; taking more risks may increase your growth potential.
Or maybe you’re missing out on opportunities to build promising collaborations because you’re too goal-oriented and want to prove to the competition that you’re strong rivals.
Do you want to have more control over every aspect of your company? If your employees aren’t performing to their full potential, you can work on the effectiveness of your organization’s procedures.
Or have you been stuck in one place for a long time? More space for creativity and innovation can bring some necessary movement to your business.
Although OCAI was developed to diagnose your present company culture, you can also use it to devise a clear vision of the culture you want to build. With that vision at hand, you can then target a few crucial behavioral shifts that you want to achieve.
3. Get the leadership on board
Successful companies pick leaders who reflect their values and ethics. Employees are inspired by the people in leadership positions and reflect their behavior and perspectives.
That’s why it’s imperative to involve every level of leadership in your cultural transformation. Make sure the leaders in your company are aligned with your company’s values and acquainted with the behavior shifts you want to emulate. They’re setting an important example for your employees.
4. Build a successful cultural transformation strategy
After you get a clear idea of what you want to achieve, it’s time to build a strategy and an actionable plan.
Start by mapping out a limited number of clear goals that are easy to measure and determining what steps you can take to achieve them.
Make sure your cultural transformation is effective on all three layers of organizational culture:
- Core values that represent your company’s essence and mission
- Norms – the informal rules that structure the interactions within the company and its members
- Behaviors that reflect the values and norms outwardly
5. Involve your employees
Encouraging your employees to contribute to your company’s cultural transformation will guarantee they understand the values of the organization and feel connected to them. Involve them in the process, provide them with space to give you feedback about the changes, and recognize their efforts. Engaged employees are happy employees.
Pinpoint the necessary skills for employees that can contribute to transforming your company culture and bring out its full potential. You can use skills assessments here on TestGorilla to evaluate their skills objectively and without bias.
6. Keep track of your progress
Make sure you can recognize success when you see it. That way you can lean on your strengths and work on your weaknesses. Measure every phase of the transformation and always have your eyes open for an opportunity to improve the process.
There are four key areas that you have to measure:
- Behavioral shifts. Are employees embracing cultural transformation? How are they reacting to the new norms? Are their services more aligned with the image your company wants to introduce to its customers?
- Business performance. Set up KPIs to track your company’s performance during each stage of the cultural transformation. Are you reaching your growth targets? Is there more room for expansion?
- Milestones. Keep your eye on a few clearly defined objectives you want to reach.
- Reaction to cultural transformation. How do the employees feel about the change that is taking place? Is it significant to them? Run surveys and ask for feedback.
7. Celebrate the victories
Set short-term and long-term goals. Quick wins have a motivational effect on people and will enable you to keep up the momentum. Celebrate these victories with your employees so you can stay motivated for the longer-term change.
Transforming culture requires commitment but it’s worth the investment
Like any significant change, successful cultural transformation requires time, effort, and resources. This seven-step guide to cultural change will help you optimize the process and achieve your desired outcome.
Remember, transforming your organizational culture is a long-term project that requires commitment and a well-defined strategy – and making the right hiring decisions enables you to move more quickly in the right direction.
To support your quest for positive transformation, we’ve developed tests like the Culture Add test and the Motivation test, which help you hire people whose values align with yours – and enable you to build a positive workplace culture.
Request a demo today to see how TestGorilla can help you transform your culture and empower your employees to succeed.