What Is Organizational Culture? And Why Does It Matter?

Your organization's reputation is a primary reason why highly talented individuals want to work for you. Especially among millennials, a strong company mission and purpose is an important factor in determining where they work.

People want to work for an organization that lives out its company mission every day. Growing and maintaining a positive workplace culture across all business units is essential for winning over elite talent.

Organizations gain momentum when their employees are aligned -- moving in the same direction toward the same goal. This momentum allows them to deliver a seamless, differentiated customer experience while creating a compelling employee experience.

Alignment means that everyone -- from current and prospective employees and customers to shareholders, industry influencers and members of the media -- thinks and talks about the company in the same way. It also allows the company culture to provide direction for leaders, managers and individual contributors, clarifying how to prioritize their time, energy and resources.

We are often asked, "Is employee engagement the same thing as culture?" The answer is no. But they heavily influence each other.

Fundamentally, employee engagement strategies center on meeting essential employee needs. Employee engagement helps leaders and managers focus on the actions that matter most to their team members and aims to build team cultures that are poised for high performance. In this way, improving employee engagement is an important method for driving a high-performing culture and accomplishing the organization's goals.

Culture, on the other hand, is a pervasive force that influences the way people work together, how decisions get made, which behaviors are rewarded and who gets promoted. Culture sets the tone for the workforce and can be a major influence on whether a prospective employee is attracted or not attracted to a company.

In short, engaged employees are the fuel for your organization. Culture -- driven by company purpose and brand -- sets the direction.

When their basic needs are not met, employees can be a barrier to cultural change. On the other hand, when employees are engaged, they are more willing to buy in to changes and well-communicated messages.

Because culture is difficult to define, it is often seen as "soft" -- only loosely related to hard dollars and cents of business fundamentals. Gallup has discovered that this view is far from reality.

Our research shows that employees' understanding of their company purpose and culture is directly linked to measures of business health.

The way an organization's leadership defines, displays and communicates the organization's purpose and brand influences whether employees will exemplify those values, especially with customers. Actions always speak louder than words, and the most influential messages are conveyed by leaders' actions.

Leaders may tell employees they want their organization to be innovative and offer cutting-edge products and services to its customers. But if they don't take action to support that claim, misalignment occurs and culture suffers.

Another type of mixed communication often happens in call centers. Company leadership may tell call center employees, "Customers come first, so take the time you need to ensure you're solving customers' problems." This sounds good in theory, but in practice, most call center employees' performance is rated based on their "handle time," or the average number of calls they complete in an hour. If employees don't meet a standard rate, they're considered poor performers regardless of how well they solve customers' problems.

But the best organizations hone their leadership skills to improve communication and avoid sending mixed messages. A major insurance company, for example, celebrated a call center employee who stayed on the line with a customer for more than an hour because that customer was going through a difficult time and needed someone to talk to. The call center representative was recognized for providing exemplary service, demonstrating the company's commitment to its customers and exhibiting behavior consistent with company culture and values.

Common and important social interactions offer a way to communicate the desired company culture and create occasions that strengthen it.

When it comes to company culture, values and rituals set and reinforce the tone for how employees interact with others when representing the organization. Values should be relevant to employees in everything from day-to-day tasks to meetings for the entire organization.

Recognizing work that highlights specific values communicates an organization's desired identity to employees, fostering a culture focused on what matters most to the company. For example, if an organization's identity includes a commitment to innovation, leaders should use companywide meetings to recognize workers who excel in new product development.

The problem is that most organizations don't successfully tie values to individuals' daily work. Our research shows that only 19% of U.S. employees strongly agree that their manager explains how their organization's cultural values influence their work. Correspondingly, a majority of employees do not perceive their leaders to be demonstrating their organization's values in their own practices. Only 27% of employees strongly agree that their company's cultural values are upheld by their leaders.

These findings should be alarming to leadership, as they raise fundamental questions about whether workers buy into their company culture.

Organizations must select, engage and develop employees in ways that reinforce company purpose, brand and culture.

Too many organizations establish and deliver their selection, engagement and development programs independently of each other, leaving employees without an understanding of how their programs collectively reflect and support company culture. This approach is a major contributor to misalignment.

For example, a new employee might be attracted to an organization because it promises a culture of autonomy, but when they start, they are met with a demanding manager who micromanages projects. This experience is not only disengaging but also disingenuous: The organization promised its employees one experience but delivered something else.

Additionally, selection and onboarding programs should identify unique types of people and talents that make company culture and brand come to life. For example, an organization that Gallup worked with in Australia not only measured the talent of applicants for open jobs but also examined how each applicant's personality aligned with the organization's desired culture. Subsequently, each new hire had the effect of naturally reinforcing and improving company culture.

Throughout the entire employee life cycle, from attraction and hiring to onboarding, development and promotion, leaders need to be consistent when delivering messages about what is unique and important to their organization.

An organization's internal structure should support its desired culture. Structure dictates who communicates with whom, how frequently and on what topics. Processes and structures also affect how customers and employees perceive and experience the organization.

Many organizations maintain process structures based on what has been done in the past rather than designing internal structures that bring their purpose to life and offer a competitive product or experience to customers. By intentionally crafting a corporate structure with purpose, brand and culture in mind, leaders can inspire employees to uplift the organization's desired identity.

For example, if a brand promises a relentless focus on customer service but customers who need support are constantly shuffled from representative to representative when they call for help, organizations can't expect customers to feel like they've received the highest level of service.

If a business goal is to produce innovative products, all relevant teams must be structured to encourage frequent interactions that promote new, commercially viable ideas.

One of the most powerful influencers of human behavior is recognition. From goal-setting to accountability to pay and other rewards, performance management practices must support an organization's purpose, deliver on its brand promise and reinforce its desired culture. When these are not in sync, misaligned measurements and incentives create conflicts of interest, confusion and inconsistency, which can translate into inconsistent experiences for customers.

For example, many of our clients state that they have a "customer first" mentality; however, customer-related metrics are not part of their employees' performance evaluations. While not all employees are customer-facing, leaders and systems should identify which aspects of the customer experience employees contribute to or are responsible for and then hold them accountable for those behaviors. This may mean that some employees should be held accountable for the internal customer experience.

Similarly, some organizations' incentives are not aligned with the leadership's values and desired culture. For instance, some organizations state that they want a highly collaborative culture, yet their employees are held accountable for and recognized at the individual level only. In the absence of well-balanced metrics and evaluation practices that assess individual achievement along with team collaboration, employees can become overly focused on their personal commitment and ignore the behaviors that cultivate strong partnerships.

The power of cultural change lies in activating and pulling the right levers within these five drivers. When leaders and managers live out a clear, consistent, aligned culture, employees begin to believe in and live out the company purpose in their daily work. As a result, employees deliver on their organization's brand promise in a genuine and powerful way.