Why Is Organizational Culture Important During Times of Economic Uncertainty

Today’s business climate presents a variety of challenges for organizational leaders. Our post-pandemic world hasn’t exactly offered the “new normal” everyone hoped for. Instead, business leaders are grappling with fears of a recession, massive layoffs in the tech industry, and low unemployment rates. Alongside these topics, organizational culture is appearing more frequently in news headlines. Amid today’s economic uncertainty, some organizational leaders may be wondering, “Why is organizational culture important?”

The short answer is that a strong, positive organizational culture helps businesses face all the other challenges on the horizon — even the ones yet unknown. From advantages in the talent market to increased productivity and profitability, understanding and embracing the significance of organizational culture is key to unlocking business success.

In this article, we’ll cover:

• The definition of organizational culture
• Benefits of a positive company culture
• Why organizational culture is so important right now

What Exactly Is Organizational Culture?

Organizational culture can be difficult to define because there is no single metric that reflects it. Instead, corporate culture is “made up of values and beliefs and the behavioral norms derived from them, and those are critical for organizational success,” according to Harvard Business Review. No two organizations will have identical cultures because workplace culture is a reflection of the combination of unique elements at play in each individual company, including company values and ethics, work environment, management style, and organizational type or structure. 

Corporate culture reflects what is happening inside an organization and can act as an indicator of the employee experience. But culture also affects the company and its employees. The impact of corporate culture can be traced through employee behavior, performance, and retention. For instance, organizations with a healthy, inclusive work culture tend to see higher levels of employee satisfaction and engagement, higher productivity rates, and better employee retention. On the other hand, companies with a toxic culture may be more likely to struggle to engage and retain employees.  

Because of the role of organizational culture in the employee experience and in tangible business outcomes, leaders must invest time, energy, and resources in developing — and protecting — organizational culture to keep the business relevant and competitive.  

Now that we’ve outlined what it is, let’s explore the burning question: Why is organizational culture important in today’s world?

Benefits of Fostering a Positive Culture

The impact of corporate culture is often felt more than it is seen — but that doesn’t mean its effects can’t be measured. Many of the benefits of a positive organizational culture help uncover clues about the health of company culture.

Here’s a look at some of the main benefits of a positive work culture and key metrics that reflect the influence of workplace culture:

Employee Engagement and Motivation 

As we mentioned earlier, organizational culture influences levels of employee engagement and motivation. These are typically measured through employee feedback surveys — but an even more effective strategy is using Employee Voice, a full suite of diagnostic employee feedback surveys in Connects. This approach allows leaders to check on employee feedback in real-time, an invaluable asset for informing business decisions. Team leaders should also keep their fingers on the pulse of the employee experience through informal check-ins and anecdotal observations.

Collaboration and Teamwork

A natural result of increased employee engagement is better — and more productive — collaboration and teamwork. Gallup research links the presence of strength-based collaborations and cross-functional teams with higher organizational agility. The potential rewards of this particular benefit can be unlocked when employees feel empowered to contribute their ideas, which Gallup notes is still a challenge in most workplaces. “Globally, one in four employees strongly agree that their opinions seem to count at work, and one in three strongly agree that their colleagues are committed to doing quality work and that they have the opportunity to do what they do best every day,” Gallup reported.

Company-Wide Stability and Resilience 

Higher employee engagement and lower turnover allow for more consistency in organizational culture. While stability might, on the surface, sound like the opposite of flexibility, organizations that cultivate both may fare better over the long term, because they have the power to embrace change and challenges on top of a strong cultural foundation.

In our 2023 Employee Engagement Trends and Forecasts Q2 report, we explored the deeper relationship between engagement and retention and included proven strategies for prioritizing the employee experience throughout the employee lifecycle — all of which build resilience across the organization.  

Adaptability and Innovation 

Flexibility and agility allow businesses to respond quickly to all sorts of challenges, from changing economic conditions to talent market factors to the actions of direct competitors. Gallup found that companies with matrixed structures — which tend to have a higher prevalence of positive organizational culture — “offer greater flexibility by improving cross-functional connections and accelerating decision-making.” A majority (75%) of U.S. employees were working in slightly or highly matrixed teams prior to the pandemic, suggesting the trend was already in place at that time.

Research has also illustrated a correlation between companies with positive cultures and higher degrees of diversity, which in turn contributes to innovation. Diverse organizations with healthy cultures may be more likely to drive innovation because there are more perspectives from which to draw upon, so investing in improving organizational culture can help drive innovation, too.

Why Organizational Culture Matters More Than Ever

Paying attention to organizational culture — by measuring its impacts, investing in improvements, and cultivating a healthier work environment — can give companies a competitive edge amid today’s economic uncertainty.

In 2022,  FlexJobs found that “toxic company culture” was the #1 reason workers quit their jobs, so it’s vital that organizations avoid it. “Of the top seven factors people consider when deciding to quit a job, six of them revolve around the employee experience,” says Toni Frana, career services manager at FlexJobs, told CNBC. “This speaks to how important it is to have a healthy company culture, with strong managers who really connect with and support employees.”

People who feel inspired, empowered, and encouraged are more likely to rally around the mission of an organization, and make innovative and exceptional contributions, and they're also the least likely to leave. In Gallup’s 2023 State of the Global Workplace Report, 41% of employees said changing the culture of the organization would make it a better place to work, which makes sense: bringing people together creates connection, and purpose and combats the symptoms of a toxic culture.

The value of a strong organizational culture cannot be understated — but it can be underestimated. Fortunately, today’s business leaders have access to many tools and platforms that can help support creating an organizational culture that makes a difference every day for employees as well as the bottom line.