What is workplace culture & why is it important?

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Workplace culture has become even more essential for cohesion and collaboration in recent years. 

It has also become harder to grasp.  

Remote and hybrid work models remove some of the physical rituals and reminders that influence employees’ connection to culture.

For employees, this means culture is more personal. 

For leaders, it means embracing new approaches to guide and shape culture.

Ultimately, it means our understanding of what workplace culture is and why it’s important have evolved.

In this guide, we’re sharing data-backed insights and practical strategies to help you understand why culture matters more than ever and shape a positive employee experience.

Why? Because workplace culture is crucial for success.

Table of Contents

What is workplace culture and why is it important?

Workplace culture refers to the shared values, beliefs, attitudes, and behaviors that characterize an organization.

Admittedly, that’s a fairly broad definition. Culture is hard to encapsulate in a sentence, though many have tried:

• The cumulative effect that leadership practices, employee behavior, workplace amenities, and organizational policies create on a worker/internal stakeholder. (Spiceworks)
• The shared values, belief systems, attitudes, and the set of assumptions that people in a workplace share. (Forbes) 
• The unique way your people live out your company’s purpose and deliver brand promises. (Gallup) 
• The common set of behaviors and underlying mindsets and beliefs that shape how people work and interact day to day. (McKinsey)

These definitions get close to answering the question of “What is company culture, and why is it important?” but two things are still missing. 

The first is the commercial advantage of a great workplace culture. We’ll dive into that shortly.

The second is acknowledging that workplace culture is increasingly defined through employees’ personal experiences. 

Key takeaway

What is workplace culture and why is it important?

Culture is the shared values, beliefs, and practices that characterize an organization. Imagine it as your organization’s personality – unique, dynamic and constantly evolving.

It’s the invisible force that shapes how employees interact with each other, their work and the organization. Positive culture means positive interactions. 

Four axes of workplace culture

Workplace culture doesn’t “live” in one place. It’s multi-dimensional and almost completely intangible.

This doesn’t mean you are powerless to shape and support a culture that’s good for business and employee wellbeing.

On the contrary, organizational leaders are responsible for defining the ideal vision of company culture.

Every employee brings their own context to workplace culture. This means the exact embodiment of culture varies from person to person.

However, by understanding what shapes and informs culture, you can encourage your team to make decisions that move workplace culture closer to the desired state.

Values

Company values originate at the leadership table. 

These fundamental beliefs and principles guide decision-making and behavior across the organization. They represent what the company stands for: innovation, collaboration, integrity, fairness and respect.

It’s essential to go beyond paying lip service to company values. As a leader, ingraining values into daily processes and demonstrating them through your actions shows employees they’re worth taking seriously.

Behaviors

How employees actually conduct themselves embodies the company’s values. 

This starts with managers.

Open communication, teamwork and a willingness to help colleagues are all examples of how your behavior can express and embody a positive culture.  

Rituals

Rituals are essential for keeping culture alive. In the workplace, these are the protocols and processes that reinforce the company’s values, and the practices that create a sense of belonging. 

Recognition platforms, formalized development pathways, transparent town halls, innovation sprints, mentoring programs and inter-departmental projects are all good options.

Symbols

Physical or intangible elements represent culture in subtle ways. These can range from a casual dress code to a unique office layout, job titles, and employee recognition rhetoric, all of which reinforce the company’s character.

Why is culture important?

There is no question that a positive culture is good for employees. People derive a great deal of their sense of purpose from work. 

But there are bottom-line benefits up for grabs as well.

Effective leaders understand that culture is an investment. Get it right, and you’ll see the returns roll out across your organization. 

Culture affects everything from employee satisfaction and productivity to employer brand, customer experience and organizational resilience.

The 10 benefits of a positive workplace culture

1. Employee engagement: Employees who feel connected to their company’s culture are 3.7x more likely to be engaged at work, according to Gallup. Workplace culture and employee engagement influence each other.
2. Retention and turnover: Gallup also notes that a strong workplace culture makes employees 55% less likely to be looking for another job. People who find their work fulfilling are less likely to quit. 
3. Attracting top talent: Potential candidates research company culture; around half (46%) check online review sites, 61% find media articles and 69% ask during an interview. Although culture is hard to define, there are clues that permeate the hiring and onboarding process. 
4. Employee wellbeing: A supportive culture prioritizes work-life balance, mental health and a healthy work environment. This reduces stress and leads to culturally connected employees feeling 68% less likely to burn out, says Gallup research.
5. Productivity: Researchers studying the impact of organizational culture on performance found that “a supportive work environment can have a major effect on productivity.”
6. Innovation: Culture and innovation cut both ways, according to Great Place to Work. Employees who say their work has “special meaning” are 56% more likely to have innovation opportunities. In return, workers who feel they “make a difference” are 64% more likely to engage in innovative work.  
7. Customer satisfaction: Values like customer centricity and service are felt by your target audience. There is research going back at least three decades that demonstrates the link between a great culture and happy customers.
8. Brand reputation: With culturally connected employees 5.2x more likely to recommend their organization as a great place to work, and 70% of customers willing to pay more for a brand they trust, the benefits of engaged employees can be counted twice.
9. Organizational resilience: With around 75% of organizations struggling to fill open roles and 42% of COOs concerned about labor shortages in 2024, cultivating a culture that retains and attracts top talent is a smart strategic move.
10. Compliance and risk: A culture that values integrity will encourage employees to follow company policies and maintain high ethical standards, protecting value and minimizing risk. 

The drivers (and detractors) of a healthy company culture

Most discussions of workplace culture – ours included – talk about “building” a healthy culture. 

While that’s not totally wrong, it implies that culture is rigid and finite. That it can be constructed from a plan and managed like a project.

Workplace culture is more dynamic. It’s subtle, nuanced and organic.

It’s also abstract, meaning you can’t build or directly control it.

But you can influence it. 

As a people leader in a visible position, your actions, communication style, direction and delegation do a lot to guide culture. 

Leadership style

Leaders set the tone for workplace culture. 

Although everyone influences culture, it’s usually the organization’s leaders who get together to decide what kind of culture they want.

This, in turn, informs the values, behaviors, symbols and rituals you (as a leader) embody and encourage. Everything from how you handle feedback to how you delegate tasks influences employees’ engagement levels and connection to culture.

Ultimately, your job is to encourage, support and guide your employees in making decisions that embody cultural ideals and grow the organization. 

Mission, vision and values

A clear set of core values and a well-defined mission statement provide a guiding compass for employee behavior and decision-making.

“Great culture” is not a value in itself, we’re sorry to say.

However, values are a communication vehicle for workplace culture. Consider whether existing values can be updated to incorporate the culture you hope to cultivate. 

For example, “integrity” is a common organizational value, but it doesn’t say much by itself. “Doing the right thing for customers and colleagues, even when nobody is looking” is a more comprehensive (if wordy) way to guide employees towards behaviors that align with cultural ideals. 

Now find ways to translate these values into business processes, communicate them across your team, and recognize employees who demonstrate them.

Open communication

There is nothing more effective at undermining workplace culture than gossip, secrecy and information silos. 

As a leader, you must communicate openly and often, even if it makes you uncomfortable.

Radical candor – employees feeling confident in sharing ideas and voicing concerns freely – is the gold standard.

However, if you’re not quite there (and that’s understandable), start with these simpler communication efforts:

• Increase the frequency of feedback to daily or weekly
• Ask for feedback from employees and show that you’re acting on it
• Establish a centralized location for ideas or concerns
• Communicate leadership goals to your team and run employee feedback up the chain

Employee recognition

People crave acknowledgment for their contributions. 

Leaders who actively recognize and appreciate employee achievements motivate employees to go the extra mile.

Recognition can also be an effective tool for guiding culture. By recognizing behavior that embodies your desired culture – like collaboration, customer service or efficiency – you set an example for others.

Similarly, by intentionally not recognizing negative behavior – like selfishness, unscrupulous selling or cutting corners to cut costs – you show what the organization won’t support.

Work-life balance

Organizations that prioritize employee wellbeing create a more engaged and productive workforce.

You can do this by offering flexible work arrangements that meet your team’s needs, promoting mental health initiatives, and implementing wellbeing programs. 

You also need to watch out for the balance tipping too far towards work. Evidence shows that too much employee engagement negatively impacts wellbeing, putting your employees on a path to burnout.

Using Time Doctor’s work-life balance alerts to monitor signs of overwork, including long days, logging in at night or on weekends, and repeatedly working outside of scheduled hours, ensures you can intervene before your employees burn out.

Shared goals

One of the simplest and most effective ways to foster a collaborative culture is by setting team-level goals.

This is especially important for remote and hybrid organizations. Employees who don’t share the same space can still work together effectively. They merely need to understand what they’re working towards.

Workforce analytics delivers a seamless solution for transitioning to shared goals. With complete visibility over how your team works, you can monitor and measure each person’s contribution to team-level KPIs.

For example, when a new product or service exceeds performance expectations, you can see exactly who worked on the project and their role. This kind of transparency makes it easy to encourage a culture of teamwork, fairness and collaboration. 

Learning and development opportunities

Employee development is an investment with proven returns. Employees who feel that their organization is invested in their development are more loyal, productive and engaged.

Work with your team to craft personalized development pathways that grow their potential and return value to the organization. 

Examples of great workplace culture in the wild

Empire Flippers brings their remote team together

Before implementing Time Doctor, award-winning online business broker Empire Flippers was having trouble tracking the productivity of its fully remote team.

We’ve seen this problem countless times. 

The risk of low workforce visibility is that distrust creeps into the culture, with managers never really sure how their team works. Conversely, employees feel like they need to work extra hard to prove their productivity.

After transitioning to Time Doctor’s intuitive productivity dashboards and versatile reporting features, Empire Flippers has a streamlined remote operation with complete visibility.

The benefits have been substantial. Empire Flippers’ managers can quickly understand team activities and adjust workflows as necessary, enhancing efficiency and supporting the company’s scaling efforts.

The lesson here is that technology – and workforce analytics in particular – can positively impact workplace culture by improving transparency and efficiency in remote work settings.

Microsoft makes a growth mindset a must

We’re asking, “What is workplace culture and why is it important?” 

There might be no better example than Microsoft.

After taking the helm in 2014, Satya Nadella quickly recognized that a rigid, performance-focused culture was one reason the company was on the decline.

He knew that to turn the company’s fortunes around, he had to transform culture.

• Replacing a competitive, rank-based performance system with shared metrics set at the team level.
• Implementing a “Model, Coach and Care” management framework to empower employees.
• Making coaching skills a priority for managers.
• Intentionally removing layers of hierarchy, bureaucracy and formality from organizational processes to inject collaboration and spontaneity.

Nadella is known as a culture champion. In less than a decade, his efforts transformed the tech giant into an exemplar of innovation.

“The culture change I wanted was centered on delivering a growth mindset,” said Nadella. “To be customer-obsessed, diverse, and inclusive, and working as One Microsoft to get us there.”

Of course, Nadella himself doesn’t attend every meeting or conduct every performance review. Rather, his guidelines for a growth mindset and the model he implemented for managing staff guide the entire organization at every level. 

What does culture mean to your organization?

Company culture is not a static concept. It’s a living, breathing entity that shapes everything from employee wellbeing to overall success.  

Today’s workplaces look different, which means culture looks different. 

Where it comes from, who or what drives it, how it impacts productivity and employee engagement, and the speed and scale at which it changes have all evolved in recent years.

Still, the core principles of a positive culture remain constant: trust, respect, open communication and a commitment to employee wellbeing.

To be an effective manager, you must recontextualize your conceptions of workplace culture without losing sight of these core tenets.

By embodying the company’s values, prioritizing clear communication and actively supporting employee growth and development, you can empower your team and unlock their full potential.

How Time Doctor helps you transform workplace culture

Questioning what workplace culture is and why it’s important will naturally lead to the next question: how do you measure whether your efforts are working?

Time Doctor provides detailed insights into how people spend their time, where they get stuck, and how their efforts contribute to the organization’s long-term goals.

All these insights make it possible to track indicators of company culture:

• Employee engagement metrics
• Productivity trends 
• Team-level KPIs
• Project and task completion rates
• Work-life balance metrics

Time Doctor also provides essential data that effective leaders use to provide meaningful feedback, recognition and support. And do it fairly, removing bias from the conversation.

With interactive productivity dashboards and 60+ software integrations, all this insight is at your fingertips.

If you want to proactively engage and motivate your team, monitor culture signals and implement targeted initiatives to improve employee outcomes and enhance organizational performance, then workforce analytics is the tech your organization is missing.

Andy is a technology & marketing leader who has delivered award-winning and world-first experiences.