Why Is Corporate Culture Important?

Article excerpt

Much has been written and even more has been said about the topic of organizational culture. Still, it can remain a nebulous and undefined aspect of an organization. Many would call it one of those "soft, HR-type things." But corporate culture is important because it's the sum total of values, virtues, accepted behaviors (both good and not so good), "the way we do things around here" and the political environment of a company.

An organization's culture may contradict itself.

Some terms that are used to describe an organization's culture can include: aggressive, customer focused, consensusbased decision making, innovative, honest, research driven, technology driven, process oriented (can be read as bureaucratic), laid back, hierarchical, family friendly, risk taking, whatever-it-takes attitude and other similar terms.

Sometimes these terms may go against or contradict one another. Can you imagine the confusion at a company that proclaimed its employees were empowered, yet the decision-making process was by consensus? Employees, customers and vendors would receive mixed signals.

You may be thinking, who would ever describe themselves using both those terms used in this example? You are probably right: No one would consciously describe their company in those contradictory terms. However, it probably wouldn't take you very long to think of an organization that openly says it's employees are empowered, yet the day-to-day operations have so much decision-making bureaucracy, one wonders how they ever get anything done at a profit.

A "desired" organization culture and an "actual" organization culture are often worlds apart, and it's important to understand how each are playing out in your workplace. It gets to the value of the organizations' culture.

Unawareness of culture can cost you.

Hiring people who aren't aware of the culture-and who don't agree with the work in a manner that ignores the culture-can cost a significant amount of real dollars. How much? Consider this: A $50,000 person is hired as a financial analyst. It will probably take six months to realize that he doesn't agree with or follow the organization's culture. When someone doesn't conform with the culture, the actions that person takes can create havoc within the departmental unit.

Let's assume that this havoc is expressed in lost or inefficient productivity. Calculate the cost of his decline in productivity at 15 percent of his salary ($7,500), the training he has been given (valued at $10,000 due to the time and resources that have been given to him), and chalk up another $10,000 for the impact he has on others productivity in a non-managerial role, his supervisor's time to coach and counsel him on less than satisfactory performance, etc.

Nine months go by and you decide to replace him. Maybe you will give him a few weeks of severance, and you feel bad, so you'll pay for outplacement cost. Then there are the recruitment costs, lost productivity, increased overtime of others who pick up the slack, lost opportunity to conduct financial analyses in particular areas of the company, along with new training and indoctrination costs. Conservatively, this can easily equal $75,000. Fortune recently estimated that the cost of replacing someone was 150 percent of their base salary. We have already come up with over $100,000 because someone did not fully accept or understand the organization's culture.

Imagine what the cost would be if the person was a senior executive making $250,000 or more with a staff of dozens, if not hundreds. How many solid people will leave who work for this executive because she gave signals that were conflicting with the stated culture of the company?

Start understanding culture by assessing it.

The impact of culture on the bottom line can be quite high, as demonstrated in the previous examples. It's imperative to know the company culture and assess new employees belief systems against your organizational culture. …