5 Tangible Reasons Why Organizational Culture Matters

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Because organizational culture is so intangible, it often goes overlooked — especially in high-pressure boardrooms. This is unfortunate, because despite its abstractness, organizational culture has a very real impact on organizational success.

Here are just five of the many compelling reasons why building and maintaining a positive organizational culture should be a priority for any company:

1. You’ll Find It Easier to Hire Top Talent

Are you struggling to hire top talent? It might be because your organizational culture is unattractive.

According to Gallup, cultural factors are key motivators in a candidate’s decision whether to apply for a role. Gallup found that applicants with advanced degrees are especially concerned with company mission and culture, while full-time applicants of all kinds were looking for companies with cultures of learning and growth. If you can develop and sustain an organizational culture that appeals to your ideal candidates, you’ll have a much easier time getting those job seekers into your talent pipeline.

2. It Boosts Productivity

If a positive organizational culture enables you to attract and hire more of your first-choice applicants, that should lead in turn to a positive performance payback. It’s simple, really: A stronger, more talented workforce delivers better results overall. In a more recent study, Gallup found companies that land their ideal candidates more often enjoy significantly higher productivity and profitability.

3. It Can Reduce Turnover Rates

Staff turnover is perfectly normal, but when your turnover rates are above your industry’s typical levels, it puts excessive strain on your hiring process. Furthermore, your remaining employees can become overtasked by having to fill in for their missing teammates, leading to more burnout and less productivity.

With a positive organizational culture, however, you can make your employees more content in their jobs and, therefore, more likely to stay at the company for longer.

While a great culture cannot retain someone who has zero job satisfaction, a worker’s willingness to stay is strengthened by the degree of compatibility between their values and those of the organization, according to a Harvard Business Review article. For example, if an employee values flexible working and job variety, yet the organizational culture is very rigid, their willingness to stay will be quite weak. Creating a company culture that complements the values of employees will boost staff retention.

4. It Can Save Your Organization Thousands of Dollars a Year

American employers spend almost $880 billion a year on healthcare benefits for employees and their dependents, according to a report from the Integrated Benefits Institute.

Promoting a more positive culture may actually help lower these costs. For example, a CBI/Pfizer study found “focusing on workplace culture had the same level of impact on absence as sickness absence management.” Organizations that invest time and money in building and maintaining positive organizational cultures should see reductions in employee illnesses and related absences. When employees get sick less, they use their benefits less — which saves money for the company paying for those benefits.

The Integrated Benefits Institute also found that illness-related productivity losses cost US employers roughly $530 billion a year. That’s about 2.5 percent of US gross domestic product!

Luckily, culture can help mitigate these costs, too. As stated above, employees are less prone to get sick and miss work when they work in positive organizational cultures. That means less money is lost to illness-related absences.

5. It Drives Innovation

Innovation is the cornerstone of success in the modern business world. Firms that fail to innovate die, while inventive and agile businesses thrive and set the pace for their competitors.

There is hard evidence to suggest that corporate culture is the crucial factor in driving innovation. According to research from the University of Minnesota, “Innovation appears to be a function of the degree to which a company fosters a supportive internal structure headed by product champions and bolstered by incentives and the extent to which that organization is able to change quickly, keeping an eye on the markets of the future.”

Innovation, then, is not about budget or location. Rather, it’s a matter of putting the right cultural traits and structures in place.

Organizational culture may feel intangible, but time and time again the research has linked positive cultures to concrete results like higher revenue, more innovation, lower healthcare costs, and more talented workforces. Organizational culture matters, and it deserves top billing on any corporate agenda.

Paul Jarrett is founder of Renaix.

By Paul Jarrett