Corporate Culture for Small Business Owners: A Complete Guide

You know that feeling when your team just clicks and magic happens? Everyone is motivated, collaborative, communicative. Now think about your least favorite place to work. Did culture come to mind? Research demonstrates that culture contributes to 20–30 percent of variation in company performance. When thinking about your team’s day-to-day experience, 70 percent of employee engagement is determined by their manager…who in a small business is usually you.

What Does Culture Mean?

At its core, corporate culture embodies the principles, values, ambitions, and attitudes of your team and organization. It’s been defined by Harvard’s Division of Continuing Education as “the personality and values of a given business—the glue that binds a team together”. Company culture isn’t your wall posters or mission statement; it’s what your team does when you aren’t looking.

Culture expert Edgar Schein noted that there are three levels of culture: visible items like office layout, employee dress code, stated company values, and mission, and the unconscious assumptions that guide team decisions. Changing organizational culture, therefore, requires deeper changes than just tweaking your logo or website copy.

Why Should You Care About Culture?

Let’s review the impact culture can have on your bottom line:

According to Gallup, only 21 percent of employees across the world are engaged at work. 

90 percent of employees who gave their company culture a thumbs down said they have thought about quitting, and 64 percent are already looking for a new job, according to research by the Society for Human Resource Management. On average, employee replacement costs 50–200 percent of their annual salary. Few small businesses have the cash to hire and train multiple new employees each year.

Companies on Fortune’s “100 Best Companies to Work For” consistently outperformed the stock market. The index’s annual return was 3.8 times that of the S&P 500.

First, assess where your current culture falls. The most popular culture framework was developed by Kim Cameron and Robert Quinn at the University of Michigan. It categorizes organizational culture into four types. High-performing companies don’t fully adhere to one type. Instead, they blend two or more types of culture depending on their goals.

Four Types of Corporate Culture

If you understand your current culture, you can play to your strengths and address your weaknesses. Elements from every quadrant can strengthen your existing culture if applied strategically: 

• Collaborate (Clan Culture): A collaborative culture prioritizes mentoring, nurturing talent, and working together to solve problems. Leaders serve as coaches to their employees. This culture fits organizations such as startups, family businesses, or any organization that relies on collaboration to innovate.
• Create (Adhocracy Culture): Innovative companies with loose hierarchies fall into this quadrant. Leaders challenge norms and allow employees to take risks. This culture works for tech companies, research organizations, and creative agencies.
• Compete (Market Culture): Leaders motivate employees by setting performance standards and fostering internal competition. These organizations focus on external market position over internal relationships. Sales organizations and rapid-growth companies tend to have a market culture.
• Control (Hierarchy Culture): Companies that establish defined processes to maximize efficiency have a hierarchy culture. Employees are evaluated on their ability to conform to regulations. Industries that are heavily regulated tend to have hierarchy cultures.

3 Steps to Building Intentional Culture

Many small business owners believe that culture will “just happen” as you grow. While organic culture evolves with your team, you can achieve better outcomes when you’re intentional about your culture from the start. McKinsey reports that 70 percent of transformations fail because of employee resistance. Start thinking about culture early if you want your employees on board with your vision.

Business analytics firm Deloitte recommended these three key activities when building a great culture:

• Culture should reinforce your business goals by encouraging specific behaviors that will help you reach your objectives. 

Instead of stating your culture is one of “integrity”, decide what actions demonstrate integrity to your employees. 

• Do you respond to customer inquiries within four hours?
• Do you share financial results with your entire team each month? 

Being specific makes your stated culture achievable instead of just a set of words.

1. Connect what your company needs with what employees care about. 

According to Gallup, although 70 percent of employee engagement is determined by their manager’s behavior, only 44 percent of managers receive training. 

If your words don’t match your behavior, employees will tune out.

• Hold culture up for review each quarter just like you would any other business metric. 

• Hiring? Make sure new candidates will fit with your culture and vice versa. 
• Promotions? Ensure employees are being recognized for demonstrating cultural ideals. 
• Conflicting behaviors? Decide if employees need coaching or if it’s time to let them go. 

Measuring Your Culture

Size shouldn’t matter when measuring your culture. There are several free or low-cost tools to effectively measure your culture. The gold-standard for culture surveys is Gallup’s Q12 employee engagement survey. The 12 questions have been refined through decades of research and only take employees five minutes to complete.

You can also use free tools like Google Forms to send out anonymous quarterly pulse surveys to your team. In addition to surveys, keep an eye on people metrics you already have access to like turnover rates, absenteeism, time-to-hire, and employee referral rates. When done correctly, exit interviews can also help you understand how employees perceive your culture when they feel comfortable giving honest feedback.

Moving Forward 

Building and maintaining your company culture takes work, but so does letting it happen by accident. The businesses that reap the benefits of a strong culture aren’t always the ones with fancy cocktail kitchens and free beer on tap. Those with cultures centered around a shared mission achieve 40 percent higher retention and 30 percent higher innovation. Take the first step towards an intentional culture by completing a culture audit like Culture15.