Company Culture: How to Create a Flourishing Workplace

Company culture has become a buzzword, particularly in the post-COVID era, with more organizations recognizing the critical importance of a healthy workplace.

During the Great Resignation in the United States, a large number of organizations struggled as employees left their jobs at rates higher than ever before.

A Columbia University study found that the probability of job turnover in organizations with low company culture was 48.4%. In comparison, it was only 13.9% in those with high company cultures (Medina, 2012).

Data points like these have compelled business leaders to take notice and prioritize culture like never before.

So what can organizations do to create flourishing work environments? Read on to find a positive way to create a flourishing workplace culture.

Before you continue, we thought you might like to download our three Positive Leadership Exercises for free. These detailed, science-based exercises will help you or others adopt positive leadership practices and help organizations thrive.

What Is Company Culture, and Why Is It Important?

Company culture is one of those concepts that everyone seems to understand, even if they can’t agree on a definition. It is often defined as the shared norms, values, attitudes, and behaviors that characterize a workplace.

Company culture is like the personality, or core essence, of a company, which gets expressed in various ways. A Harvard Business Review article (Walker & Soule, 2017, para. 1) likened culture to the wind:

It is invisible, yet its effect can be seen and felt. When it is blowing in your direction, it makes for smooth sailing. When it is blowing against you, everything is more difficult.

Wilderom (2011, p. 79) specified that a positive work culture involves:

Positive member-supporting rites [i.e., rituals], symbols, practices, values, assumptions, and other elements that influence work experiences for every individual employee.

A negative or unhealthy work culture, on the other hand, can have damaging effects on the long-term success of a company.

Both leaders and employees rate company culture as one of the top factors that affect the overall success of a company, including the attraction of top talent, retaining employees, and facilitating a workplace conducive to high performance (PwC, 2021).

The following section reviews the research on the impact of company culture on many important factors.

Research Findings on the Impact of Organizational Climate and Culture

An abundance of research exists on the effects company culture has on variables such as employee productivity, employee wellbeing, and rates of employee retention. We will review a few key findings here.

For further reading, the Arbinger Institute has compiled an extensive list of corporate culture statistics.

Productivity

A meta-analysis of over 200 positive psychology research studies revealed the link between happiness and productivity (Achor, 2011). Oswald et al. (2015) conducted an experimental study to show causal evidence that happy workers are, indeed, more productive.

Not only are happy workers more productive, but workers are more productive when they miss fewer workdays due to sickness or mental health issues.

In fact, healthy teams who share similar values and a sense of shared purpose outperform teams who do not by 17%, and companies with strong, healthy cultures show a four-times increase in revenue growth compared to companies with weaker cultures (Groysberg et al., 2018).

By creating workplaces that facilitate health and wellbeing, organizations can expect to see higher productivity, which often translates into greater revenue.

Employee wellbeing

From increased health care expenditures to millions of workdays lost each year due to workplace stress, the American Psychological Association (2015) estimated that more than $500 billion is lost each year as a result of workplace stress.

It’s estimated that between 60% and 80% of workplace accidents, as well as more than 80% of doctor visits, can be linked to stress on the job (Seppälä & Cameron, 2015).

In Wellbeing at Work, Clifton and Harter (2021) outline five elements of wellbeing that they argue should be addressed in organizations if leaders want a thriving culture:

• Career wellbeing
• Social wellbeing
• Financial wellbeing
• Physical wellbeing
• Community wellbeing

They assert that career wellbeing is the most important element and fundamental to the other four, as adults spend a large percentage of their waking hours in the workplace.

Turnover

One of the clearest impacts of poor company culture is on employee retention, which has been demonstrated many times over.

A study on workplace culture by the Society for Human Resource Management (2019) estimated that $223 billion is wasted on employee turnover. They found that 1 in 5 Americans had left a job due to bad company culture.

It is costly to replace an employee; it’s estimated that it can cost up to twice the employee’s annual salary (Gandhi & Robison, 2021). MIT Sloan conducted research into the top predictors of attrition during the Great Resignation. They found that workers were 10.4 times more likely to leave their jobs because of toxic work culture than because of employee compensation (Sull et al., 2022a).

In fact, this same study showed that a toxic workplace was rated higher than many other variables affecting retention, including reorganization, job insecurity, and lack of performance recognition.

10 Signs of a Toxic Workplace

Given the negative impact poor company culture has on several key outcomes, leaders and employees are wise to be on the lookout for patterns of behavior indicative of an unhealthy culture.

Here are five commonly cited signs of a toxic workplace:

1. High turnover

Turnover increases with poor company culture, and indeed, a high turnover rate is one of the clearest signs that an organization is struggling with creating a healthy culture.

Leaders should immediately assess what the root issues are when a high number of employees choose to leave.

2. Chronic, excessive stress

It’s not uncommon for people to experience stress in the workplace. However, when stress becomes chronic and/or excessive for employees, this is unhealthy and unsustainable.

It is often a symptom of deeper issues within the organization, including role confusion and unhealthy work boundaries.

3. Role confusion

When employees are unclear about their own or others’ job roles and responsibilities, this can create unnecessary stress and dysfunction within a company.

In healthy organizations, leaders are clear about their roles, and they make clear the responsibilities of those on their team. When there is chronic confusion over job responsibilities, this can lead to frustration and negativity (see number 5).

4. Unhealthy work boundaries

Another sign of a toxic workplace is the lack of boundaries between work and personal life. Healthy organizations know that, particularly in an ever-connected technological world, employees will be healthier, happier, and more productive when there are realistic expectations.

For example, leaders can model healthy boundaries by not working while on vacation or by setting healthy limits around communication outside normal working hours.

5. Low morale and negativity

All of the aforementioned signs of a toxic workplace will often result in workplace negativity and low morale. Companies that attend to culture find ways to assess and address negativity before it becomes endemic to an organization.

6. Toxic five attributes

MIT Sloan conducted a study in which they analyzed such negative comments that individuals made about their workplaces (Sull et al., 2022b). After reviewing the data, they identified the “toxic five attributes,” which are five characteristics that employees most frequently mentioned:

1. Noninclusive
2. Disrespectful
3. Unethical
4. Cutthroat
5. Abusive

Organizations that exhibit these toxic attributes are often characterized by workplace bullying, a form of abuse that is still tolerated in many environments, particularly in the United States (Namie, 2017).

It is important to point out that a difference exists between aspects of work culture that are irritating due to personal preferences and toxic elements such as those listed above.

While it is unrealistic to assume leaders can cater to the needs and preferences of all employees, it is realistic and beneficial for leaders to create a workplace culture founded on respect, inclusivity, integrity, and kindness.

6 Key Characteristics of a Healthy Company Culture

What does a healthy company culture look and feel like?

A report by Harvard Business Review summarized their key research findings, which resulted in the “six essential characteristics” of a positive company culture (Seppälä & Cameron, 2015, para. 11):

• Taking care of, showing interest in, and upholding accountability for coworkers as friends
• Supporting one another by being kind and compassionate to one another when they are in need
• Forgiving mistakes and avoiding blame
• Inspiring one another at work
• Highlighting the importance of the work
• Demonstrating gratitude, integrity, trust, and respect for one another

They also report that employees, above all, desire healthy workplace wellbeing over any company perk, benefit, or other material rewards a company may offer.

Surveys & Methods for Measuring Company Culture

While there are standardized survey tools to measure company culture, such as the Employee Net Promoter Score, Workleap Officevibe, or Leapsome, to name just a few as of this writing, many companies create their own surveys, which can then be tailored to their particular values and goals.

There are a few nonnegotiables when conducting these surveys. They should be anonymous, confidential, and ideally, conducted more regularly than once a year.

Typically, a workplace culture survey covers topics such as:

• Values and beliefs
• Norms and behaviors
• Leadership and management
• Communication and language
• Teamwork
• Employee wellbeing
• Employee engagement
• Diversity and inclusion
• Career development

In addition to using job satisfaction surveys to measure company culture, companies often use performance management tools, such as 360-degree feedback, key performance indicators, and personal development plans.

Human resources teams can also use analytics tools to collect “people data” such as employee satisfaction and productivity rates. Examples of common tools include ADP Workforce Now, Workday, Tableau, ChartHop, StaffCircle, and Engagedly, to name a few.

How to Build a Strong & Positive Work Culture

Positive psychology can be applied in several key areas that support workplace culture, including positive organizational behavior, positive emotions, strengths-based approaches, and the PERMA model.

Positive organizational behavior

​​Positive organizational behavior (Luthans, 2002, p. 59) is

“the study and application of positively oriented human resource strengths and psychological capacities that can be measured, developed, and effectively managed for performance improvement in today’s workplace.”

By focusing on psychological strengths — including motivations, talents, and attitudes — as well as areas that promote thriving within an organization, the study of positive organizational behavior assists companies in building more positive cultures using a scientific framework.

Positive emotions

The research on positive emotions can be applied in many useful ways in the workplace. Positive emotions have a positive impact on cognition and behavior; specifically, they expand our awareness and scope for creative thought and action (Fredrickson & Levenson, 1998).

By applying this research to the workplace, leaders can facilitate warm, trusting social connections; psychologically safe places to learn, experiment, and innovate; and an overall life-giving environment where employees experience more job satisfaction, motivation, and engagement.

Strengths-based approach

Using a strengths-based approach means that more focus is put on strengths rather than weaknesses in order to facilitate change.

By adopting a strengths-based approach, leaders leverage the power of focusing on the positive to foster more personal agency, resilience, and positive outcomes for employees while showing respect and compassion, key characteristics of a positive culture.

Appreciative Inquiry

Extending this further, appreciative inquiry is a specific strengths-based model used to facilitate organizational change and development. Rather than fixing what’s “wrong,” organizations can use this approach to focus on what’s working and collaboratively engage employees in the change-making process.

PERMA model

The PERMA model is a framework developed by Martin Seligman (2011), a founding father of positive psychology, and it describes five essential elements of wellbeing:

• Positive emotions – the experience of positive feelings such as joy, contentment, and satisfaction
• Engagement – the experience of being fully absorbed and focused on an activity, often referred to as “flow”
• Relationships – the quality and quantity of social connections an individual has
• Meaning – the sense of purpose and direction an individual has in their life
• Accomplishment – the sense of progress and achievement in one’s life

The PERMA model directly addresses many of the areas that have an impact on the overall climate of an organization.

10 Tips to Improve Your Company Culture

Research points to several ways leaders and decision-makers can improve company culture (Seppälä & Cameron, 2015).

If you’re in a position of leadership and wondering, “Where and how do I start?” here are a few suggestions.

1. Prioritize leadership development, focusing on trust-building leadership practices

In a survey of leaders and decision-makers, 52% responded that leadership development has the greatest impact on improving culture (The Arbinger Institute, n.d.).

2. Recognize high-performing employees

Implement a clear process for employee recognition and encourage managers to explicitly celebrate and acknowledge the good work of individual team members (Chapman & White, 2019).

3. Improve management

Time with a manager is cited as the worst part of an employee’s day, and managers are key players in the transmission of an organization’s culture (Clifton & Harter, 2021).

Managers who are trained in a strengths-based coaching model have been found to be more effective in their roles (Clifton & Harter, 2021).

4. Use a strengths-based approach

Make sure everyone in the organization knows their strengths and actively coach employees to use their strengths (Clifton & Harter, 2021).

5. Improve social wellbeing at work

Create opportunities for employees to form relationships, whether that’s at sponsored corporate social events like team-building activities and happy hours or other less-formalized activities outside the workplace.

Shared activities outside of the workplace are also associated with higher retention and social wellbeing.

6. Give employees a voice

A survey by Salesforce Research (2017) found that employees who feel like their voice is heard are 4.6 times more likely to show optimal performance.

The issue of empowerment is even more critical as it relates to practices ensuring diversity and inclusion of particular groups.

7. Prioritize employee wellbeing

Innovative workplaces view employee wellbeing as central to the business, understanding the many benefits it provides. Companies should tailor their approach after conducting a comprehensive evaluation of their specific needs.

8. Give importance to workplace wellness programs

CareerBuilder’s (2017) survey on workplace stress found that a high rate of employees are burned out on the job.

Workplace wellness programs, including those emphasizing stress management and resilience, can certainly be helpful but should not be seen as a quick fix. It will not solve more chronic organizational dysfunction, such as unrealistic workloads or poor work/life boundaries.

9. Show empathy

Dutton et al. (2014) found that leaders who are compassionate toward employees help to foster resilience in the workplace, on both an individual and collective level. Emotional intelligence is key to developing levels of empathy within an organization.

10. Create psychological safety

Encourage people to be open about their problems and create psychological safety. Leaders who are highly skilled in creating trusting environments are more likely to build positive workplace relationships, encourage innovation and creative thinking, and retain employees.

Team-Building and Leadership Tools From PositivePsychology.com

Now that you have a sense of some of the practical ways you can improve company culture, let’s take a look at a few of our selected articles and resources that leaders and managers can use in the workplace.

• Transformational Leadership: How to Motivate & Inspire Teams
• 83 Leadership Activities, Building Games, and Exercises
• The Psychology of Teamwork: 7 Habits of Highly Effective Teams
• How to Develop Empathy: 10 Exercises and Worksheets
• What Is Positive Organizational Psychology?
• What Is Job Crafting (Incl. 5 Examples and Exercises)

You can also check out the following PositivePsychology.com resources:

Maximizing Strengths Masterclass©

For a creative yet science-based approach to finding and building on the strengths of employees, the Maximizing Strengths Masterclass© is an ideal option. It can help ensure a team delivers optimal performance, and use their unique potential.

If you’re looking for more science-based ways to help others develop positive leadership skills, check out this collection of 17 validated positive leadership exercises. Use them to equip leaders with the skills needed to cultivate a culture of positivity and resilience.

A Take-Home Message

A positive work culture breeds an array of positive outcomes, from employee wellbeing to bottom-line financial success.

The challenge for most leaders and decision-makers is balancing the long-term benefits of prioritizing company culture with the demands and stressors of shorter-term goals.

However, the most successful, forward-thinking companies have demonstrated that when leaders invest in the long-term vision, which includes the wellbeing of its employees, companies succeed and thrive.

Those that neglect the importance of proactively creating resilient teams, skillful leaders, and environments of respect and kindness will ultimately find themselves trailing behind those that do.

By using the resources and research-backed tools provided in this article, we hope you will be empowered to take the lead in your circle of influence, regardless of your role or title.

Everyone has a role to play in creating a flourishing workplace. How can you show up differently in yours?

We hope you enjoyed reading this article. Don’t forget to download our three Positive Leadership Exercises for free.