How to build a happy business culture from the start

Developing a strong business culture is a necessity for small businesses who want to attract the best talent in their industry and gain a competitive advantage.

According to Deloitte’s 2021 Global Human Capital Trends survey, 94% of respondents agreed that well-being drives organisational performance to some extent.

Further, Glassdoor found that 77% of people would consider a company’s culture before applying for a job there, and 56% say company culture is more important than salary when it comes to job satisfaction. 

But new business owners sometimes neglect culture because they’re too busy getting their business off the ground. The same Deloitte survey reveals that while 80% of organisations say worker well-being is important for their success, only 12% state they are ready to address the issue.

This article will help you understand why cultivating a positive business culture is so important for your venture and how you can create an environment for employees that gives purpose and meaning to their workday.

Table of Contents

• What is business culture and why is it important?
• How to develop your company’s core values
• Examples of small businesses with excellent culture
• Embracing diversity and promoting inclusion
• 4 ideas for increasing employee engagement
• Wrapping up

What is business culture and why is it important?

By definition, business culture is the collective values, beliefs, language, style, expectations, communication, habits, practices and work environment of a company.

It is everything that defines the personality of your business and forms the basis of your employees’ work ethic and behaviour.

Here are three reasons why culture is important for your business and its success:

1. Impacts employee engagement and productivity

A report by Gallup shows that businesses with employee engagement have an 83% chance of having a high (above average) composite performance. 

Composite performance encompasses: customer loyalty/engagement, profitability, productivity, turnover, safety, absenteeism, shrinkage and quality [defects].

Specifically, compared to businesses with low-engagement, high employee engagement leads to:

• 10% higher customer loyalty/engagement
• 23% higher profitability
• 18% higher productivity (sales)
• 66% higher wellbeing (thriving employees)
• 13% higher organizational citizenship (participation)

In short, most of the key performance indicators (KPIs) that matter to your business are significantly improved from high employee engagement.

In contrast, businesses with low employee engagement only have a 17% chance of achieving a high composite performance. That’s 5x lower than those with high engagement.

Engaged employees are proven to deliver exceptional results, which ultimately improves the financial health and wellbeing of your company.

2. Influences employee retention

A strong business culture that keeps employees engaged can also reduce turnover rates.

According to research from BetterUp, workplace belonging leads to a 50% reduction in turnover risk and a 75% decrease in employee sick days.

Why does ‘belonging’ matter so much?

People are driven by the desire to feel fulfilled by the work they do, comfortable in the environment they’re in and connected to the people around them. All of these factors contribute to a person feeling like they belong.

In fact, 44% of people report that feeling aligned to their organisation’s purpose, mission and values, and being valued for their individual contributions, is the biggest driver of feeling like they belong at work.

Investing in a positive work culture shows employees that you care. This makes them feel more valued and appreciated, meaning they’ll be more committed to their work and will stay at their jobs longer.

3. Affects your brand reputation

A strong culture directly influences your company’s internal and external brand reputation.

A strong internal brand can help you attract top talent and turn your employees into advocates for your company, which directly impacts how external factors view and interact with your organisation.

In turn, a company with a good brand reputation attracts loyal customers. These are customers who are more likely to trust you, recommend you and pay a higher price for your products and services.

Top Tip: Building a strong brand does more than simply help you make your employees and customers happy. Consistent brand positioning across all channels can lead to a 23% increase in revenue. To learn more, read our 7-step guide to building a brand that customers love 🙌.

How to develop your company’s core values

Regardless of how big or small your business is or what industry you operate in, you must have your own unique identity, built around your core business values.

In this section, we’ll help you understand what core values are, how to develop them, how to implement and reiterate them and how to hire people who resonate with them.

What are core business values?

Core values are the fundamental beliefs that your business and its behaviour is based upon.

They influence how a company makes decisions and plans for future strategies. They also act as a guide for an organisation’s end goal, as well as internal and external conduct.

Every business has its own driving force, the ‘why’ and ‘how’ of its existence. These values should be front and centre in your public mission statement and marketing strategy.

More importantly, however, they should be reflected internally in your management style and throughout all areas of operations.

Top Tip: To learn more about which management style aligns best with your personality and business goals alike, read our guide to 6 effective management styles to become a stronger leader 💡.

Without core business values, your company will lack direction and focus.

Let’s take a look at the core corporate and cultural values of some popular companies, starting with Coca-Cola:

• Leadership: The courage to shape a better future
• Passion: Committed in heart and mind
• Integrity: Be real
• Accountability: If it is to be, it’s up to me
• Collaboration: Leverage collective genius
• Innovation: Seek, image, create, delight
• Diversity: As inclusive as our brands
• Quality: What we do, we do well

And here are the values that Google follows:

• Focus on the user and all else will follow
• It’s best to do one thing really, really well
• Fast is better than slow
• Democracy on the web works
• You don’t need to be at your desk to need an answer
• You can make money without doing evil
• There’s always more information out there
• The need for information crosses all borders
• You can be serious without a suit
• Great just isn’t good enough

Do you notice the difference in the core values of Coca-Cola and Google?

Even the tone of their core values reflect the nature of their business culture.

This goes to show that no two companies are the same. Every business has its own set of values, which ultimately forms the basis for its unique brand identity.

How to develop your core business values

Start with a brainstorming session with a handful of people who understand your organisational structure, are high-performers and are well-respected in the company.

This includes you as the CEO along with your business partners. You should also consider interviewing key employees – such as your managers, salespeople, designers or any top rate employee who is invested in your company.

Ask each person to list what they think are the core values of your organisation. Next, ask them the following questions, created by Jim Collins in his article “Aligning Action and Values”, to narrow them down:

• Are the core values that you hold to be fundamental regardless of whether they are awarded or not?
• If you woke up tomorrow morning with enough money to retire for the rest of your life, would you continue to hold on to these core values?
• Can you envision these values being as valid 100 years from now as they are today?
• Would you want the organisation to continue to hold these values, even if at some point, they became a competitive disadvantage?
• If you were to start a new organisation tomorrow in a different line of work, would you build the core values into the new organisation regardless of its activities?

Of course, actions speak louder than words. Successfully implementing your core business values into everyday business life is a challenge – one worth the effort.

How to implement your core business values

Once you develop your core business values, the next step is to create a plan to roll them out. You don’t want to hire employees without a strategy for reinforcing a positive business culture. It’s a lot harder to kick habits than it is to learn new ones.

Here are a few tips for how to successfully implement and reinforce your core business values:

• Teach through an orientation and training. Giving employees the tools they need to be successful is key to future performance. Take the time now to train new hires on what is expected of them, how to achieve it, and how to ask for help if they encounter issues. This will help to establish a solid foundation for a system that works.
• Lead by example. If you want your employees to embody a certain attitude, you have to maintain that same attitude. Your employees observe your actions and in doing so, hopefully embody the values that drove them. Leading by example is fundamental to the success of your core value system.

Top Tip: One of the best ways to lead by example is to follow the principles of servant leadership, which requires a leader to be more invested in serving rather than leading. This includes focusing on creating a strong company culture that breeds happy and motivated employees. To learn more about the qualities and practices of a good servant leader, read our guide to servant leadership and the 7 traits of effective leaders🌟.

• Publicly reward value-centric work. Congratulate a team member on their work and work ethic at a meeting. Turn your employees into value ambassadors by implementing an employee of the month reward with peer nomination and voting. Create a budget for managers to treat their employees to team lunches or dinners, if possible. There are so many options for how to reward a job well done. Make them a tradition from the get go.
• Reiterate core values often. As employees come and go, it’s important to reinforce your core values to ensure they never fall off the radar. You can mention them at company wide meetings, create an internal newsletter, reinforce them through employee and customer success stories, and so on.
• Stay true to your core values during hard times. It’s especially important to reinforce values during tough times. For example, if your company loses a big client which puts a dent in revenue, stay hopeful and positive and employees will follow suit. If you need your employees to work that much harder to make up for it, work harder yourself.

How to hire employees that match your company’s core values

Now that you have a set of core business values, and a plan to implement them, it’s time to hire employees. If you want to hire employees who will work hard and stay committed to your organisation, you need to hire for a good cultural fit.

This means you need to look beyond a candidate’s resume, their technical competencies and prior work experiences. Look for people who resonate with your core values.

Why is this important?

When you hire for culture fit, you’re more likely to end up with employees who are happy in their role, are invested in your company’s success and stay with you for a long time.

In fact, organisational culture, leadership behaviours and personal relationships are the three biggest factors that produce workplace belonging, which as we described earlier leads to lower turnover.

Ultimately, hiring people who fit the culture of your company and team can impact your bottom line and improve your profitability.

Here is a three-step process to hire employees that match your company’s core values:

1. Match candidates’ characteristics against your values

If you want to attract great talent that’s also a good culture fit, you have to put your core values directly into your job postings and job descriptions.

By penning your core values into your job postings and descriptions, you are: 

• Deterring people who read it and immediately know they are not a fit.
• Attracting people who read it and think “wow, this feels like a match.”
• Reiterating what people can expect from your culture. By being upfront from the get-go, you are properly setting expectations and implementing your core values before a candidate even hits ‘apply’.

You can also leverage your current employees’ networks by offering them a referral bonus if somebody that they recommended ends up getting hired.

Finding a great personality fit does take time, but this process will help you avoid a mismatch that could negatively affect company morale or your client relationships down the line.

It’s hopeful to know that many people also care as much about culture fit as they do about earning a great salary.

In an article for Fast Company, Harvey Deutschendorf writes about how employees seek out companies that exhibit cultural values similar to their own:

“Today’s workplace is different. Employees are no longer willing to work for just a pay check but are looking for a reason to work, contribute to something worthwhile, and make a difference. They actively seek out organisations whose purposes matches their own. In a world of rapid workplace turnover, employees who identify with the values of an organisation are less likely to leave.” – Harvey Deutschendorf, emotional intelligence expert.

Top Tip: If you’re employing somebody for the first time, there is a lot to think about, including complying with legislation, writing contracts, and more. To ensure you don’t miss a step, read our guide to how to employ someone (for the first time) 📌. 

2. Ask interview questions that directly relate to your core values

A great way to gauge if the interviewee is a good culture fit is to have several current employees interview them. These should be employees from both your team and other teams. A culture fit goes beyond a single team – it permeates the whole office.

Therefore, as weird as it sounds, have a developer interview a salesperson. The developer obviously won’t ask the salesperson to perform on-the-spot coding tests.

Rather, have them ask a series of smart interview questions to uncover if they are a team player. From these questions, you will discover their own core values, their work ethic, why they want to work at your company and who they are as a person.

Here are a few examples of behavioural interview questions:

• What are the three most important characteristics of people you like to work with?
• Tell me about a time when there has been a disagreement within your team. What did you do?
• Give me an example of a major mistake you made. How did that happen? How did you proceed with it?
• Give me an example of a situation when you had to work on multiple projects simultaneously. How did you prioritise?

Have each team member relay their feedback to your recruiter, if you have one, and schedule an internal follow-up meeting if necessary. Allowing your team to participate in this process makes them feel like their opinion is valued, and helps to ensure you’re hiring people that harmonise with your business environment.

3. Reiterate the importance of core values during the post-hiring phase

Hiring someone you believe is a great fit for your business values isn’t enough.

As discussed above, you need to dive in deep with your new employees during the post-hiring phase. This is done through on-boarding processes, along with introductory sessions, to make sure they fully understand your values and are ready to commit to them.

It doesn’t stop there, though. Implementing core values from the top-down through training programs and company-wide meetings are extremely important. But, as an owner, you don’t have enough time to focus on culture and morale every day.

Outsourcing this role to managers turns the act of upholding core business values into a team effort.

Even further, allow your employees to become voluntary ambassadors of your core values. You can achieve this by empowering your staff to share ideas they may have about how to make your company better. Or keep lines of communication open by allowing employees to submit anonymous feedback about new processes or company directions.

While not all ideas and/or concerns will affect change, all will be heard. This makes employees feel they are a contributing member of business growth.

What if the employee ends up being a bad cultural fit?

Even with all of your best efforts, you may still end up with an employee that isn’t a good cultural fit.

Of course, letting somebody go isn’t the first option, especially considering the effort you put into hiring them. So, what can you do in this situation?

Understand the consequences of a bad hire

First, it’s important to understand the financial and team morale ramifications of losing an employee.

BE Offices in the UK created a guide to uncover how much it actually costs to hire someone. They found the estimated average cost of recruiting alone is £3,000/year. If your company provides insurance, that’s an average of £4,037/year. Training costs an average of £1,068/year.

Overall, if you are paying somebody an average starting salary of £27,600, with all additional costs included “you’ll actually need to budget for something closer to £50,000 in their first year of employment.”

As a real life example, Tony Hsieh, CEO of Zappos, estimates that bad hires have cost him over $100 million. He goes on to say:

“One bad hire can lead to a domino effect of more bad hires and decisions costing a company millions.” – Tony Hsieh, CEO of Zappos

And according to a study by Robert Half, 20% of employees experienced decreased confidence in management’s ability to make good hiring decisions after a bad hire. Moreover, 91% of CFOs said they think a poor hiring decision affects team morale.

How to handle a bad cultural fit

Before pointing the finger at your new hire, make sure you take a step back to see if you did everything you could in the onboarding process.

Did you follow the post-hire plan correctly? Were the necessary steps taken to onboard them into their new role? Do they feel adequately supported?

If you find you have done everything by the book, set a one-on-one meeting with your employee (or assign a manager to conduct this meeting if that’s more appropriate) and let them know what you are experiencing. Ask them how they are feeling in the company and how they think they are doing.

Give them honest feedback and ask them for their honest feedback as well. Make sure they understand they are in a safe space that is supported, rather than backing them into a corner. Perhaps now is the time they will share something personal that is going on at home, if they did not feel comfortable before.

From here, if the employee states they are happy and wants to stay, give them another shot on a trial basis.

The key word is trial. If something isn’t working, it needs to be nipped in the bud fast. This will save you lots of money, wasted time and the risk of crumbling team morale.

Create a plan and stick to it. If after the trial period the new employee is still a bad cultural fit, let them go.

Top Tip: Conducting productive one-to-one meetings, performance reviews and employee appraisals is an important aspect of keeping your team engaged and driven. To learn more about how to effectively prepare for these meetings, read our guide to employee appraisals: how to conduct effective performance reviews 🌈.

Examples of small businesses with excellent culture

Excellent culture makes for an excellent place to work. As noted above, employees actively search for a good culture fit when looking for a new job.

What exactly are these employees looking for? According to the 2019 CIPD UK Working lives report, employees seek out a positive work-life balance above all. Flexible working arrangements are also extremely important, as well as championing mental health and overall well-being.

So, how do employees find companies that align with these values?

Here are some examples of successful businesses who have been recognised for their excellent company culture.

1. Highspot

Highspot is a sales enablement platform used by some popular companies, such as Adobe, Twitter, Hootsuite, TripAdvisor and Starbucks.

The company is known for not just their platform and services, but also for their diverse and supportive culture.

Highspot is a winner of the 2019 Best Places to Work award by Glassdoor and won four awards by Comparably in 2018 for Best Company for Culture, Diversity, Women and Leadership.

These cultural awards, along with employee testimonials, can be seen across their careers page helping to attract top talent who value a company with such accolades.

Secret to success

Highspot believes in creating a culture that serves its people, which is why their company’s values are focused on respect and collaboration, along with well-defined roles, responsibilities and processes.

Some initiatives they’ve taken include providing free meals to their employees, the option to sign up for a company sports team, offering eco-friendly snacks and drinks, giving equity to every employee and offering flexible transportation options.

Their culture allowed them to achieve high employee satisfaction and retention rates. As they put it in a blog post:

“Walk into every meeting no matter your level, age, or experience knowing your idea will be heard. Highspot was built upon a foundation of what our co-founder and CEO Robert Wahbe refers to as “Most Respectful Interpretation” (MRI) of every interaction.”

2. Brad’s Deals

Brad’s Deals is a platform that shares hand-picked coupon codes and online store discounts with its customers.

The company has won several awards for its great business culture, such as the 2018 National Best and Brightest Program Winner and the Optimas Award for 2017. They have also been rated as ‘Grade A’ in leadership and culture by Comparably. You can see a full list of their awards proudly displayed on their careers page.

Secret to success

Brad’s Deals is committed to turning their employees into top-quality professionals. As they state on their career page, they are advertising their open positions as careers, not simply as jobs.

Some of their initiatives to make that happen include mentoring their employees, funding their education and encouraging smart risk-taking.

Due to their exceptional culture and leadership, most participants that were interviewed for the Comparably survey states that the environment at Brad’s Deals is positive. About 89% of the employees at Brad’s Deals work 8 hours or less. Overall, the employees are extremely happy.

Learn more about the employee benefits and perks offered by Brad’s Deals here.

3. CultureIQ

CultureIQ is a culture management company that provides company culture and employee engagement solutions.

It’s no surprise then that they maintain an A+ culture score in 2019 on Comparably and won the Best Company Culture and Best Company for Women awards in 2018.

Secret to success

CultureIQ values respect, both internally and externally. They are open to changes in the workplace and the technological environment, which makes them flexible.

This ideology has allowed them to receive great scores from its own employees. Of the employees interviewed for Comparably, 51% of them say they work 8 hours or less a day, and the majority of employees say the environment is positive.

Embracing diversity and promoting inclusion

Something every successful business has in common is embracing diversity and promoting inclusion. As we can see from our small businesses above, in order for an organisation to foster a happy and thriving workplace, the sense of community must be strong.

While this feels like an obvious fact, unfortunately, diversity inclusion is still a barrier that many people face today.

According to a global diversity & inclusion survey by PwC, 76% of respondents say diversity is a stated value or priority area for their organisation, but 33% say they agree or strongly agree that diversity is a barrier to progression at their organisation.

Many companies view this as a challenge to overcome, but it’s actually an opportunity to embrace each person as an equal regardless of background. Companies that understand this are the ones that employees will continue to flock to.

As an extra perk, promoting a culture of diversity and inclusion has been proven to bring top-notch results for businesses in nearly every industry.

Take a look at these statistics:

• Companies with gender diverse executive teams are 25% more likely to have above-average profitability than companies that don’t (McKinsey).
• Companies with ethnic diversity have a 36% higher average profitability than those that do not (McKinsey).
• Inclusive teams make better decisions up to 87% of the time (Cloverpop).
• On average, gender-diverse and inclusive teams outperform gender-homogeneous, less inclusive teams by 50% (Gartner).

Hiring people from diverse backgrounds can also increase creativity and innovation while solving problems in your organisation.

It also improves the quality of personnel through better recruitment and retention.

4 ideas for increasing employee engagement

Creating a strong business culture that supports employee engagement and growth is important, but if you’re not sure where to start, here are some ideas.

Note: Not all methods and ideas are applicable to every business—choose the ones that work for your company and you feel confident implementing.

1. Flexitime

Flexitime is an increasingly popular work arrangement that allows employees to alter their workday start and finish times.

According to a report by Zenefits, 78% of employees believe that flexitime makes them more productive. Flexible work arrangements are also known to reduce absenteeism and employee turnover by helping them maintain control over their schedule and a good work-life balance.

Before you offer flexitime to your employees, make sure they are self-motivated and have the ability to manage their own time.

2. Parental leave

Statutory maternity leave in the UK is 52 weeks, whereas fathers can choose to take either 1 or 2 weeks off for paternity leave.

Having a baby is one of the happiest moments in a person’s life, and when businesses choose to recognise that and offer paid leave to their employees, it shows them they care.

Offering parental leave will make your employees feel more connected to your organisation and once they return, you’re likely to have a fully motivated employee with high productivity levels.

Some huge companies have made some pretty big statements to support parental leave:

• The Gates Foundation now offers 26 weeks of parental leave and a $20k stipend to new parents.
• Netflix provides unlimited paid parental leave.
• Google offers paid maternity leave for 18-22 weeks while non-birth and adoptive parents receive 7-12 weeks of paid leave.
• Amazon offers 20 weeks of paid maternity leave to birth parents and 6 weeks to non-birth parents.

A study conducted by Eileen Appelbaum and Ruth Milkman regarding Paid Family Leaves (PFL) revealed these findings:

• 88.5% said PFL had “No noticeable effect” or “positive effect” on Productivity
• 91.0% said PFL had “No noticeable effect” or “positive effect” on Profitability/Performance
• 92.8% said PFL had “No noticeable effect” or “positive effect” on Turnover
• 98.6% said PFL had “No noticeable effect” or “positive effect” on Morale

What does this mean? Life in the office goes on unaffected when a person is out on parental leave. It does not negatively impact the team. There is not a huge turnover due to being out on parental leave. The team morale stays intact. And you do not lose money as a business.

3. Unlimited days off

All workers in the UK are entitled to 5.6 weeks of paid holiday each year.

Top Tip: For employers and employees alike, you can learn more about the rules and regulations regarding time off in the UK in our guide to annual leave: how to calculate it and how to create an annual leave policy 🔍.

But some companies also offer unlimited holidays to their employees. This may sound too good to be true, but can be a game-changer for employers depending on the type of work.

Unlimited holidays can boost employee morale and increase happiness. It’s also a fantastic competitive perk to attract top talent, as more companies are beginning to offer this incentive.

It’s not surprising that more companies are serving up unlimited holidays, as a 2019 MetLife survey shows that 72% of respondents in the US expressed interest in unlimited paid time off.

However, there are some cons to how unlimited holidays plays out in workplaces. These policies have been known to discourage employees from taking any holiday at all, which is an unfortunate, yet very real, side effect.

Employees may feel that nobody else at their company can handle their work, fear getting left behind, feel too dedicated to a company to ask for a holiday, fear they will lose their job and so on.

It’s important to note that the idea of unlimited holidays began in the US, which is a culture that does not require employers to give a specific number of paid holidays. While there is a small and steady growth of companies in the UK offering this trend, it will be interesting to see how it plays out here.

So keep an eye on if this trend catches fire in the UK and see if it works for your business. If you find your employees end up taking less than the 5.6 week allowance, encourage them to take time off. Burnt-out teams are unhappy teams.

4. Four-day work week

The idea of a four-day work week initially surfaced to allow employees to maintain a good work-life balance. It has tons of advantages for both employees and employers. Where employees earn an extra day with their families, employers enjoy an increase in productivity.

Perpetual Guardian, a New Zealand based company, tried the four-day work week and witnessed excellent positive results, such as a 7% decrease in stress levels and an overall increase in life satisfaction by 5%.

As great as this can be, there are both pros and cons to implementing this policy.

If you are in business with companies that work a five-day work week, it could harm your relationships. Employees may also need to work more hours throughout the four days to make up for a day lost. This will most likely cause stress and a potential disability to hit targets.

While advanced technology can impressively handle many tasks, humans are still needed for key decision-making.

This will be an interesting trend to track as well.

Wrapping up

Your workplace culture is one of the most important things to get right. And no one is more responsible for encouraging and promoting it than you as a business owner.

To effectively develop the values that make up your company culture, remember to:

1. Look at other organisations for inspiration
2. Ask yourself insightful questions that lead you to uncover your beliefs and core values
3. Get everyone within your organisation involved in the creation of those values
4. Make sure your values are part of your mission statement and are present in everything you do to attract the right talent

If you focus on creating a strong culture that supports collaboration, diversity and inclusion, success and financial growth is sure to follow.

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