How to Build — and Improve — Company Culture

A company with a healthy culture has engaged employees, fosters trust and respect, and encourages new ideas. A poor work culture creates a toxic environment where team members become disengaged, productivity suffers, and employee retention is negatively impacted.

In this post-pandemic world, characterized by mass layoffs and remote work, a strong company culture is more crucial than ever to ensure long-term success.

What Is Company Culture?

Company culture is a shared set of values, goals, attitudes, and practices that characterize an organization. Not only does it set the “personality” and values of a given business, but it is also the glue that binds a team together and informs how work gets done within the organization.

Michael McCarthy, instructor of The Art of Workplace Engagement: Creating a Positive Environment to Engage Employees at Harvard Division of Continuing Education Professional & Executive Development, defines company culture simply as “how things are done around here.”

McCarthy explained that a healthy company culture will help businesses overcome such hurdles as employee disengagement, high turnover, and high recruitment costs, and make a company one that people want to work for. It can also lead to:

• Improved profitability
• Higher levels of innovation
• A greater competitive advantage 
• Improved flexibility and adaptability

What Can Turn a Company Culture Toxic?

A toxic company culture spreads like a virus, leading to employees picking up bad habits and negative attitudes, eventually poisoning the workplace atmosphere. It can stem from a variety of issues including change of leadership, layoffs, unreasonable workloads, or lack of clarity.

“I find the worst thing is a lack of transparency,” McCarthy said. “When something happens, and the company isn’t straightforward about what is going on, or they try to put a spin on it, it is literally the worst thing you can do. It opens up a vacuum for gossip and conspiracy theories, and once people start to believe untruths it is hard to unwind that.”

A 2022 study delving into the Great Resignation that happened during the COVID-19 pandemic blamed toxic work culture as a major driver. It defined a toxic workplace as one with a lack of diversity, equity, and inclusion, one where workers feel disrespected, or one with unethical behavior within an organization.

Signs of a toxic work culture include:

•  Unfair treatment or discrimination
• Exclusionary behavior or cliques
• Lack of workplace trust and support among team members
• Excessive workload and unrealistic expectations
• Poor communication and lack of transparency
•  High levels of stress and burnout
•  High employee turnover
• Absence of purpose and pride in work

How to Improve Company Culture

When a workplace becomes toxic, look first at the top of the organization.

”Seventy percent of workers’ experience is based on manager behavior,” McCarthy said. “If the job is great, 70 percent of that will be because you have a great manager — and the opposite is also true. If there is a toxic workplace, you may want to point a finger at the manager.”

Inaction or turning a blind eye to behaviors such as disrespect, unreasonable workloads, favoritism, rewarding bad behavior, and micromanagement are signs of a toxic workplace.

5 common examples of toxic company culture:

1. Values are meaningless 

Core values guide the behavior of an organization, but if they are defined without real commitment, they are inauthentic and hollow — and employees know it.

2. Rewarding short-term wins over long-term vision 

Some companies reward growth at any cost. Leaders who don’t act on toxicity early do so because they don’t want to sacrifice short-term profits generated by unethical behavior.

3. Promoting silence and secrecy over psychological safety 

Leaders of toxic companies don’t want to hear what people have to say; they just want people to obey.

4. Feedback is used to judge people rather than encourage them to learn and grow.

5. Rules limit people rather than empower them 

If you show people that you don’t trust them, why should they trust you or your organization? 

According to Harvard Business Review, employee surveys are a useful tool for diagnosing the root causes of a toxic workplace, helping to pinpoint problems that are in the way of creating a positive work environment. Surveys can offer a variety of benefits including:

• Gathering honest employee feedback
• Spotting patterns and trends
• Ensuring equal representation
• Encouraging open communication
• Identifying strengths and opportunities
• Building trust and collaboration
• Driving employee engagement

How to Repair Company Culture

“Changing culture is difficult,” McCarthy said. “It has to be from the ground up, and everyone has to buy in.”

When a toxic workplace culture is identified, the first step to repair is acknowledgment and accountability, with leaders accepting responsibility for past mistakes and current issues. Only then can a positive company culture begin to emerge.

Leadership

Leaders must follow words with clear actions demonstrating a commitment to change that includes ongoing, transparent, two-way communication with employees.

Revisit the core values that guide your organization; the principles and priorities that guide all of your organization’s actions. Are they relatable to each employee? Are they actionable? Are they focused on how you want employees to treat each other and how you want people to feel about your brand?

By being clear on your core values, you ensure your company can evolve and thrive.

Employees

Next, look at your employees. Are they energized and motivated by the work they do? Do they understand the goals of the company and are committed to working toward your goals? In addition to conducting employee surveys, talk one-on-one with them about how the culture has evolved over the years.

Outline a plan for improvement. Create an employee engagement strategy with benchmarks to track progress. Seek out employee suggestions for meaningful engagement activities outside of work.

“There really needs to be sincerity and buy-in from people,” McCarthy said. “Have the people decide what the event is and, if they like it, they buy in.”

Focus on building trust and respect. If everyone feels valued for who they are and has a sense of belonging, they will be more productive.

Next Steps

Additional ideas for improving company culture and maintaining progress include:

• Conduct regular anonymous employee engagement surveys to gain insight into company strengths and weaknesses.
•  Set up a culture committee that encourages employee engagement throughout the organization from the onboarding process to every level.
• Welcome creative problem-solving and new ideas through brainstorming sessions or innovation labs.
• Focus on employee well-being and work-life balance to avoid burnout.
•  Establish a mentorship program and help employees advance in their careers.
•  Celebrate successes, milestones, and team wins.
• Provide clear expectations.
• Track progress and adjust your strategy accordingly.

How to Rebuild Trust

Something has gone wrong at your organization. There have been layoffs or a change of leadership. Employees feel unmoored, unmotivated, overworked, and underappreciated.

You have identified the problem and are committed to change, so how do you begin to rebuild their trust?

“You have to become a different person,” McCarthy said. “You have to be transparent and say, ‘This culture does not work for us anymore, and we need a new one.’”

Communication and transparency are essential to rebuilding trust in leadership. Remind employees of the organization’s shared mission and involve everyone in coming together to support that mission. 

Ask for feedback and listen to it. When employees see feedback is taken seriously and leads to change, trust will reemerge. This will create a healthier workplace and go a long way toward dispelling toxicity.

Prevent employee burnout

If employees are stressed, unmotivated, negative, and walking out the door, burnout is likely to blame. Burnout is a response to prolonged exposure to emotional, physical, and interpersonal stressors, which, as they accumulate, lead to feelings of emotional and physical exhaustion.

Some of the most common causes of burnout include work overload, role conflict, high levels of ambiguity, pressure from management, and lack of support and feedback. 

Burnout is also highly contagious and can spread across a team. According to a report on the Great Resignation, 40 percent of employees cited burnout as the top reason for leaving their jobs.

However, employers can prevent burnout in employees by creating supportive workplaces. 

• Prioritize both employees’ and managers’ well-being and stress management
• Provide recovery time and breaks
• Allow employees to set boundaries
• Build social connections inside and outside the workplace
• Help employees find their purpose in the organization
• Encourage flexible work arrangements to give employees more control over their lives
• Take a holistic approach to wellness by supporting physical, emotional, and mental health
• Set clear expectations to prevent misunderstandings
• Provide feedback and transparency through regular check-ins
• Provide resources for burnt-out employees to help achieve work goals, reduce job demands, or stimulate personal growth

Positive conflict resolution

When people work closely together, sometimes conflict can’t be avoided, even in the most harmonious of work environments. 

But conflict isn’t always bad or a sign of a toxic work culture — it can actually be an opportunity to model conflict resolution strategies and strengthen the team through healthy debate. 

The key is to harness these strategies in a way that parties find a solution to their disagreement and leaves everyone involved reasonably satisfied. This, in turn, contributes to an improved company culture based on open dialogue and discussion.

Conflict can occur due to multiple reasons, including previously unresolved issues, poor communication skills, or clashing personalities and perspectives.

Effective leaders can channel conflict into solutions by:

• Staying solution-focused. 

If discussions take an unproductive direction, guide them toward finding a solution.

• Listening and allowing everyone to express themselves. 

Encourage every team member to speak up and listen, even if they disagree with what someone else is saying.

• Controlling emotions and behavior. 

Try to remain calm and provide a safe, respectful space.

• Being aware of and respectful of differences. 

Mutual respect is key, especially when employees have differences in opinion.

Provide support during change

Change can be difficult, especially in the workplace. If employees are uncomfortable with the nature and pace of change, they can become angry, anxious, and unproductive. 

“Twenty-five percent of remote workers report being lonely,” McCarthy said. “But they don’t want to come into an office, or they might never have worked in an office before. That level of detachment is bad all around. They are not going to be as engaged because they are not as connected.”

It is important for leaders to communicate clearly and empathize with employees. This will help them adjust to a new workplace culture and be more resilient, even when many workers are no longer working in the same office space.

“A great culture, in-office or hybrid, could be a great solution. You spend so much time at work, you might as well love it,” McCarthy said.

Steps to help your team adapt to change:

• Explain why the company is changing and what is now expected from them.
• Hold discussions to help employees feel heard and to express resistance.
• Keep employees informed at every step of the way as changes unfold.
• Ensure adequate training.
• Break changes into steps so employees can see success and accomplishments along the way.
• Remove barriers and reward acceptance.
• Celebrate success and work done under the previous system to encourage employees to take on their next challenge.
• Celebrate successes under the new system, and acknowledge those who are making the change successful.

Continue Developing As a Leader

Effective leaders are always learning and growing, especially during periods of change. When your employees see you developing new leadership skills, it may help them adopt a new mindset toward your company’s culture. 

If you are ready to make a change that can help improve your bottom line and increase job satisfaction, consider enrolling in a Harvard Division of Continuing Education Professional and Executive Development program. These programs are geared to help leaders gain the skills and knowledge to increase their impact across an organization.

By developing your own skills and expertise as a leader, you can help craft a new healthy workplace culture grounded in empathy, committed to transparency, utilizing strong communication skills, and focused on your team’s values and unique perspectives.  

In turn, you’ll see improved employee engagement, a spirit of trust and positivity, and increased job satisfaction across the board, and in the process, improve your company overall.