Loading the player...

What is 'Corporate Culture'

Corporate culture refers to the beliefs and behaviors that determine how a company's employees and management interact and handle outside business transactions. Often, corporate culture is implied, not expressly defined, and develops organically over time from the cumulative traits of the people the company hires. A company's culture will be reflected in its dress code, business hours, office setup, employee benefits, turnover, hiring decisions, treatment of clients, client satisfaction and every other aspect of operations.

BREAKING DOWN 'Corporate Culture'

Google Inc. (GOOGL) is a company that is well-known for its employee-friendly corporate culture. It explicitly defines itself as unconventional and offers perks such as telecommuting, flextime, tuition reimbursement, free employee lunches, on-site doctors and, at its corporate headquarters in Moutain View, Calif., on-site services like oil changes, massages, fitness classes, car washes and a hair stylist. Google's corporate culture has helped it to consistently earn a high ranking on Fortune magazine's list of 100 Best Companies to Work For.

History of 'Corporate Culture'

While awareness of corporate or organizational culture in businesses and other organizations such as universities emerged in the 1960s, the term “corporate culture” was developed in the early 1980s and widely known by the 1990s. Corporate culture was used at this time by managers, sociologists and other academics to describe the character of a company, not only through generalized beliefs and behaviors, but also through company-wide value systems, management strategies, employee communication and relations, work environment, attitude, and even company origin myths via charismatic CEOs, as well as visual symbols such as logos and trademarks.

By 2015, corporate culture was not only created by the founders, management and employees of a company, but also influenced by national cultures and traditions, economic trends, international trade, company size and products produced. A well-cited historical example of distinctions between corporate cultures are the traditional business practices of the Japanese, and the American individualistic and entrepreneurial corporate culture of the 1960s.

There are a variety of terms that relate to companies affected by multiple cultures, especially in the wake of globalization and the increased international interaction of today's business environment. As such, cross culture refers to “the interaction of people from different backgrounds in the business world”; culture shock refers to the confusion or anxiety people experience when conducting business in a society other than their own; and reverse culture shock is often experienced by people who spend lengthy times abroad for business and have difficulty readjusting upon their return. To create positive cross-culture experiences and facilitate a more cohesive and productive corporate culture, companies often devote in-depth resources to combating the occurrence of the above, including specialized training that improves cross-culture business interactions.

Examples of Contemporary Corporate Cultures

Just as national cultures can influence and shape a corporate culture, so does a company’s management strategy. In top companies of the 21st century, such as Google, Apple Inc. (AAPL) and Netflix Inc. (NFLX), less traditional management strategies that include fostering creativity, collective problem solving, and greater employee freedom have been the norm. It has been argued that this is also the key to these companies’ success. Progressive policies such as comprehensive employee benefits and alternatives to hierarchical leadership – even doing away with closed offices and cubicles – are a trend that reflect a more tech-conscious and modern generation. This trend marks a turning away from aggressive, individualistic and high-risk corporate cultures such as that of former energy company Enron.

Some recent, high-profile examples of alternative management strategies that significantly affect corporate culture include holacracy and the shoe company Zappos (AMZN), and agile management and the music streaming company Spotify. Holacracy is an open management philosophy that, amongst other traits, eliminates job titles and other such traditional hierarchies. Employees have flexible roles, and self-organization and collaboration is highly valued. Zappos instituted this new program in 2014 and has met the challenge of the transition with varying success and criticism. Similarly Spotify, a relatively young but very successful company, uses the principles of agile management as part of its unique corporate culture. Agile management in essence focuses on deliverables with a flexible, trial-and-error strategy that often groups employees in a start-up environment approach to creatively tackle the company’s issues at hand.

Characteristics of Successful Corporate Cultures

Corporate cultures, whether shaped intentionally or grown organically, reach to the core of a company’s ideology and practice, as well as affect every aspect of business from each employee to customer to public image. The current awareness of corporate culture is more acute than ever. The Harvard Business Review identifies six important characteristics of successful corporate cultures in 2015. First and foremost is "vision": from a simple mission statement to a corporate manifesto, a company’s vision is a powerful tool. For example, Google’s modern and infamous slogan: “Don’t Be Evil” is a compelling corporate vision. Secondly, "values," while a broad concept, embody the mentalities and perspectives necessary to achieve a company’s vision.

Similarly, "practices" are the tangible methods, guided by ethics, through which a company implements its values. For example, Netflix emphasizes the importance of knowledge-based, high-achieving employees and, as such, Netflix pays its employees at the top of their market salary range, rather than an earn-your-way-to-the-top philosophy. "People" come next, with companies employing and recruiting in a way that reflects and enhances their overall culture. Lastly, "narrative" and "place" are perhaps the most modern characteristics of corporate culture. Having a powerful narrative or origin story, such as that of Steve Jobs and Apple, is important for growth and public image. The "place" of business, such as the city of choice and also office design and architecture, is also one of the most cutting-edge advents in contemporary corporate culture.


  1. Cross Culture

    The interaction of people from different backgrounds in the business ...
  2. Merger Of Equals

    A merger of equals is when two firms of about the same size come ...
  3. Accounting Control

    An accounting control is a set of procedures that are implemented ...
  4. Corporate Hierarchy

    Corporate hierarchy is the arrangement of individuals within ...
  5. Organizational Behavior - OB

    Organizational Behavior (OB) is the study of the way people interact ...
  6. Human Resources (HR)

    The company department charged with finding, screening, recruiting ...
Related Articles
  1. Small Business

    How Corporate Culture Affects Your Bottom Line

    Here's a look at how companies can be successful financially by promoting a positive work atmosphere for employees.
  2. Insights

    Sexism Charges Bring Uber's Toxic Culture to Fore

    An employee penned a lurid tale of sexism in the workplace culture at the fast-growing startup.
  3. Tech

    Top Tips for Buying a Financial Advisory Practice

    When acquiring a new financial advisory practice, make sure that your game plan avoids these acquisition missteps.
  4. Investing

    Hedge Fund Fortunes Change, High-Rolling Culture Doesn't

    The lavish lifestyles of hedge fund employees have persisted, even as returns have dwindled.
  5. Small Business

    Zappos.com & Holacracy, Will It Work?

    Zappos amounts to the most expansive corporate implementation of Holacracy. Why did they do it?
  6. Managing Wealth

    Top 5 Ways to Retain Your Best Employees

    You need to think beyond salary to make the most talented people want to stay on for the long term.
  7. Insights

    Facebook Is the Best Place to Work in 2018: Glassdoor Survey

    Facebook regained its crown as the best company to work for in the U.S., marking the third time it has won the title.
  8. Personal Finance

    Top 10 Companies with the Best Parental Leave Benefits (NFLX, ADBE)

    Ikea just announced it will offer its 13,000 salaried and hourly employees in the U.S. up to four months of paid parental leave. Here are the other companies that offer the best benefits around. ...
  9. Insights

    Uber to Change Culture and Present Diversity Report

    Controversies aside, the ride-sharing company had its most successful week ever last week.
  10. Financial Advisor

    Buying an Advisory Practice? These Tips Will Help You Get it Right

    Before purchasing a financial advisory practice, ensure due diligence is done and that you understand the business and culture of the organization in question.
  1. What are some ways employers can reduce employee turn over?

    Learn a few strategies in hiring, compensation and management that employers can use for increasing employee retention and ... Read Answer >>
  2. How do interpersonal skills influence a business culture?

    Interpersonal skills are vital to business culture because they determine not only how a person interacts with others, but ... Read Answer >>
  3. What does a merger or acquisition mean for the target company's employees?

    Learn about the likely impact of a merger-and-acquisition deal on the target company's employees, including their benefits ... Read Answer >>
  4. What are major differences between investment banking and private equity?

    Private equity and investment banking both raise capital for investing purposes, but they do so in very different ways. Read Answer >>
Hot Definitions
  1. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  2. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  3. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  4. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
  5. Leverage Ratio

    A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt, or ...
  6. Annuity

    An annuity is a financial product that pays out a fixed stream of payments to an individual, primarily used as an income ...
Trading Center