Is Company Culture the New Salary?

Is Company Culture the New Salary?

Company culture is the HR trend that isn't going away, but could it be more important to candidates than the actual salary on offer?

Company culture can be a complicated issue for organizations. What really matters to employees? How should you reward and motivate them? And how can you deliver an effective strategy that keeps finance happy? All of these are questions that need to be answered to ensure that company culture is something that engages and attracts talent.

But can it really be more important than salary?

There are many suggestions that, if you want to hire the best talent, then you need to be prioritizing your company culture over everything else - including the salary on offer. It's not just in recruitment that it can have an impact though, with research suggesting company culture can have a significant effect on retention among your current workforce.

Why is company culture so important?

Company culture, whether you're talking about what the brand stands for ethically or how it treats its employees, is a massive part of employment. This is especially true among younger workers, who value flexible working, parental leave, and transparency from their employer.

Millennials are willing to sacrifice a portion of the salary they could earn in return for a better company culture. Research from Fidelity found that these younger professionals are happy to give up $7,600 a year if they got a better work environment.

"Clearly, many young professionals are thinking about more than money and are willing to sacrifice a portion of their salary in exchange for a career move that more closely aligns with their values or passions or improves their work/life balance." - Kristen Robinson, Senior Vice President, Women & Young Investors, Fidelity Investments.

It may be simple to see why company culture is important to this demographic. Unlike previous generations, they are starting families later and when they do, they want to have flexibility over how to split parental leave.

And the reasons behind this may be about much more than just the sentiment, with childcare being one of the most expensive outgoings parents have. Millennials often live away from relatives so having an employer that will create a supportive environment when you choose to start a family is a clear draw advantage.

It's not just about starting a family either, with company culture often coming hand-in-hand with more flexibility and autonomy in roles. Research from Bloomberg found that the most common reason for people leaving their job was that they were bored. In contrast, salary was the second-least popular reason.

Company culture and employee retention

Research also suggests that company culture is a key reason employees leave and part of how firms attract them in the first place. It's understood that organizations that value their staff have much lower turnover, reducing their recruitment and onboarding costs and giving employees more security in their role.

Employers obviously have a moral obligation to provide a safe and healthy environment for the people that work for them, but company culture is much more than that. Nowadays professionals want to feel valued and respected at work and this is more important than a large paycheck.

Maslow's hierarchy of needs

This can be explained by the well-established hierarchy of needs, which was pioneered by Psychologist Abraham Maslow in the 1940s. It breaks down what drives human beings from the very basic (food, warmth, shelter) to the more in-depth such as belonging, esteem, and self-actualization.

Maslow's theory helps to explain why simply paying a competitive salary may no longer be enough for a great portion of employees. Although this has undoubtedly evolved in practice during the 80 years since its publication, the theory still offers valuable insight for employers looking to understand how to motivate people.

Making professionals feel valued in their role and as individuals will have a significant impact on their sense of belonging in an organization, esteem in regards to themselves and their work, and the self-actualization of their goals.

Providing value with company culture

Making professionals feel valued in their role and as individuals will have a significant impact on their sense of belonging in an organization, esteem in regards to themselves and their work, and the self-actualization of their goals.

An effective culture strategy should be built around these principles to ensure all members of staff are getting the fulfillment they need at work. This is particularly important among the younger generation of professionals, who want to find roles that will respect and value their assets, allowing them to develop and challenge themselves as much as possible. This is because money really doesn't buy happiness and people are only satisfied at work when they feel fulfilled and engaged.

Over a period of time, this can develop into self-actualization, where people feel valued for who they are just as much as for what they can provide. This is the ultimate goal for employers as it breeds loyalty, advocacy and high levels of productivity.

Research from Glassdoor found that - across all income levels - the top predictor of workplace satisfaction wasn't salary, it was the culture and values of the organization. This was closely followed by the quality of senior leadership and the career opportunities at the company, which should both be an intrinsic part of company culture too.

It's not just younger workers that are influenced by company culture either. According to PwC, all generations value flexibility in their jobs. Whether this is relating to working hours, location or their role, it's an important element of the modern workplace. The study found that in many instances, this freedom was a higher priority than a promotion or compensation.

How businesses can benefit from good company culture

Company culture isn't just comparable to salary because of how it can incentivize and drive professionals but also because it can effectively gauge the success of an organization, and have a real impact on its bottom line.

Research has shown that company culture is a wise investment for employers big and small, with a potential eight-fold ROI at stake. Other studies have revealed that engaged professionals take less sick days and are more productive - two factors that can be massive money drains for businesses.

Although a strong company culture doesn't mean you can have employees who work for a pittance, it gives you the opportunity to hire the best talent, keep your most-valuable employees, and be a more efficient business.

Employee-centric models allow your company to get much better value from your staff, making them more engaged, likely to stay longer with you and to be more motivated while they're there.

This is why employers need to prioritize company culture more than salary. Not only does it attract and incentivize employees, but it gives you the professionals you need to run a successful organization.

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