This is the second post in this spring’s company-culture series, in which we examine whether company culture is worth our attention. It is. Just ask Target.
April 16, 2025
By Rachel Smith
Last week we introduced our company-culture blog series. We learned that, while studying company culture may be a relatively modern idea, company culture itself is not new. There were even some 19th-century examples of exceptional culture that we can learn from today.
We also learned that company culture is a difficult term to define and perhaps even harder to measure. Gallup, which has been studying workplace culture and business performance through a 25-plus-year meta-analysis, defines company culture simply as “how we do things around here.” This week we’ll explore whether worrying about “how we do things around here” is really worth our time and attention. What does research tell us regarding the importance of company culture?
Sure, in a perfect world, everyone in an organization is happy and feels rewarded by what they do, but (gestures frantically at everything) we don’t live in a perfect world. Is company culture truly worth our time?
Spoiler alert—yes.
Happiness is great and all, but the fact of the matter is that when you report the quarter’s numbers to your board of directors, “number of happy employees” is not one of them. So, let’s talk about some of the other measurements that are discussed in the boardroom.
Research from the MIT Sloan School of Business looked at employees who quit their jobs during the Great Resignation. What the researchers found interesting was that employees were not leaving companies in equal amounts. Even companies in the same sector saw vastly different percentages of workers leaving. What was making the difference? They found that whether employees experienced a “toxic corporate culture” was the most reliable predictor of attrition. It was 10.4 times more reliable a predictor of attrition than compensation. Further investigation into what warranted a label of toxic corporate culture identified five attributes—disrespectful, non-inclusive, unethical, cutthroat, and abusive.
Similarly, when researchers looked at what elements of company culture mattered most to employees, the top answer (nearly twice as important as the second-most-popular answer) was that employees felt respected. While attrition rates might be discussed during board meetings, chances are high that the true reasons for attrition are not part of the discussion. employee attrition has much more to do with company culture than compensation, benefits, and training.
Beyond predicting whether your employees are likely to leave, corporate culture also significantly impacts productivity. A study published in the Journal of Management and Administration Provision found that culture was responsible for 17% of the variations in worker output. A one-unit increase in organizational culture led to a 0.54-unit increase in employee productivity. The way company culture units were measured was a bit convoluted, but the bottom line is that all else being equal, a better organizational culture had a positive impact on productivity.
Gallup research found that employees and teams who most align with their company culture perform higher on internal performance metrics than those who least align. Further research by Gallup determined that workers who feel strongly connected to their company’s culture are 2.7 times more likely to agree that they feel responsible for the quality of products and services.
So, a good company culture and a workforce that feels connected to that culture make your employees less likely to leave, more productive, and more apt to take responsibility. But maybe that’s not enough for you? (You’re so demanding!) The impact of company culture goes well beyond employee retention and productivity. It also affects your profit margins.
Each year, Fortune publishes its list of the Fortune 100 Best Companies to Work For. In 2025, they looked at the list to see how being a great company to work for impacts a company’s revenue per employee (RPE), an indicator of the productivity and efficiency of an organization’s workforce. They found that the 100 best companies to work for earn 8.5 times more revenue per employee than the average company. Their stock performance beats the market average by 3.5x.
But is being a great place to work the same as company culture? Maybe employees like working at the company because they are making more money. Nope. Companies on Fortune’s list outperform other organizations in every employee-experience metric including accessible leadership, honest and clear communication, and support for their well-being, with 90% of respondents describing their workplace as “caring.” In other words, it’s not about the money.
Business consulting firm LSA Global did their own research and found that corporate culture accounts for 40% of the difference between high-performing and low-performing companies in terms of revenue and profits. But it’s not just revenue and profits. Cultural factors also account for 40% of the difference in customer retention, customer satisfaction, and employee engagement.
Engagement, like culture, is one of those concepts that is hard to define, but here’s the important part—companies with a highly engaged workforce are 23% more profitable. Gallup also reports that employees who strongly agree with the phrase, “I feel connected to my organization’s culture” are 3.7 times more likely to be engaged at work.
And if revenue, profits, and employee engagement aren’t enough, cultural factors also account for 40% of the difference in customer retention and customer satisfaction. Your employees aren’t the only ones that care about your company culture.
Gallup found that a strong organizational culture resulted in a 138% improvement in patronage over a five-year period. If you’re unsure whether your customers are paying attention to company culture, just ask Target.
A long list of companies rolled back their DEI initiatives this year, but Target is noteworthy for the significant backlash they faced from their customers and employees. What made Target different? Their focus on DEI had been an embedded part of their company culture, and they weren’t just paying it lip service. Target supported black-owned businesses. They featured LGBTQ-owned companies and highlighted them and their products during Pride Month.
While other companies did away with their DEI initiatives, those initiatives had not been so integral to their culture. By taking a step back on DEI, Target changed who it was in the eyes of many customers and employees. Foot traffic in Target stores has fallen for nine consecutive weeks, and stock prices also tumbled, resulting in a loss of $12.4 billion.
Similar outrage was evident when REI joined 30+ outdoor recreation organizations in signing a letter of support for interior secretary appointee Doug Burgum. His support of increased drilling on public lands goes against the values of many of REI’s customers as well as REI’s own stated company values. REI CEO Mary Beth Laughton had to make a public statement admitting that signing the letter had been a mistake.
Your board might not care as much about it as it does other metrics, but maybe it should. A professor of economics at the University of Warwick studied the impact of employee happiness on productivity. He found that happiness makes people 12% more productive. It sounds like “how we do things around here” is pretty critical to productivity, profit, and customer satisfaction and retention. Maybe employee happiness should be the first thing you talk about at your next board meeting.
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