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Don't Underestimate the Power of Company Culture. It's Still as Important as Ever. Company culture goes beyond good times and happy hours — it's the reason employees continue to show up every day.

By Daniel Todd Edited by Kara McIntyre

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

If you're lucky, you have a friend you talk to for hours on the phone. And, after every conversation, you walk away with 25 new ideas for a startup and the energy to run a marathon.

Imagine we could fill our companies with people who provide the same energy. What if we were excited to go to work tomorrow because it meant we got to talk to and learn from our coworkers? It sounds pretty idyllic, but how do we do it?

Building companies with engaged employees excited to come to work daily requires us to invite the right people to the party — and hire for cultural fit.

Related: How to Employ a Team That Shapes Your Company Culture

What is a "cultural fit" and why is it so important?

Cultural fit means hiring employees who align with our organization's values and collective behaviors. A meta-analysis reported that employees who fit well with their organization, colleagues and managers enjoyed greater job satisfaction, appeared more committed to the company and displayed superior job performance. On the other hand, a mismatched cultural fit can cost organizations 50-60% of an employee's annual salary.

Avoiding this mismatch means we must hire with culture in mind, ensuring that each employee we bring on is aware of and excited to join our company's culture. Recently, we hired an employee who decided to come out of retirement to join our company, specifically because he was so excited by the culture we cultivate. His excitement for our work has been contagious, making the problems at hand seem less overwhelming and the lofty goals we share less out of reach.

I want every employee we hire to bring this excitement to the culture they are joining, inspiring others to engage and bring their best selves to work. A 2021 survey from PWC only further proved the positive effects of hiring for culture fit: 72% of respondents said culture contributed to the success of change initiatives and 69% said culture provided a competitive advantage. Hiring employees with culture in mind is not a mere "feel good" add-on to our work but rather an essential element to the success of our businesses.

Related: Build the Right Culture by Building the Right Team. Here's How (and What You Need to Look for).

What to do if an employee is not a cultural fit

Sometimes, we will make mistakes when hiring, so what should we do if a recent hire isn't a cultural fit? Often, the feeling is mutual if there is a mismatch in values. An employee who does not feel they fit in may leave the organization. However, if they do not, we must do our best to ensure everyone can succeed long-term:

  1. Get a second opinion.
    • If we feel an employee does not match our culture/values, we should first get feedback from others in the organization to ensure we are not relying on our own (potentially biased) opinion.
  2. Consider if they're struggling due to a lack of training or unclear expectations.
    • Have our actions (or lack thereof) made their job more challenging? Establish clear lines of communication and provide more training if necessary.
  3. Give employees every chance to succeed.
    • Work with them and their manager to set clear goals and guidelines around what you expect to be delivered and when. If the person does not meet the established expectations, it is not just a cultural fit but a performance issue.
  4. Provide one last chance.
    • Before we let someone go, I give them two options: Receive six weeks' severance now or stay for six more weeks and make XYZ improvements. If they don't make those improvements in six weeks, we will let them go with two weeks' severance.

As leaders, we have to take responsibility for each hire's success, which means giving them every chance to improve, grow and thrive at our company. But there is a fine line between giving someone a chance and giving someone a free pass. If someone isn't working at our company, we must step in before their actions affect others and degrade morale.

Related: Every Hire Has Been a Good One Since This CEO Started Hiring for Values

Cultural fit requires a clear culture

At the end of the day, to find employees who are a good cultural fit, we need to clearly define what our culture is.

This starts by turning inwards. Ask yourself, "What type of company do I want to lead? What adjectives do I want to come to people's minds when they think of this company?" From there, ask your employees, "What do you want more or less of?" And, "What excites you about coming to work each day?" Once you've established answers to these questions, hire with these values at the forefront. If you and your employees value collaboration, teamwork, and relationship building, the eager engineer who wants to become the next Elon Musk might not be the right fit for your company. This may mean you have to pass on a talented engineer, but it could also mean you will gain an employee others want to work with — an employee who will likely be more loyal to your company in the long run.

Related: Should You Hire a Tom Brady or a J.J. Watt? How to Choose the Right Players for Your Culture and Team

More than the sum of our parts

Companies are living organisms, with each cell, bone and muscle working together to create a healthy, happy whole. When a bone is broken, we can no longer function optimally. We need all parts to work together, from our heads to our toes, to reach our highest potential — and the same is true for the employees who make up our companies.

It is important to acknowledge that what makes a great culture may vary from person to person, and there is no one-size-fits-all approach. It is essential for leaders to establish a culture that aligns with their values, beliefs and style and then ensure that every employee who works within it feels comfortable, valued and empowered to contribute their unique perspectives and talents.

When this happens, each employee becomes greater than the sum of their parts: no longer merely an arm or a leg but instead, a living, breathing organism working together to take another step forward.

Daniel Todd

Entrepreneur Leadership Network® Contributor

Founder and CEO of Influence Mobile

Daniel Todd is the founder and CEO of Influence Mobile. He is credited with creating a corporate culture that repeatedly won Washington CEO’s and the Puget Sound Business Journal’s “Best Places to Work” awards.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

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