How Leadership Affects Culture

It’s well-known that a positive organisational culture has many benefits: from improved productivity and creativity to greater retention, returns and growth.

However, with the unemployment rate in the U.S. at its lowest in almost 50 years, employees have more freedom to switch jobs if dissatisfied. And with only 1 in 3 U.S. workers saying they received recognition from their employer within the past seven days, it’s important to consider how leaders can achieve a better and more inclusive corporate culture that makes their employees want to stay. Because employees who don’t feel valued are twice more likely to leave their job within a year. This article considers how we understand organisational culture, why it’s important and how leadership affects culture.

What is organisational culture?

Your organisational culture is created by the beliefs, actions and behaviours and values learnt by employees in your organisation. In his book “Organisational Culture and Leadership”, Edgar Schein defines this as “a pattern of shared basic assumptions that the group learned as it solved its problems of external adaptation and internal integration, that had worked well enough to be considered valid, and therefore, to be taught to new members as the correct way to perceive, think and feel in relation to those problems”. It doesn’t happen on its own and it is directly influenced by how your employees act at work.

Organisational culture types

Often defining your company’s culture can be difficult as this is not something that is immediately obvious. Schein’s organisational culture model is designed to make culture more visible. According to him, this comprises 3 layers: basic underlying assumptions, espoused values (core values) and artifacts and symbols (for example, dress code, office layout or communication style). The latter layer is the easiest to change, while assumptions can be the most resistant to change, as sometimes you might not even be aware you hold them. Ultimately culture dictates organisational strategy, so from Schein’s perspective, it is essential that leaders look through the lens of how culture affects the company’s goals, current or future problems.

According to another model, Cameron and Quinn, there are types of organisational culture which are based on competing values: internal focus and integration or external focus and differentiation, as well as stability and control or flexibility and discretion:

  • Clan – this type of culture is displayed in companies such as Disney, Starbucks or Twitter and it revolves around loyalty, building a community and providing mentorship at work. People feel they are making a difference and are part of something bigger;
  • Adhocracy – these companies focus on being agile and creative and taking risks, examples include Amazon, Nike and a lot of the big tech companies, like Facebook and Apple;
  • Market – rooted in being competitive and results-oriented, companies such as Tesla and SpaceX can arguably be seen as belonging to this model;
  • Hierarchy – based on control and structure, the culture is formal and built around internal procedures. This is considered an outdated model and in recent years, structures have become flatter and leadership is based a lot more on diversity, collaboration and meritocracy. However, this type of culture can still be observed at some educational and financial institutions.

Companies will often have a dominant culture but overall combine two or more of these cultures within it; sometimes different departments display different cultures to those of the entire organisation. Defining a company’s culture is complex since its implementation and change relies on all employees, but it’s essential to identify and understand it to bring about organisational culture development and thrive in today’s competitive environment.

Organisational culture examples

Twitter, Nike and Edelman are all known for their good culture. And so is Adobe – a company founded in 1982, driving $4 billion in revenue and known for flagship products such as Photoshop and the Portable Document Format (PDF). Its culture is based on the company’s values of being genuine, exceptional, innovative and involved. The leadership provide great benefits and mentorship opportunities, encourage work-life balance, support involvement in the community and over 15,000 non-profit organisations, and even lead programmes such as “KickBox”: a red box filled with sugar, caffeine and a pre-paid card worth $1,000 for any employee to pursue their innovative ideas. Employees often share insights into this through the hashtag #AdobeLife.

How do leadership behaviours shape organisational culture?

It is obvious that culture matters and by embodying the values that organisations hold high, leaders have a role in shaping culture. In a PwC report, 86% of C-Suite executives believe culture is critical to their organisations’ success. In the same survey, 84% of all respondents thought culture was critically important, however less than half believed their companies do a good job of managing culture.

Time and time again, the ability of an organisation to adapt to change has proven to have one of the most significant impacts on an organisation’s performance. David Cummings, Co-founder of Pardot believes: “Corporate culture is the only sustainable competitive advantage that is completely within the control of the entrepreneur. Develop a strong corporate culture first and foremost.”, while Simon Sinek believes “Customers will never love a company until the employees love it first.”

A company’s culture has been shown to be one of the top factors that employees take into consideration when looking for a new role. When it comes to establishing and reinforcing this, leaders will usually display the following behaviours:

  1. Observe – by understanding how employees view and act within your organisation and what motivates them, you can ensure that your employees are productive and satisfied with their workplace.
  2. Communicate – employees need to understand what is expected of them. You should provide updates via email and the intranet. Also, as your organisation matures, when you observe something that doesn’t sit right, make a note and figure out ways to change this. Put it in writing, discuss it and find a solution.
  3. Consistently embody the values and behaviours – defining and refining your organisation’s culture takes time, so to see change you have to be active and consistent when it comes to the culture you want displayed throughout your organisation.
  4. Help others and promote unity – encouraging cooperation and information leads to a cohesive organisation; coach your employees; use diplomacy and tact to know when to push for your ideas and when to push back to have the biggest impact. Be confident but be ready to spotlight your employees and teams, no matter their level, who have contributed to the success.
  5. Try not to do everything – changing mindset and empowering employees is crucial as they are the ones who have the most power in activating your culture. Employees don’t leave a company, they leave bad bosses and toxic cultures. To make a change having the systems, processes and policies in place.
  6. Be transparent and accountable – transparent and fair about where you are where you are heading and give employees the freedom to take part and shape their roles for the good of the company and their own. The spirit of gratitude and generosity can be infectious.

 Why it matters?

Measuring corporate culture can be difficult, but it impacts so many areas in a business that you cannot overlook it. A good organisational culture is often associated with:

  • Recruiting power – companies such as Google and Zappos attract top companies due to their reputation as good places to work where people live their purpose and take pride in the work they do.
  • Increased productivity – when leaders care, employees are more likely to believe their work to be important and meaningful. The cooperation across teams also increases, leading to supply chain efficiencies. Employees are more engaged with their work and their organisation and can provide better customer service or work quality, more innovative solutions and ultimately increased productivity.
  • Decreased turnover and maximised loyaltystudies show that whenever an employee needs replacing, it costs your business on average 6 to 9 months’ salary on average. In the US, this translates to $11 billion lost annually to employee turnover. With a good corporate culture, employees are more likely to be receptive to change and stay with their employer through the good and the bad times. This is even more important, in a time when Millennials and Gen Z are becoming more and more a part of the workforce. In a recent survey, 49% of Millennials said they would, if they had a choice, quit their current job in the next 2 years.

Don’t make defining your culture a one-time exercise – to maximise the benefits of your organisational culture. Consistently embody this and you will have a place where everyone feels included, valued and rewarded.

Interested in learning more about leadership and culture? Visit our Leadership section for articles and videos from Philip Hemme, co-founder & CEO of Labiotech.eu, clinical psychologist Bruce L Levine, Kathryn Petralia, Co-Founder of Kabbage, a fintech start-up valued at more than $1.2 billion, and Karen Blackett OBE, Chairwoman, MediaCom UK.