a figure of a business professional climbing a path of blocks growing in size, the last block is circle-shaped, and purple, the whole scene symbolic of the leadership culture he is building at his organization


How Leadership Influences Organizational Culture

Learn what it takes to develop a healthy organizational culture and why your leadership culture is a key factor.

Publish Date: May 11, 2022

Read Time: 11 min

Author: Stephanie Fergusson

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Last month I was facilitating a leadership development course when I was asked a provocative question: “Why should I care about organizational and leadership culture?”

At a time when many organizations cite talent as their greatest challenge, we can easily find ourselves occupied with managing important operational tasks. Yet there has never been a more important time to avoid being drawn into a purely reactionary role. If organizational culture is going to work toward the company’s performance and not against it, it’s critical for HR and leaders across levels to work together to proactively shape and maintain it.  

What Is Organizational Culture?

Organizational culture is the shared values, attitudes, beliefs, goals, and norms that collectively prescribe how to behave in the workplace. It’s how employees fit in, build relationships, and move agendas forward. It influences the company’s success from recruiting, engagement, and retention to performance. It’s also the big-picture answer to “how things get done around here.”

Organizational culture is always shifting and changing—both in response to what’s happening inside the company and what’s happening in the world. And leaders are important influencers in styling and evolving the culture to meet the needs of the organization. 

How Does Leadership Influence Company Culture?

Employees often report different experiences of organizational culture depending on their direct leader.

For example, I recently had the opportunity to observe two teams from an organization. Both teams had the same purpose, goals, structure, and organizational values. But the workplace culture in each team was very different.

Members of one team were engaged in their work and supported each other emotionally. This healthy workplace culture had arisen in part because of the leader, who connects with each team member individually and cares for the wellbeing of the whole team.

The other team was regularly in conflict and did not have the same camaraderie, connectedness, or support. The leader of this team ignored conflicts between team members, which allowed conflicts to linger, and the dynamics of the entire team suffered as a result.

Two teams, in the same organization, with very different workplace cultures. So, what was the difference?

Leaders play a key role to set and demonstrate behavioral standards and provide feedback and coaching to support team members.

Shaping culture is not the responsibility of frontline leaders alone. Senior leaders set the tone and identify values and behaviors that enable success and drive performance. These values and behaviors are a critical foundation for creating the desired culture. Leaders across the organization must demonstrate them to build the foundation and keep the organizational culture strong for the long term.

How to Shape a Healthy Organizational Culture

To shape a healthy company culture, you need to determine what type of organizational culture you are striving to create. What are the values, attitudes, ideals, and goals that you hope will characterize your organization?

For instance, if you plan to foster a culture that values innovation, you may need to consider how to create an environment that encourages curiosity and exploration. How will you promote new ideas, incentivize experimentation, and create a safe space for employees to challenge the status quo?

Many leaders aspire to create an inclusive culture where diversity can thrive. These organizations need to take steps toward behavior change, developing an environment in which colleagues delegate equitably, resolve conflict fairly, and have empathy for one another.

The Reach of Organizational Culture

As you consider the culture you hope to build, be intentional, and consider the far-ranging implications. According to Tony Hsieh, former CEO of Zappos, “A company’s culture and a company’s brand are really just two sides of the same coin. What goes around the office comes around to the customer.”

Although you may think of culture as internal to your organization, in reality, it is on display during every customer interaction. Employee engagement, attitudes, and behaviors shape the customer experience, and potentially even your brand.

5 Key Leader Behaviors to Build a Positive Workplace Culture

In our 2021 Global Leadership Forecast (GLF) we identified five key behaviors that leaders should strengthen and apply to be part of an organization that’s considered a “Best Place to Work.” 

1. Support the development of team members.

Leaders should help their team members define development goals and create a plan for development. The plan should include leader check-ins to ensure healthy accountability for development, and to allow leaders to offer support to team members, without removing responsibility. Leaders should also ensure team members have time to dedicate to their development.

2. Provide opportunities to gain visibility.

Leaders should offer development that includes stretch assignments with opportunities to work with other leaders and teams across the organization, so team members can gain visibility. Leaders at “Best Places to Work” organizations spend more time attending group meetings than others. This provides opportunities to foster relationships, share openly about experiences, and allows leaders to provide opportunities for team members to gain visibility.

3. Celebrate team member success.

Leaders should applaud team members who excel and recognize achievements in front of the entire team. If the success was a team effort, celebrating with lunches or sharing the team’s success with high-level leaders can help team members feel appreciated and proud of their work.

4. Share credit with team members.

Leaders should recognize the contributions of team members’ work when their own work has been recognized.

When leaders take credit for work completed by the team, it can deflate and demotivate the team, and even make them feel betrayed, leading to feelings of distrust. (Check out this blog about why it’s so important for leaders to build and sustain a culture of trust.)

Leaders who spotlight their team show they are committed to the team and their success. It's also a great way for leaders to build confidence in their team with other stakeholders and leaders, which strengthens relationships across the business, improving organizational performance.

5. Share openly about their experiences.

Leaders should take the time to build connections with their team members including showing vulnerability. That means sharing both times when they did well and times when they made mistakes.

By using vulnerability, as well as empathy, to get to know team members for who they are, leaders can build connections that make up a healthy organizational culture. When leaders positively model connectedness, their team members are more likely to connect with each other.

When leaders demonstrate these five key behaviors consistently, they create a strong foundation of trust and a platform for shaping the organizational culture.

How a Consistent Leadership Language Supports Organizational Culture

To help leaders be successful establishing and maintaining an organizational culture, it is important to create a consistent leadership language and development experience. Help your leaders develop positive leadership habits.

Good leadership habits are entrenched in the core skills leaders need to be effective. Based on decades of research, DDI has found again and again that these core skills are critical for successful leaders at all levels:

  • Emotional intelligence
  • Active and authentic listening
  • Conducting purposeful conversations
  • Having a growth mindset
  • Being a good coach
  • Building relationships
  • Asking questions

These skills can be learned and practiced, forming new habits, which can then shape a team’s culture. When this behavior is reinforced and replicated across multiple teams, you have created consistent organizational culture.

What Are the Most Common Mistakes to Avoid in a Leadership Culture?

Building or changing organizational culture is difficult work. It requires leaders to emulate an organization’s stated values with their behavior and coach team members to do the same. Paying lip service isn’t enough.

Here are four of the most common mistakes I’ve seen companies make when trying to build an effective leadership culture:

1. Balancing leadership and management equally.

When leaders prioritize management tasks over leadership, they can become disconnected and inaccessible.

DDI’s 2021 GLF research found that leaders spend more time than they would like on management tasks and less time interacting with their teams. According to the report, leaders want to spend 1.5X more hours interacting with their team each day.

When leaders prioritize interactions with team members, they have more opportunities to support development, celebrate success, collaborate on tough problems, delegate effectively, and more. All these activities support common cultural values such as alignment, appreciation, trust, and teamwork.

2. Losing sight of the organization’s values and goals.

Leaders and employees are often very busy. They can become so absorbed in daily tasks that they lose sight of the bigger picture. When this happens, the culture of the organization can become misaligned from the organization’s purpose and vision.

Organizations with a strong culture create an environment in which values are ubiquitous from day one. Leaders and employees are evaluated for cultural fit during the hiring process and organizational culture is introduced during orientation. Annual or quarterly goals at the individual or team level may even be aligned with the values and behaviors required to achieve them. An ongoing leadership development program can help frontline and mid-level leaders expand skills in areas that can help them promote healthy team and organizational culture.

3. Allowing negative or ineffective behaviors to persist.

Australian Chief of Army Lieutenant-General David Morrison is well known for his advocacy of gender equality and leadership in building equitable military culture. In the wake of an investigation uncovering misogynistic behavior by soldiers and officers, his three-minute address to his workforce has been frequently viewed and quoted for the specific phrase: “The standard you walk past is the standard you accept.”

In this speech, he called upon “…all of us, but especially… . . . .those that have a leadership role” to not let unacceptable practices go unchallenged. His powerful message rings true for leaders outside of military service as well.

It’s critical to set and communicate clear standards of behavior, and if team members do not live up to these standards, be clear and direct about the misaligned behavior. The bottom line? Clarity, feedback, and coaching are required to maintain and uphold your desired organizational culture. Looking the other way when behaviors violate your company values is the first step in allowing those values to erode.

4. Inadvertently shifting workplace culture due to changing work models.

While employee demands for greater flexibility have led to a surge in hybrid work models, our 2021 GLF research found that only 20% of leaders said they were effective at leading virtually. Leaders who feel ill-equipped to lead virtually may not be able to create a supportive hybrid workplace culture where employees can grow and avoid job burnout.

Core leadership skills become even more important for hybrid work. And there are three additional differentiating skills that help leaders bridge the gap as workplaces transition to hybrid or virtual:

  • Connectedness: Effective leaders of hybrid or virtual teams connect with their team members and colleagues on an individual level. They are intentional about creating time and space for conversations that may have happened organically in an in-person environment.
  • Empathy: Effective virtual leaders develop crucial interpersonal skills, including empathy, and use them to build trust with team members and peers.
  • Wellbeing: In organizations with an effective hybrid work culture, a significantly higher percentage of employees say their manager cares about their wellbeing as compared to employees in organizations with a less effective hybrid work culture. And it’s clear that this concern for employee wellbeing pays off. According to our 2021 GLF research, these organizations are also 2.3X better prepared to prevent employee burnout.

In Conclusion:

An Effective Organizational Culture Is a Differentiator

HR professionals and leaders at all levels are often drawn into reactionary roles, playing defense to protect the health of their areas or the bottom line. But proactively establishing and maintaining a healthy workplace and leadership culture is imperative for organizations to succeed. And this is true more today than ever before. As we face significant competition for talent and search for creative ways to improve retention during the Great Resignation, employees are prioritizing culture when selecting their next workplace.

A study from Glassdoor suggests that a company’s culture may even be of equal importance as other benefits. According to Christian Sutherland-Wong, Glassdoor President & COO, “Having a compelling mission, culture, and values are critical for attracting and retaining top talent in a competitive job market—it is what differentiates each and every employer.” Findings like these should signal to every organization that they need to invest in building a desirable culture now more than ever.

Learn how to build an inspiring organizational culture.

Stephanie Fergusson is managing consultant for DDI Australia. When she’s not busy leading client projects, you will most likely find her on a soccer, netball, or basketball sideline supporting her teenage children in their chosen sports.