How Does Leadership Influence Organizational Culture

Since Edgar Schein published his seminal work Organizational Culture and Leadership, leaders and researchers have engaged in a constant dialogue about the importance of culture, the ways to build culture, and the differences between a positive and toxic culture. But surprisingly, little has been said about the question, “How does leadership influence organizational culture?”

It’s not that no one talks about it.

It’s just that most attempts at building a positive culture focus on visible artifacts or perks and benefits programs. But culture isn’t a foosball table in the office, and it’s not your flashy new vacation policy. Those things can be important, but they don’t impact culture as much as the actions and behaviors of leaders at all levels.

So, in this article, we’ll outline the six ways leaders influence organizational culture…which ironically were outlined by Schein himself in the very same book.

Who They Hire

The first way leaders influence organizational culture is in who they hire. 

Who is let into the organization has a massive effect on how the corporate culture changes or doesn’t change. Examining candidates based solely on credentials or past success can add talent. But if that talent is also toxic, then the culture suffers. 

In addition, “who they hire” also refers to who gets promoted, selected for development programs, and even who gets fired and why. Leaders who just look for results, not behaviors that build teamwork and collaboration, unknowingly create cultures that emphasize results at all costs—and often, those costs are too high.

What They Measure

The second way leaders influence organizational culture is in what they measure. Every organization is measuring something, and many companies measure multiple things. 

However, what gets chosen as the most important metric will shape the focus and behaviors of everyone in the organization. Measuring solely profit or production might yield temporary gains but at the cost of exhausted and overly competitive coworkers. 

Measuring efficiency might lower costs but at the cost of a less innovative culture. Sometimes, focusing on a single measurement can positively shape culture, like Paul O’Neill’s focus on safety at Alcoa. Often, smart leaders choose measurements that balance each other out and create a culture that is productive but also positive.

How They React

The third way leaders shape organizational culture is by how they react. When a crisis hits or bad news breaks, how leaders respond in the moment usually determines how the rest of the crisis will play out and how that crisis will shape the culture. 

Leaders who focus on finding blame—or making sure blame doesn’t find them—create a culture where everyone runs from responsibility when times get hard. 

However, leaders who focus on admitting failure and extracting lessons create a culture of psychological safety where crises become defining moments, and the team is stronger as a result.

What They Fund

The fourth way leaders shape organizational culture is through what they fund. 

What do they make room in the budget for? Some leaders draw up a budget based on maximizing profit, while others create space for experimentation that leads to innovation. 

Some organizations have a generous budget for learning and development, and others demand their people invest in themselves instead—and you can guess which one develops better new leaders. The departments and programs that get more funding are seen as more important, and as a result, the organizational culture learns to respect and protect those and diminish others.

How They Act

The fifth way leaders shape organizational culture is how they act. 

Leaders who treat subordinates with civility and respect create cultures of psychological safety. Leaders who berate and degrade subordinates teach them to behave in the same manner. 

In fact, when researcher Christine Porath studied the reasons employees gave for poor behavior and incivility in their workplace, the number one reason was uncivil behavior by leaders in the organization. Leaders model the way they act, and how they act affects how everyone else acts as well. 

That’s true at all levels; team leaders’ actions shape how teams act—even when they differ from how senior leaders behave.

What They Reward

The final way leaders shape organizational culture is by what they reward. While people are irrational in many situations, they’re generally rational when finding ways to make more money.

The incentives that senior leaders put into place shape behavior in predictable, if unexpected, ways. Creating bonus programs solely on profits shapes culture one way, while a bonus structure based on a more balanced scorecard will shape culture another way. And this applies to team leaders as well. 

Even if team leaders lack the ability to pay monetary bonuses, the behaviors that get praised and celebrated get repeated. So, praise wisely.

While Edgar Schein was writing mostly about senior leaders and organizational culture, these six insights apply to team leaders and team cultures as well. Even in poor organizational cultures, there are great team leaders who shape great team cultures. In positive organizational cultures, there are a few poor team leaders who create strife in their teams. Leaders model the way at all levels and make the difference between a toxic culture and one that helps everyone do their best work ever.

How Leader Communication Shapes Culture

Communication is the key to maintaining a healthy organizational culture, and leaders are responsible for setting the tone. Everything should be transparent, open, and clearly communicated top-down from the leaders to the rest of the team.

The leader should also be open to frequent communication as that will help build trust and align the people with the values and organizational goals in a setting. So, the leaders are responsible not just for sharing the “what” but also the “why” or the reasoning behind the decisions to strengthen the organizational culture. 

Moreover, leaders should not just communicate, they should also become active listeners and engage with employees at all levels. They can do the same by one-on-one sessions with their team or through town halls or team meetings. Wherever feedback can be taken, it must be encouraged, and suggestions should be acted upon.

This way, the employees will know that their words are not being wasted and that communication is open. All of this creates a culture of respect and collaboration. 

Likewise, if you look at the opposite scenario or an organization where we have poor communication, it shows a lack of transparency and inconsistency, which affects the organizational culture negatively.

There is a lot of mistrust and confusion. The employees feel disengaged and uncertain about the company as well as their own roles. This leads to low morale and productivity levels.

It is the job of an effective leader to communicate and become a good listener, as it will help clarify the expectations and goals and create a culture of belonging.

Impact of Leadership on Trust

Trust is the base or foundation of a relationship or an organization. The leaders are responsible for cultivating it.

Those leaders who show integrity, consistency, and transparency in not just their words but also their actions build an environment where the employees or team members feel safe and can confidently cite their concerns. 

When we have trustworthy leaders, employees are more likely to trust the system. This leads to stronger collaboration and a unified culture in the organization. The leader needs to be honest and not fear making mistakes. 

They must follow their promises as they will be setting the standard that others will follow. Similarly, if they are the opposite, such as dishonest, inconsistent, and fail to meet their promises, the employees are likely to follow the same. 

Leadership trust has a direct effect on employee satisfaction, leading to retention, turnover, and company stability. 

Also, creating trust is an ongoing process where leaders must be very careful about each and every action (specially those that they take in the times of pressure, crisis, and uncertainties.) When they stay consistent and act with integrity, only then they will be able to create a culture where people can trust them.

Wrap Up

We can safely say that leadership plays a major role in shaping and maintaining the organizational culture. Starting from the hiring and measuring success to how the leaders react in times of pressure and crisis, each and every behavior has a consequence and lasting impact.

Effective leaders can create a culture of trust, inclusivity, and accountability. These lead to high levels of employee engagement, retention, and organization success. When leaders consistently model their behaviors, a cultural shift or transformation can occur.

So the leaders must recognize their power and be very careful about their actions to create a culture that supports the growth and success of the organization. This way the organization becomes a place where the employees feel empowered to perform their best.