Industry Insights

Guest Blog: How Organizational Culture Impacts Business Performance

Posted by Alicia David on Jul 27, 2021 12:16:15 PM
Content exclusively written for stratx-exl.com by Alicia David

Many psychology and business experts such as Elliott Jaques have introduced and redefined ‘organizational culture’. Today, we understand it as a set of beliefs, practices, and “shared assumptions” that influence the behaviors and actions of an organization. Researcher Edgar H. Schlein also noted that a combination of internal and external factors affect how culture is formed, these include the structure and nature of the business, the employees hired, the goals set by the organization, as well as the socioeconomic landscape it operates in. This blog will explore the role leadership plays in shaping organizational culture and why it is an essential driver in boosting business performance.

How Organizational Culture Affects Impacts Business Performance

How Leadership Shapes Organizational Culture

From fostering trust among employees to uniting them under a single purpose, the role of leadership is vital in shaping organizational culture. The leadership strategy the CEO uses, whether they act as an authoritative figure or encourage participation across the board, impacts the kind of culture that forms within an organization. With the latter style of leadership, a company will be in a better position to develop a highly agile and collaborative workforce.

The CEO's approach carries over to the rest of the executive and managerial roles, then disperses across the rest of the workforce. Take, for instance, human resources. HR managers play an integral part in shaping organizational culture. These professionals have a strong background in management, marketing, and operations. Thus, they're well equipped to hire and retain the right talent. As business leaders, they must also possess relationship skills and an openness to learning about the company's applicants so they can decide whether an applicant has the right qualifications and traits for a position, and whether they share the same values as the organization based on its vision and mission. This can reinforce the organizational culture alongside the learning and development programs they put in place. They also serve as an indispensable link between employers and the rest of the workforce and aligning the two groups.

Clearly, leadership plays a sizable role in shaping organizational culture, but that begs the question: Why is it important?

How Organizational Culture Benefits Business Performance

Boosts Employee Engagement
According to statistics on employee engagement published by Forbes, 87% of employees look to leadership to set the right work-life balance. They reject a culture that’s always on and seek work perks like flexible schedules on top of holistic wellness programs. Furthermore, employees reported that leadership’s inability to provide “compelling missions, highly trusted relationships, and well-designed jobs” contribute to their disengagement, which costs companies nearly $550 billion in losses yearly.

Employee disengagement can result in job dissatisfaction and high employee turnovers. To encourage a healthy organizational culture, leaders must set the right example by being role models and establishing clear boundaries between their work and personal life. Furthermore, leaders should refrain from asking employees to work overtime unless absolutely necessary and avoid sending emails outside of work hours. Encourage employees to use up their vacation days or to take breaks from time to time also promotes a healthy work-life balance.

Encourages Checks and Balances
A healthy organizational culture encourages checks and balances among the workforce. If employees and employers alike are aware of their duties, they're less likely to step over their boundaries or overextend themselves. Checks and balances also entail accountability. If someone does overstep their bounds, executives can step in and prevent it from happening any further.

The first step to building a system of checks and balances is to encourage employees to air out any concerns they have. Executives should make an effort to listen to these concerns and try to reach a compromise with the workforce.

Upholds Company Goals and Values
A business has a vision and mission in mind. If the workforce is moved by these, it sets the foundation for a healthy organizational culture. A culture that is motivated by what the business stands for pushes the company in the right direction. Additionally, having a workforce that shares a common goal makes it easier for the employees to grow as a team as the company's success is everyone's success.

To instill company goals and values in employees, highlight them as early as the recruitment process. And remind existing employees through both words and actions. Employee development programs should be created with the business's values in mind, as these shape your employees' future in the company.

Drives Innovation
Finally, a healthy organizational culture drives innovation. If employees are engaged and aligned with company goals and values, they're in a good position to produce novel and effective solutions to company problems.

While organizational culture is a key driver of innovation, executives should also provide their employees with the resources they need to innovate. This includes modern technologies and programs that will boost in-house innovation capabilities and expedite business operations. Technology to collaborate is crucial especially in an era where remote work is here to stay. Simple remote communication tools can foster stronger connections among people who are not located in one office.

Organizational culture is an internal aspect of business, but its effects are many and far-reaching. But most notably, it has the potential to boost business performance through various facets of the company. This is why executives are making an effort to build and mold the right culture, because a healthy organizational culture makes for effective business.

Discover more from StratX ExL on building effective leaders.

Topics: organizational culture

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