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The link between leadership and culture

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You can’t build company culture from scratch. It’s an asset built over time, by values and behaviors percolating down through the entire organization. No matter how many fancy PowerPoints you make or catchy slogans you paint on the office walls, it simply can’t be forced. 

But culture has a huge impact on the performance of your company. 

Culture is the lifeblood of a company. It’s a set of embedded beliefs and behaviors that arise from repeated, intentional action and clear communication.

In a way, it’s the shared consciousness of the business. It influences each strategic decision you make and each person you hire. It’s something that can be defined and described to the outer world, but not as easily identified within.

And it’s a truly powerful force; when properly focused, it can really define a company’s performance (or lack of it). As explained in this HBR piece,

"Cultural norms define what is encouraged, discouraged, accepted, or rejected within a group. When properly aligned with personal values, drives, and needs, culture can unleash tremendous amounts of energy toward a shared purpose and foster an organization’s capacity to thrive.” 

Ignoring the power of a unique, unified culture in business is a surefire way to leave a lot of potential on the table. While it’s something that’s shared throughout the organization, the most noticeable, defined cultures are those led from above by those with a vision. 

Leadership's influence on company culture is huge - but this is a mixed blessing. It can be a force for good and bad. Let’s look at the extent to which company leaders can make their mark on culture for the better. 

Table of contents

Transparency - culture thrives in an open environment

Most employees have, at some point in their working lives, wondered what the heck management is up to. 

  • Who made this decision?
  • Why has this person been promoted and not me? 
  • Why are we focusing on this problem instead of that problem?

When it’s an occasional complaint, lack of transparency can be a minor inconvenience and not much more than a talking point in the canteen. When you’ve got a rigid, opaque operation full of secrets, misinformation or gossip, dissatisfaction can foment and turn employees untrustworthy and paranoid. 

So there’s a slightly uncomfortable way for leaders to positively affect their culture: be more open. 

Leadership and culture improve with radical transparency

Billionaire hedge fund manager Ray Dalio knows how to build a high-performing company; his firm Bridgewater Associates employs around 1,500 people managing $138b in assets. Dalio built the company foundations on ‘radical transparency', as he explains in his book Principles:

Radical transparency forces issues to the surface - most importantly (and most uncomfortably) the problems that people are dealing with and how they’re dealing with them - and it allows the organization to draw on the talents and insights of all its members to solve them. Eventually, for people who get used to it, living in a culture of radical transparency is more comfortable than living in the fog of not knowing what’s going on and not knowing what people really think. And it is incredibly effective.” 

This doesn’t mean everything is discussed openly. Personal matters, sensitive conversation topics and secure financial information aren’t debated in the open at Bridgewater. There’s certain sensitivities that are needed for people to be comfortable in the working environment. 

But a culture where more decisions are openly justified and changes explained to all stakeholders inevitably ends up as a high-performing one. It means problems are more quickly identified, discussed and dealt with. It means risky behavior isn’t given free rein to be swept under the rug. 

In the end, difficult conversations are worth it. As Dalio explains,

Share the things that are hardest to share. While it might be tempting to limit transparency to the things that can’t hurt you, it is especially important to share the things that are most difficult to share, because if you don’t share them you will lose the trust and partnerships of the people you are not sharing with. So when faced with the decision to share the hardest things, the question should not be whether to share but how.” 

This means you might open up some opportunities for conflict, but you’ll end up building a healthier company in the long run.

Autonomy - building a culture of internal leadership

It’s not just directives and examples from above that shape a culture, of course. The foundations of a successful company are its people. And if you let those people be leaders within their roles, they’ll have a much bigger impact on the company culture. 

In a rigid hierarchy, culture reflects that rigidity; culture is slow to change because change only cascades downwards.

In a flexible, autonomous organization - where employees are given more of a blank slate to make decisions and start projects - culture benefits from a dynamic environment where useful and innovative ideas have more freedom to move around. 

The more autonomy employees have, the more they can drive forward the company’s cultural objectives. They get to shape it from within by acting as nodes in a network of ideas, rather than just receivers of wisdom from above. 

Cultivating 'intrapreneurship' is vital for enabling these cultural flag-bearers to build that cultural influence throughout the company. While a culture of independence won’t work for every employee, you might find that encouraging it leads to much higher levels of motivation with those who work better with a little freedom. 

Acceptance - leaders are both liked and feared

Many modern business leaders are used to carefully cultivating their image. Often with a polished public character - a personal brand, even - CEOs and owners can shy away from the spotlight, preferring to appear when there’s a convenient photo opportunity or easy publicity win. 

But leadership means showing up, being visible, and being accountable - because appearances betray what’s really going on.

People are naturally inclined to want leadership while at the same time resenting leaders. This is something leaders need to accept and work with if they want to build an effective culture. 

Robert Greene explains in The Laws of Human Nature:

We intuitively recognize the need for leaders. In any group, people have their narrow agendas and competing interests. The members feel insecure about their own position and work to secure it. Without leaders who stand above these competing interests and who see the larger picture, the group would be in trouble. Hard decisions would never be made.” 

He notes that without leadership we can feel lost and disoriented - which is why that strong leadership needs some form of transparency, as we discussed earlier. Many employees really appreciate having someone assertive, driven and clear at the forefront of their organization, or else they feel like they’re on a boat without a captain. 

But the opposite of adoration is never far away, Greene writes, and without realizing this, leaders will find their goodwill is built on shaky ground:

Those in power will tend to notice only the smiles of their employees and the applause they receive at meetings, and they will mistake such support for reality. They do not realize that people almost always show such deference to those above them, because their personal fate is in the hands of such leaders and they cannot afford to show their true feelings. And so leaders are rarely aware of the underlying ambivalence that is there even when things are going well.

This leads to a culture built on precarious foundations; a misstep or error in judgement can lead to the house of cards falling down faster than expected. Trust can be lost in an instant, and without truly listening to what’s really happening in the organization, the inflated ego of a blinkered leader can miss warning signs that they need to act upon before things fall apart.

Responsibility in leadership and culture: how poor leadership can ruin everything

In the same way that inspiration can be sparked by good leadership, its opposites can also permeate a company’s culture: fear, secrecy, negativity, and more. 

Traits that can filter down from leadership can include: bullying, abdication of responsibility, addiction to short-term results, moral or ethical negligence, micromanagement, outdated beliefs, and more. 

If issues with these are routinely ignored or even perpetrated by leadership they’ll inevitably become a part of the fabric of the company. Every time an incidence of negative behavior is allowed to go unchallenged, it both enshrines it as acceptable, and makes it harder for victims to speak up against it. 

The end result? Dissatisfaction with injustices. Poor reviews on Glassdoor. A bad reputation in your industry for being an undesirable place to work. If you’re known to have an unpleasant culture, you’ll have to work harder to convince the best talent to come join you. And that could be expensive if all you have to go on is high salaries. 

Before your next round of employee appraisals, it might be time to assess your own management transgressions. For the sake of culture - your greatest asset - how can you turn things around?

Discover your leadership style, map your team’s culture and access free personalized coaching by joining F4S today.

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