What Is Organizational Culture and How Do Leaders Influence It?

“I do have just one final question. Can you describe the organizational culture?”

How often have you heard this question during job interviews? Perhaps you’ve asked it yourself. It’s a top consideration for job seekers—and for good reason. Organizational culture shapes how work gets done, how employees experience the workplace, and how organizations achieve results. Driven by leadership behaviors and reinforced through daily actions, company culture directly impacts employee engagement, retention, innovation, and long-term business performance. Asking about organizational culture shows an understanding that a position is more than job responsibilities and salary. Today, company culture is the heartbeat of any workplace, influencing everything from employee satisfaction to business success. And it’s far too important to leave unexamined.

Let’s explore why organizational culture holds such sway over the modern workforce, who influences it, and how to build a positive culture in your company.

What Is Organizational Culture?

Organizational culture is the set of behaviors, procedures, and expectations that connect and guide interactions between all employees. It’s the rhythm of the workplace, shaping attitudes, actions, and, ultimately, the organization itself. While your strategy drives what gets done at your organization, your company culture drives how.

While HR and senior leaders may try to set culture with intention, realistically, it evolves organically over time with the day-to-day behaviors of employees at all levels. Maintaining the right culture requires leaders who show up with consistent behaviors and values every day and employees who follow their example.

The culture of the modern workplace is on display for all the world to see. And failing to nurture it can be harmful. Anyone from prospective employees to investors and advisors can read about—and sometimes watch—your employees’ actual experiences. If actions and practices don’t align with the values and attitudes you claim, your company may experience the consequences. The fallout can range from struggling to recruit or retain talent to suffering a full-blown public relations crisis.

In a word, culture is a mirror. It reflects the collective identity of your workplace, including values, attitudes, character, and behaviors—for better or for worse.

Maintaining the right culture requires leaders who show up with consistent behaviors and values every day and employees who follow their example.

Benefits of a Positive Organizational Culture

Culture is important to employees, and workplaces that build a positive culture perform better. DDI research shows that a positive organizational culture—reinforced by strong leadership—drives better business outcomes. Organizations that implement leadership development best practices are 4.1X more likely to be recognized as a Best Place to Work. Those practices include creating high-quality development plans at every leadership level and ensuring leaders maintain personal development plans that are regularly reviewed with their managers and grounded in clear assessments of strengths and development needs.

The impact extends beyond culture. In organizations where HR operates as a strategic anticipator rather than a reactive function, there are 33 percent more high-quality leaders, and these organizations are 2X as likely to be top financial performers. Together, the data underscores a clear connection: A healthy culture and intentional leadership development fuel stronger performance and long-term success.

When organizations invest in leadership capability, they don’t just improve results—they create the conditions for a culture that drives:

• Increased employee engagement and retention: Workers feel more connected to company values, mission, and goals.
• Higher job satisfaction: Employees experience greater fulfillment when aligned with organizational purpose.
• Reduced turnover rates: Strong cultural connection decreases the likelihood of employees leaving.
• Enhanced employee loyalty: Shared values create deeper commitment to the organization.
• Improved collaboration and teamwork: Common values encourage employees to work together more effectively.
• Better communication: Positive culture promotes open, honest dialog across teams.
• Enhanced innovation and creative problem-solving: A supportive environment encourages new ideas and solutions.
• Increased productivity: Cultural alignment leads to more efficient work and better performance.
• Improved decision-making: Shared values provide a clear framework for choices and priorities.

How to Build the Right Organizational Culture for Your Business

But even a positive culture isn’t one-size-fits-all. It should align with key business priorities, and this alignment matters. For example, a fail-forward culture of innovation may drive creativity in software development, but on-the-fly innovation would be dangerous in a hospital operating room where lives are on the line. Here’s how to determine what is the right culture for your workplace.

1. Clarify cultural goals aligned with business challenges.

Focus on specific difficulties your organization faces, such as regulatory compliance issues, globalization demands, market disruption, or competitive pressures.

2. Define cultural elements that address those challenges.

Determine which cultural values will help solve your specific problems, such as:

• Ethics, integrity, and accountability for regulatory compliance.
• Inclusive practices and cultural competence for global expansion.
• Adaptability and innovation for volatile or disrupted markets.

3. Connect cultural values to workforce skills development.

Identify the key actions and capabilities your leaders and employees need to develop, such as:

• Leading with integrity.
• Facilitating cross-cultural collaboration.
• Creating an agile learning environment.
• Embracing experimentation and change.

4. Align culture with actionable behaviors.

Translate your cultural values into specific skills, behaviors, and practices that your workforce can learn and implement. 

Leaders Drive Organizational Culture

While all employees contribute to an organization’s culture, leaders play an outsized role in maintaining the status quo or driving culture change. Their behaviors, values, and priorities serve as a blueprint for employees to follow. By consistently reinforcing desired behaviors and creating an environment that aligns with company values, leaders can influence the attitudes and behaviors of their teams.

Ultimately, no one influences a company’s culture more than its leaders. Consider these scenarios:

Scenario #1:

Stated culture: Work-life balance is important to your company’s culture. HR offers wellness programs and a generous PTO package.  

Employee experience: Your leader frequently assigns work on short notice, meaning you need to work during evenings, weekends, and vacations to meet deadlines. 

Outcome: A single leader prevents their team from accessing the work-life balance the company values.

Scenario #2:

Stated culture: Your workplace values collaboration, open communication, and innovation, supported by resources for training, idea development, and continuous improvement.

Employee experience: A leader you regularly work with plays favorites and is dismissive of ideas that don’t align with their own perspective or preferred way of working.

Outcome: The leader’s behavior discourages idea-sharing and innovation, revealing a clear gap between the company’s stated culture and employees’ lived experience—and highlighting the influence leaders have on culture.

By consistently reinforcing desired behaviors and creating an environment that aligns with company values, leaders can influence the attitudes and behaviors of their teams.

Maintaining Culture Through Disruptive Change

Leaders' role in maintaining culture is perhaps most challenging when the company is experiencing a disruptive change, like a reduction in force, a return-to-office mandate, or a significant business transformation (like a merger or acquisition).

In these situations, company culture is put to the ultimate test, and companies with strong cultures face the highest levels of corporate cognitive dissonance. Employees begin to ask difficult questions like:

• How can a company that claims to operate with integrity and care for employees simply eliminate 20% of my department overnight?
• Will it feel the same to work here once our company has been fully acquired?
• How will all of these changes impact our ability to serve our customers?

An African proverb warns that “the axe forgets, but the tree remembers.” In critical moments of transformation, how leaders react (or fail to react) can come to represent an abrupt reset of company culture. While leaders may want to get back to business as usual as quickly as possible, it’s essential they take time to manage through the human impact of change. Leaders who fail to acknowledge and address employees’ concerns can inadvertently contribute to the degradation of a previously strong company culture that can last for years to come.

About the Author
Mark Smedley is a Leadership Advisor for DDI. He is passionate about helping organizations make leadership development a way of work in a fast-paced world. He’s particularly interested in supporting leaders in mission-driven companies as they help their organizations thrive through disruptive change. You can follow Mark on LinkedIn for his regular hot takes on leadership and the modern workplace.