why is organizational culture important

What is Organizational Culture and Where Do Leaders Fit In?

Behind any strong and successful organization is its employees. In business, we can’t stress how important it is not just to obtain talent, but to retain talented people. In 2022, 37.4 million employees in the U.S. quit their jobs, reaching a turnover rate of 24 percent. That’s not just inconvenient—it’s also an expensive, time-wasting disaster that can cost companies $57,150 annually and up to 100k for almost a quarter of hiring manager respondents.

Why do people seek greener pastures elsewhere in the workforce? Competition in the job market and the ability to find higher wages is one huge reason. Another is the sobering fact that baby boomers are retiring in droves. However, the most compelling reason for employees to leave their jobs is to search for better benefits and an organizational culture that is tailored to them and their needs. This reason speaks to a new psychology towards work: Employees today, particularly in the post-pandemic job market, experience increased sensitivity to their work-life balance. They recognize the importance of their physical and mental health and their job’s impact on their body and mind. A positive organizational culture today is in tune with the needs of today’s workers.

As a business leader, this should be at the forefront of your mind.

What is organizational culture?

Whether you’re a leader hoping to evolve your organization to better serve its employees or you are hunting for the perfect job, it’s important to start by learning about organizational culture.

Organizational culture is a set of values, norms, or beliefs that govern a group and its mission. It is a mutual outlook that helps orient all employees toward the common business goal. It also determines the organization’s structure. In 1999, Kim S. Cameron and Robert E. Quinn of the University of Michigan published an extremely influential study on different types of organizational culture which broke the landscape into four major culture categories.

According to this study, businesses embrace one of the following organizational culture categories:

  • Hierarchy – A strict, rule-driven organization that prides itself on order, efficiency, and stability.
  • Clan – In which employees bond over shared interests and an equal level of commitment, collaborate easily, and open communication is valued.
  • Market – A competitive and business-first culture that champions result.
  • Adhocracy – The most popular option for a creative or entrepreneurial environment in which employees are encouraged to be constantly innovative.

“Diagnosing” organizational culture is often the first step to solving a retention problem. When building an organization, considering culture first is a make-or-break moment. This is because the approach that an organizational leader takes to attract prospective employees says everything about the business. The organizational culture matrix is codified into a Competing Values Framework, which is a means of assessment for organizations to understand how their cultural profile falls within four axes labeled by each category type, governed by the concept of internal and external business emphasis, and the concepts of flexibility vs. control. By mastering these concepts, emerging organizational leaders can buoy their businesses.

How is organizational culture connected to leadership?

At the core of organizational culture is leadership. Organizational leaders are responsible for motivating their teams, strategizing workplace initiatives, setting goals, evaluating employee work, and recognizing employees for their talent and productivity.

Ultimately, organizational leaders’ success can be measured by their employees’ performance. Happier employees who are inspired by their organization’s culture will be more engaged in their job, more satisfied, loyal, and harder working. A positive attitude is contagious and leads not only to better teamwork but to improved customer service. Everyone wins when leadership pays close attention to setting the tone of the organization’s culture.

It is estimated that humans spend about one-third of their life at work. It’s not surprising that employees today are rating organizational culture as one of the most important aspects of their jobs. Cultivating organizational culture, in many ways, actually means caring for employees not just through accolades or dollars, but through actions.

Why is organizational culture important for business success?

As we’ve learned, it is people, not ideas, that drive an organization’s business. People need to feel inspired by their environment to become personally invested in the goals of the business. The experience of reward gleaned by one’s work is just as critical as compensation.

Increasing communication with leadership, opportunities for two-way feedback, and active listening are all methods by which leaders can assess their work communities’ relationship with the organizational culture. Quashing any toxic components to the culture that rise to the surface through this process, or bolstering facets that appear to be helping employees thrive, results in an even stronger and more business-beneficial organizational culture. For those who resign from their jobs, workplace toxicity is a leading cause for their decision, particularly in the apparel retail, management consulting, technology, fast food, research hospitals, and hospitality industries. The bottom line is that organizations and their employees must perform symbiotically, and an organization’s culture underpins its potential for success.

Many aspiring business leaders put their ambition to the test by learning the theory and operational methodology behind organizational leadership with a master’s degree. Goodwin University’s Master’s in Organizational Leadership (MSOL) empowers graduate students with the confidence and skills needed to become more entrepreneurial, hirable, and advanced executives. Classes are offered fully online and can be completed in as few as 20 months while studying part-time! To learn how to lead and lead well, contact our administrators today at 800-889-3282 or request more information online.