The impact of culture

We’re often told a business’ culture is secondary to its other functions (growth, profit, survival etc.) I imagine that many companies facing the threat of recession don’t consider their culture to be of immediate concern; understandably it will be irrelevant if they cease to exist. But as I explain in this article, it has the potential to become a strong force.

What do I mean by culture?

It’s the way a company behaves. I think the following extract from Ben Horowitz’s book “What You Do Is Who You Are” most succintly describes this:

The right answers for your company depend on what your company is, what it does, and what it wants to be. In fact, how your employees answer these questions is your culture. Because your culture is how your employees make decisions when you’re not there. It’s the set of assumptions your employees use to resolve the problems they face every day. It’s how they behave when no one is looking.

Culture is both the product of a company’s behaviour (the collective behaviours of its employees) and an indicator of the organisation’s relationship with its people.

Culture is not a set of values

I think the confusion between “values” and culture is why so many businesses seem to get it wrong. Values are aspirational; they describe what a business wants to be but may not have any correlation with how it actually behaves and operates. Unless used to guide decision-making, values do not indicate culture. Culture cannot be merely decided on or chosen, but guided and nurtured.

Why bad cultures lead to failure

In order to survive, a business must continually generate and implement new ideas. There are many external and competitive forces (commonly known as Michael Porter’s “Five Forces”) that shape how a company operates. Its ability to articulate and implement ideas so that it may adapt to these forces is what will determine whether it succeeds or dies.

Where a poor culture is present, a business cannot hope to thrive: It may not reach its sales targets, it might have a high staff turnover or the quality of work may deteriorate.

The conditions for growth

If a Biologist creates the conditions for a cell culture to grow, a business leader must carefully cultivate the conditions in which their employees’ behaviours evolve. While some behaviours can be encouraged and rewarded, others may emerge of their own accord. While a manager assigns and delegates work, a healthy culture is the mark of good leadership.

The actions of leaders

The actions of leaders are just one of the ways a business’s culture can be influenced. Whether consciously or not, a leader may “normalise” certain behaviours in his or her executive team. For example, if a leader is particularly critical of a manager’s ideas, managers are also likely to be more selective of their own team’s ideas. Simply rewarding undesirable types of behaviour, like for example awarding a promotion to an employee not on merit alone may send the wrong kind of message to others. As Ben Horowitz explains in “The Hard Thing About Hard Things”, this can have far-reaching consequencues:

When you are CEO, senior employees will come to you from time to time and ask for an increase in compensation. They may suggest that you are paying them far less than their current market value. They may even have a competitive offer in hand… You might even give the employee a raise. This may sound innocent, but you have just created a strong incentive for political behaviour. Specifically, you will be rewarding behaviour that has nothing to do with advancing your business… The object lesson for your staff and the company will be that the squeaky wheel gets the grease, and that the most politically astute employees get the raises. Get ready for a whole lot of squeaky wheels.

As L. David Marquet suggests in “Turn the Ship Around”, one way a leader can reinforce desired behaviours is through immediate recognition, in other words recognising and rewarding good behaviours quickly and publicly. He writes, “Immediate recognition can be used as a mechanism for clarity.”


A team’s trust that their manager believes in and supports their ideas will hugely influence how they perceive the organisation’s culture. A team that doesn’t feel comfortable offering suggestions and sharing ideas stagnates. The following excerpt from “Turn the Ship Around” explains this:

Trust means this: When you report that we should position the ship in a certain position, you believe we should position the ship as you indicated. Not trusting you would mean that I thought you might be saying one thing while actually believing something else. Trust is purely a characteristic of the human relationship.

To establish trust, leaders must ultimately tell the truth. While sometimes this isn’t as easy as it sounds, as Ben Horowitz explains in WYDIWYA, leaders can attach their own meaning to reality. He writes:

Imagine the reality you have to assign meaning to is a layoff… if you assign meaning to the layoff before anyone else, and you do so candidly and convincingly, your interpretation has a decent chance of being the one that everyone remembers.

Trust can also apply the other way. A manager must trust his or her team to carry out their work to the best of their ability. A team that isn’t motivated to work hard usually has an ineffective culture, but a manager must also incentivise their staff to work hard by seeing that their suggestions are implemented. As Andy Grove says in “High Output Management”:

…management has to develop and nurture the common set of values, objectives, and methods essential for the existence of trust. How do we do that? One is by articulation, by spelling out these values, objectives, and methods. The other, even more important, way is by example. If our behaviour at work will be regarded as in line with the values we profess, that fosters the development of a group culture.

Trust is paramount to any kind of healthy working relationship, but organisations that don’t have some degree of trust cannot collaborate.


Business leaders must find ways for their employees to actively participate in decision-making at all levels of the organisation. Merely being told what to do by a superior is not motivating, especially when you may not agree with the reasoning behind doing the work in the first place. Empowerment involves giving employees the opportunity to influence how their work turns out; so that they can see the direct link between their efforts and the outcome.

One strategy L. David Marquet suggests, to empower subordinates and increase proactivity, is by changing the language an organisation uses. He writes:

Here is a short list of “disempowered phrases” that passive followers use:

  • Request permission to…

  • I would like to…

  • What should I do about… Here is a short list of “empowered phrases” that active doers use:

  • I intend to…

  • I plan to…

  • I will…

…Eventually we turned everything upside down. Instead of one captain giving orders to 134 men, we would > have 135 independent, energetic, emotionally committed and engaged men thinking about what we needed to do > and ways to do it right. This process turned them into active leaders as opposed to passive followers.


How a business reacts to and learns from failure goes hand-in-hand with its attitude to trust and empowerment. A team that uses failure as an opportunity to learn is usually one that’s empowered. But only teams with a degree of trust are able to learn from their mistakes. The alternative is an organisation in which employees are blamed for mistakes, creating a culture of fear. Fear is not conducive to trust. In “Creativity Inc.”, Ed Catmull writes:

Ask yourself what happens when an error is discovered. Do people shut down and turn inward, instead of coming together to untangle the causes of the problems that might be avoided going forward? Is the question being asked: Whose fault was this? If so, your culture is one that vilifies failure… If you create a fearless culture (or as fearless as human nature will allow), people will be much less hesitant to explore new areas, identifying uncharted pathways and then charging down them.

While often it’s important to recognise failure, especially failure that’s expensive or damaging, leaders may inadvertently create ineffective cultures by finding scapegoats. But a culture of fear is toxic and contageous. Instead leaders, must use failure to find opportunities for their teams to grow.

The benefits of an effective culture

Different organisations will have different understandings of what a healthy culture includes and the behaviours they want to encourage but ultimately the mark of all good cultures is a productive (and hopefully happy) workforce.

It’s important to note that a perfect culture will never be attainable but the value of a workforce that enjoys its work versus one that doesn’t cannot be underestimated.