Updated: Jul 1
Organizational culture is more than just a "nice-to-have"; it's the solid foundation upon which lasting success is built. This hidden force shapes how people interact, how decisions are made, and ultimately, how well a company performs. A well-aligned culture directly boosts employee involvement, sparks new ideas, and ensures everything aligns with the company's main goals. A strong culture is genuinely essential for success, as it profoundly influences how well leaders perform, how committed employees are, how satisfied customers are, and the company's ability to innovate. This series of articles is designed to provide HR leaders with the in-depth understanding and practical steps necessary to shape their organization's culture actively, transforming it from a vague idea into a powerful, tangible business asset.
HR Leaders' Role in Defining Culture
To truly influence culture, we must first understand its complex nature. Organizational culture is best viewed as having different layers, and Edgar Schein's model provides a valuable way to explore this concept. This model breaks down culture into three distinct, yet closely connected, levels:
Artifacts: These are the most obvious and observable parts of a culture. Think about the office layout, the unspoken dress code, how people usually communicate, and daily habits. These are "what we do"—the visible signs of the culture's deeper workings.
Espoused Values: Going a bit deeper, espoused values are the officially stated beliefs, philosophies, and goals that an organization publicly supports. These represent "what we say we believe"—the principles the company says are important.
Basic Underlying Assumptions:Â At the deepest level are the basic underlying assumptions. These are the unspoken, deeply rooted beliefs and feelings that unconsciously guide behavior. They are the "why we do what we do," often operating without us even realizing it, and they are very hard to change.
Understanding these layers is crucial because organizational culture profoundly influences how employees interact, make decisions, and approach their work, affecting everything from the company's core mission to its daily operations. Cultural patterns can persist for a long time, even after leaders change, often revealing how deeply these basic, underlying assumptions are rooted. For example, a company once led by a very controlling CEO might still have a culture where people avoid risks or push decisions up the chain for over a decade, even under a more friendly leader. This happens because the hidden belief that "it's safer to let others make the tough calls" remains unchallenged.
The Cost of Doing Nothing
High Turnover
Ignoring your organization's culture, or allowing it to become unhealthy or toxic, comes with serious and measurable business consequences. A toxic company culture is a strong indicator that bad outcomes are likely to occur within the organization. For example, a toxic culture is ten times more likely to cause employees to leave than low pay. A shocking one in five employees reportedly leaves a job specifically because of its culture. The financial burden of replacing just one employee can be huge, often costing a company up to twice that employee's annual salary. This direct link to keeping talent shows the immediate and clear financial drain of an unhealthy culture.
Increased Recruiting, Hiring & Training Expenses
Beyond these direct costs, a toxic culture severely damages a company's reputation as an employer. 73% of job seekers say they will only apply to a company if its culture matches their personal values. This proves that a healthy culture isn't just an internal issue; it's a vital factor in competing for talent.
Less Productive Workforce
Furthermore, employees becoming disengaged and less productive are direct results. Highly disengaged employees are nearly 20% less productive, and disrespectful behavior at work results in a noticeable decline in effort and time spent by those affected. This decrease in productivity directly impacts a company's efficiency and overall output. The negative effects also lead to higher healthcare costs, as toxic workplaces are linked to increased healthcare spending, and employees who feel treated unfairly are statistically more likely to suffer from serious diseases.
Risk of Unethical Behavior
Finally, the risk of harm to a company's reputation and legal problems greatly increases. A compelling 85% of CEOs and CFOs believe that a toxic company culture can lead to unethical or illegal behavior, and there's a clear link between low company integrity and reduced financial value. This highlights that cultural honesty is not just an ethical concern, but a crucial part of maintaining financial stability and adhering to rules.
Unrealized Potential
A key point for HR leaders to understand is that cultural issues, if ignored or allowed to become harmful, can quietly weaken even the best-planned company strategies. For example, a strategic shift toward innovation, while good on paper, will fail if the current culture is marked by fear of failure or a "cutthroat" environment. People will naturally hesitate to share new, potentially risky ideas. Similarly, growth strategies are naturally hindered by high employee turnover and a reduced ability to attract top talent. This demonstrates that cultural alignment isn't just a secondary consideration; it's a fundamental requirement for successfully implementing strategy. Without a supportive culture, other strategic efforts are built on shaky ground, thereby reducing the company's ability to achieve its primary goals and remain competitive.
Table: The Real Costs of a Toxic Culture
Cost Category | Impact of Toxic Culture [6] |
Employee Attrition | 10x more predictive of attrition than compensation; 1 in 5 employees leave due to culture; Replacement cost up to 2x annual salary. |
Poor Employer Brand | Strongest predictor of negative Glassdoor reviews; 73% of job seekers apply only if culture aligns with values. |
Employee Disengagement & Reduced Productivity | Highly disengaged employees are ~20% less productive; Incivility leads to decreased effort. |
Higher Healthcare Costs | Incremental costs ($16B in US in 2008); Employees perceiving unfairness 35-55% more likely to suffer major disease. |
Reputational Damage & Legal Liability | 85% of CEOs/CFOs believe toxic culture leads to unethical/illegal behavior; Low integrity associated with lower financial value. |
HR's Changing Role: Moving from Office Tasks to Strategic Leadership in Cultural Transformation
While changing culture is truly a team effort that can't be handled by HR alone, HR's role remains incredibly important. HR professionals now have a unique, "once-in-a-generation opportunity" to become strategic enablers, especially as organizations deal with big changes like the rise of artificial intelligence.
Updated Skills
This changing world means HR needs to update its skills. Key abilities for HR leaders in this new environment include a deeper understanding of data, strong change management skills, and a high level of adaptability. This means HR must completely rethink old ways of managing talent, moving beyond just hiring for roles to using skills-based approaches that fit new priorities, and actively creating a work culture that can naturally adapt to constant change.
Be the Bridge
HR's special position as the "bridge" between top leadership's big goals and employees' practical needs makes it central to determining the best way to change culture and ensuring it happens. For HR to truly impact this change, it must have a strong voice in decision-making, skillfully balancing leadership's mission with the real experiences and abilities of the workforce.
Bringing It All Together
A crucial point for HR leaders to understand is that while HR's expertise is vital for cultural change, the ultimate responsibility for cultural outcomes must go beyond just the HR department. HR professionals have a deep understanding of change processes and cultural dynamics, making them ideal helpers and guides for such efforts. However, culture is a living thing, shaped daily by the actions and decisions of everyone, especially business unit leaders who turn strategy into daily operations.
If these leaders don't fully accept and implement the desired cultural shifts in their daily work, the effort risks becoming a superficial HR task that won't truly take hold or last. This highlights that HR's real strategic value lies in empowering and helping other leaders, providing the necessary methods and support, rather than trying to "fix" the culture all by itself. This means HR needs to develop advanced skills in influencing others, building strong partnerships, and effectively delegating, changing its image from a support role to an essential strategic partner.
Are you an HR professional who is looking to gain more influence within your organization? Email Dorian Cunion at dcunion@yourpathexecutiveolutions.com to initiate a conversation about building your skills and strategy, enabling you and your organization to reach its full potential.
