How Leadership Can Make or Break Organizational Culture

Did you know that 94% of executives and 88% of employees believe that having a distinct workplace culture is important for a business’s advancement? There’s a good reason why this belief is so widespread; one study found that companies with performance-enhancing cultures enjoyed a 628% increase in revenue over an eleven-year period, while companies with weak cultures only saw a 166% increase.

If your organization is struggling when it comes to culture, it’s important to improve your office dynamics as soon as possible. In order to do so, it’s important to understand that when it comes to culture, companies tend to emulate their leaders. So, to better steer your organization towards healthier office dynamics, you’ll need to embody the traits you wish to imbue in your company.

To help you do so, here are some examples of cultural practices you’ll want to emulate and avoid in order to gain a competitive advantage through culture.

Arthur Anderson: How Capricious Leadership Ruins Culture

For decades, the accounting firm Arthur Anderson was considered the gold standard for accounting in America. The firm reached these heights by developing a hierarchical, lock-step culture that did not tolerate deviation from the norm. Originally, when the organization’s leaders stood for decency and integrity, this disciplined culture worked wonders.

However, unfortunately, as time went on, the leadership became capricious and egotistic, demanding huge increases in revenue with no interest in realistic, data-driven projections. To meet these ends, in the early 1990s, the leadership purged many of Anderson’s in-house ethics watchdogs, opening the door for unscrupulous practices.

As a result, the employees began looking for any opportunity to charge extra fees to their clients. At the same time, they hiked their rates to astronomical levels, prioritizing profits above all else. Due to these shifts, one former consultant for the company reported that “the organization’s mighty culture had disintegrated into a soulless cult.”

Due to their corrupt attitude, the firm eventually became involved in the fraudulent accounting and auditing of many organizations, ultimately resulting in their criminal indictment and bankruptcy in 2001. This scandal cost investors billions of dollars, eliminated thousands of jobs, and threatened the retirement security of millions of citizens.

Arthur Anderson’s story is a perfect example of how the negative traits of leaders can permeate throughout an entire culture. Thankfully, on the other hand, these pitfalls can be avoided with strong leaders who build strong cultures.

Zappos: Putting Employees Happiness First

Nearly all of us have heard of Zappos, a company that’s currently one of the largest online retailers in the world. One of the main reasons for their success is that their CEO, Tony Hsieh, is a strong advocate of strong company culture.

In the past, he’s stated, “Our number one priority is company culture. Our whole belief is that if you get the culture right, most of the other stuff like delivering great customer service or building a long-term, enduring brand will just happen naturally on its own.”

Putting this idea into practice, Zappos makes it a priority to hire based on cultural fit. In fact, before being hired, candidates are sometimes expected to meet with current employees in informal social settings such as bars in order to see if they fit in.

Once hired, employees are trained on the company’s core values in order to ensure that everybody is on the same page. These values include:

  • Delivering WOW through service
  • Embracing and driving change
  • Create fun and a little weirdness
  • Being adventurous, creative, and open-minded
  • Pursuing growth and learning
  • Building open and honest relationships with communication
  • Building a positive team and family spirit
  • Doing more with less
  • Being passionate and determined
  • Being humble

If they don’t like the job or these values, new employees are incentivized to quit after the first week of training with a $2,000 check. This ensures that only employees who truly want to work at Zappos stay with the company.

The CEO’s conviction is also expressed through the company’s fun and creative work environments, which actively engages employees while avoiding monotony. For example, new hires participate in scavenger hunts around the office where they meet new people and find out important information about the company. Also, each manager is expected to spend 10 to 20% of their department’s time on team bonding activities that help employees become comfortable with the culture and one another. These events include holiday gatherings to group learning opportunities.

In addition to all of this, both managers and employees are actively encouraged to use their own imaginations to add value to the customer experience. This results in securing 75% of sales from repeat customers, a clear indication of customer satisfaction.

With all this in mind, it’s clear that Zappos’ CEO’s strong conviction to creating a strong company culture permeates through all levels of the organization, from management to call-center employees. When compared to the greedy leaders at Arthur Anderson, we find that having uplifting leaders can make or break an organization’s culture. So, when developing your company’s culture, always remember to start at the top in order to yield the best results.

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