What Is Organisational Culture And Why It Matters More Than You Think

While strategic plans, systems, and metrics are often viewed as the primary drivers of organisational success, there is a more fundamental yet often underestimated element at play: organisational culture. Though intangible, culture exerts a powerful influence over how individuals behave, how teams function, and how organisations adapt over time.

This article will examine the nature of organisational culture, explain its role as a foundational force within the workplace, and outline its critical importance to long-term performance and organisational health.

Understanding Organisational Culture

Organisational culture refers to the collective values, assumptions, norms, and behaviours that characterise how work is conducted within a company. It is commonly described as "how things are done around here," but this simplicity belies its complexity. Culture operates at multiple levels: observable elements such as rituals and symbols; stated values such as collaboration or innovation; and underlying assumptions that are often unconscious yet deeply influential (Schein, 2010).

While many organisations publish official values, it is the everyday behaviours, what is encouraged, tolerated, or rewarded—that ultimately define the real, lived culture. This distinction between espoused values and enacted culture is crucial for understanding how culture impacts organisational effectiveness.

Culture as a Foundational Operating Environment

Organisational culture functions as a foundational operating environment, an implicit system that guides behaviour and decision-making across all levels of the organisation. Much like the underlying code of a technological platform that shapes user interaction and system behaviour, culture influences communication patterns, power dynamics, risk tolerance, and collaboration practices.

Unlike formal structures or procedures, culture is not easily documented or controlled, yet it remains consistently influential. Whether consciously shaped or left to evolve organically, culture emerges from repeated actions, shared experiences, and the implicit rules by which employees learn to navigate their workplace.

Importantly, culture does not remain static. It evolves in response to leadership, organisational change, external pressures, and internal feedback loops. Without deliberate attention, it may become misaligned with strategic goals or enable dysfunction, particularly in high-growth or high-pressure environments.

The Strategic Importance of Culture

A substantial body of research highlights the powerful relationship between culture and performance. In one of the most comprehensive studies on the subject, Kotter and Heskett (1992) found that organisations with strong, adaptive cultures outperformed those with weaker cultures in areas such as revenue growth, workforce retention, and stock performance over an 11-year period.

Furthermore, cultural alignment plays a central role in employee engagement and commitment. According to Gallup (2023), employees who perceive alignment between their personal values and organisational culture are significantly more likely to be engaged and to remain with their employer over time. Conversely, cultural misalignment often leads to decreased motivation, increased employee turnover, and reduced organisational citizenship behaviours.

Culture also serves as a critical determinant of ethical conduct. In situations where formal rules may be ambiguous or under pressure, employees typically rely on cultural norms to guide decision-making. An ethical culture provides a safeguard against misconduct, while a permissive or inconsistent culture may inadvertently encourage it, even in the absence of ill intent.

Conclusion

Organisational culture is not a peripheral concern, it is a core determinant of strategic execution, employee experience, and long-term resilience. Its influence permeates decision-making, shapes employee expectations, and sets the tone for what is considered acceptable or desirable behaviour. As such, understanding and actively shaping culture should be treated as a strategic priority for leaders and organisations alike.

Gallup. (2023). State of the Global Workplace 2023 Report.

Kotter, J. P., & Heskett, J. L. (1992). Corporate Culture and Performance. Free Press.

Schein, E. H. (2010). Organizational culture and leadership (Vol. 2). John Wiley & Sons.