In the last article, we learnt that only half of all employees can actually fulfil themselves and be fulfilled in their work, Only half of them? It could be different - at least that’s the credo of Great Place to Work®. As experts in workplace culture, we want to enable employees to achieve their full potential where they work - by making them feel comfortable and empowered. But the question is, how is that possible?
The answer is trust. And that at all levels. That means trust between employees and managers - but also between managers and employees. You almost don’t want to hear it, but in fact, our consultants repeatedly come across management teams that don’t trust each other. Yet they wonder why there is also no trust between employees. The reason why trust is so important is because it expresses appreciation for the skills and competencies of employees and gives them the freedom to make decisions. It is also important because trust helps to build, stabilise and develop relationships.
And trust is important because it forms a community, makes it strong and increases the innovation and value creation of the entire company. This is shown by studies where shares of listed companies with a trust-based workplace culture increased in value three times as much as those without. There are also practical examples, such as the former “FedEx Days” and now “Shiplt Days” of Atlassian1, where employees can work 24 hours a day on a project of their choice - developing the “coolest things the software has today”.
Leadership style as success factor for workplace culture development
Developing a trust-based workplace culture is challenging. It is crucial that it is supported by lived values and leadership quality. In other words, not just glossy brochures with great phrases or beautifully designed posters with the so-called company values hanging on the walls, but that the values are actually lived. So if transparency is a company value, then this must also be demonstrated in everyday work - for example, through wage transparency or open access to strategic documents.
The second point, leadership effectiveness, also partially affects the values that are lived - because to develop workplace culture, it needs managers who actively live these values. A trend study by the Institute for Leadership and Human Resources Management at the University of St. Gallen shows the influence of the type of leadership on employee performance. The leadership styles are divided into authoritarian leadership, laissez-faire leadership, inspirational leadership and shared leadership.
Authoritarian leadership is defined by command and control, instructions and corrective behavior, and a strong top-down mentality. Laissez-faire, on the other hand, means that leaders neither take responsibility nor give feedback and generally do not maintain a personal relationship with employees. Inspiring leadership means that managers lead with a motivational vision in which employees recognise the purpose of their work. It is an approach that focuses on emotional values and relationships and where motivation is the resulting added value. Shared leadership, on the other hand, means that the tasks that typically fall to a single manager are divided among several people - including employees.
In this way, responsibility is shared within the team and employees can make their own decisions. The impact of the leadership style - if only on employee performance - is severe: while companies with high levels of directive leadership reduce innovative performance by 5%, laissez-faire leadership reduces it by 17%. But if you look at companies with high inspirational leadership, innovative performance increases by no less than 14%!
A similar picture emerges in terms of business performance, employee productivity and productive energy. Only the corrosive (i.e. destructive) energy decreases, which again benefits the workplace culture and thus the companies. It is exciting and remarkable that shared leadership also has positive effects, but not to the extent of inspiring leadership. The reason for this is that employees are often not yet used to this level of trust and competence in decision-making – because employees are usually socialized in strongly hierarchical structures and sometimes still feel overwhelmed by the new styles.
But the fact that such positive dimensions are already measurable is a clear sign that the positive effects will become even stronger. At the same time, inspiring leadership and shared leadership show a strong impact on employee engagement. For example, intrapreneurship among employees with high inspirational leadership increases by 33% - while the opposite is true for companies with high laissez-faire leadership, where it decreases by 30%.
Overall, the results of laissez-faire leadership and authoritarian leadership are not surprising - but the fact that the effects are so strong shows how important a change in leadership styles is for a better workplace culture.