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When is Organizational Culture Considered Dysfunctional?

Posted by JJ Puentes

Oct 28, 2021 9:36:00 AM

Female hand emerging from crumpled paper pile holding a white flag with help written on itMost leaders would agree that culture is an essential element of the success of any organization. However, in a study by the HR company, Hayes, 46% of employees cited culture as the reason they quit their job. Clearly, there is room for improvement when it comes to workplace culture.

Before we get into the signs and symptoms of a dysfunctional culture, it is helpful to outline what culture does in business.

The Functions of Culture

Company culture serves five fundamental purposes:

  1. Culture helps to create distinctions between one organization and all the others.
  2. Culture lends a sense of identity for the members of the organization.
  3. Culture creates an emotional investment in something beyond the individual's self-interest.
  4. Culture creates social system stability. It serves as the glue that helps instill standards for what employees say and do.
  5. Every organization has its own set of assumptions and implicit rules to guide the day-to-day behavior of the employees. New employees will be accepted as fully-fledged group members only when they learn to follow these rules. Adherence to the rules is a primary basis for recognition and promotions.

In these ways, culture is beneficial to the organization as it enhances employee commitment and increases the consistency of behavior. In addition, culture is advantageous to the employee because it reduces ambiguity. Employees come to recognize how things are to be done and what is most important for the organization.

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Dysfunctional Culture Creates Barriers

Every organization has a culture, whether it is intentional or not. However, when culture is allowed to grow without thoughtful attention, it can hinder its success. 

Barrier to Change

The predictability of employee behavior is of great value to an organization when everything is stable. However, during times of change, it can become a liability as employees cling to old ways. For example, many companies with solid cultures and long-term success did not survive the jump into the internet age because leaders and employees could not embrace the new workplace reality. 

Barrier to Diversity

An organization's culture becomes a barrier to diversity when it limits the range of people considered during the hiring process to those with similar backgrounds, experiences, and values. When those promoted within the organization have a similar set of demographics and education, the organization suffers from a lack of original thinking and challenging ideas. 

Barrier to Retention

As we mentioned, culture is a significant factor when it comes to employee churn. The most motivated and highly skilled employees have many employment options. They will choose another path when they discover that a dysfunctional culture impedes their personal development and the organization's success. 

Barrier to Revenue

According to Gallup, organizations that can attract and retain top talent by creating and promoting a highly functional workplace culture can see a revenue advantage as big as 33%

Building a Culture That Works

Research shows that the type of culture where excellent people can thrive has three key elements:

  • High employee engagement
  • Individuals in positions that align with their natural talents
  • Frequent opportunities to learn and grow


Engagement is the performance indicator of culture, and it should be considered part of your culture data dashboard. Engaged employees show up with their whole selves to their jobs every day. They are excited to show up for work and actively look for opportunities for improvement. High engagement has been connected with nearly every critical measure of organizational health - customer satisfaction, employee retention, safety, productivity, and profitability. 

But what causes people to become engaged? Many of the "culture" perks that people turn to, such as free snacks and a foosball table in the break room, don't align with the underlying psychological needs of workers. Those needs run deeper and include things like having a manager who really listens, having the opportunity for helpful feedback that leads to personal development, and recognition for outstanding work.

Any effort at culture change must address these fundamental needs because highly engaged employees are most open to change, an essential element of success in today's highly competitive environment. 


Gallup reports that employees who are in the position to focus on what they are naturally good at and leverage their strengths are six times more likely to engage at work. However, misalignment between a person's strengths and their actual job happens for a couple of common reasons.

Unfortunately, many organizations have a weakness-oriented culture. They believe that they will achieve higher performance by focusing on and eliminating workers' most significant problems. Thus, they revel in unpleasant performance reviews and take pride in being harsh on coworkers, all under cover of "development." In this situation, employees spend most of their effort trying to avoid mistakes rather than getting the most out of the areas in which they excel. 

The second reason is less deliberate. Talented people can get caught up in a role creep trap in which business necessities overtake personal talents. It is similar to a group project in which one student does the vast majority of the work so everyone in the group can get a good grade. The same dynamic happens at work as well if leaders don't recognize and address it. Rock star workers find that they are doing activities unrelated to their talents because that is the only way to avoid project failure. Often, leaders reward this behavior rather than flag it as a sign of a dysfunctional culture. The result is burnout, depression, and employee churn.


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Build a Winning Culture

Cultures that thrive invite highly talented people and give them the support they need to leverage their strengths and constantly develop and grow.

Your focus should be on the elements of culture that are meaningful to your specific organization. For example, if innovation is central to your mission, engagement, strengths, and development should focus on processes and results that promote creativity alongside thoughtful risk-taking. The vision and mission of each organization are unique, as is their culture. That is what allows an organization to provide a distinct and singular value to its customers. 

Topics: Improvement Culture

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