Business Leadership Today

How Leadership Affects Organizational Success


Matt Tenney, Author of Inspire Greatness: How to Motivate Employees with a Simple, Repeatable, Scalable Process

The future success of any organization depends on its employees. But what has the biggest impact on employees in an organization?


The daily interactions employees have with leadership strongly impact their employee experience. In fact, about 50-70% of an employee’s perception of their work environment is linked to the actions and behaviors of management. 

When we understand the potential positive and negative effects leaders can have on the teams they lead, we can see how essential good leadership is for organizational success. 

Leadership affects organizational success in a number of ways that can help or harm employee engagement, employee retention, and profitability. Leaders who foster a positive employee experience and support a positive, collaborative work environment can have a positive impact on organizational success. 

In this article, we will explore the ways leadership affects organizational success and how leaders can ensure they are affecting their team members in a positive way to ensure the organization’s future success. 

Employee Engagement

Employee engagement is an employee’s emotional commitment to their work, the organization they work for, and its goals. It affects an employee’s job satisfaction and well-being, and we can also see its impact in more tangible metrics such as retention, turnover, absenteeism, performance, profitability, and productivity.

High engagement indicates that employees care about their work, are dedicated to the organization, and their attitudes and behaviors are aligned with the organization’s core values. 

Leaders play a pivotal role in shaping organizational culture, which, in turn, affects an employee’s engagement level. 

According to Business Leadership Today contributor Laurie Sudbrink, “Leaders affect employee engagement the most. A leader’s ability to authentically build relationships with team members, their level of self-awareness, their sense of accountability, as well as their health and well-being, can all have a significant impact on employee engagement.”

We recently sat down with Bruce Tulgan, author of It’s Okay to Be the Boss, and discussed seven ways leaders can build engagement with their employees:

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Employee Retention

Employee retention refers to a company’s ability to prevent turnover and retain its employees. Employee turnover refers to the number of employees who leave a job, either voluntarily or involuntarily, during a certain period of time. 

Employee retention is driven by employee experience and employee engagement because an employee’s attitude toward their job and their level of engagement with the work they do determines whether an employee will stay or seek out other job opportunities. 

Because leadership has such a profound impact on an organization’s culture and the level of engagement of its employees, leaders are in a position to positively or negatively affect employee retention. 

Dick Finnegan, author of The Power of Stay Interviews for Engagement and Retention, says this is especially true when it comes to an employee’s relationship with their direct supervisor: 

“What I realized was that everything I had been taught about turnover in HR was wrong. What I learned was that you win turnover leader by leader, supervisor by supervisor. Turnover issues don’t arise from the top of the org chart, they come from the bottom. Most employees don’t leave because of the actions of the CEO, they leave because of the actions of their direct supervisor.”

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Leadership can have a major effect on a business’s profitability due to the many ways that leaders affect the employee experience, especially engagement and retention. When leaders are able to maintain high levels of engagement and retention on their teams, it improves customer service, performance, and productivity, which leads to better overall profitability. 

Losing employees with strong institutional knowledge and exceptional customer service skills can be devastating to an organization’s bottom line.

Recruitment is also a costly process. It costs more to recruit, train, and onboard a new employee than it does to retain one. Because the costs associated with recruitment can be so high, it can negatively impact an organization’s profitability. 

Though it can vary by role and by industry, the average cost of hiring an employee is estimated to be around $4,000, but the expense goes beyond salaries. Recruiting, training, and competitive benefits packages add additional costs. Organizations spent more than $92 billion in 2020-2021 on training alone.

In addition to the expense of replacing an employee that leaves, the employee shortages associated with high turnover can then lead to the remaining employees experiencing burnout and stress associated with longer hours and more job duties. 

When you factor in the loss of productivity, the loss of institutional knowledge, and the potential hits to morale turnover can cause, it can put a real dent in profits. This is why it’s so important to have leadership in place that can keep employees engaged, happy in their roles, and committed to organizational success. 

How to Positively Affect Organizational Success

Leaders have a positive effect on organizational success by having a positive effect on engagement, retention, and profitability. The way they do this is by keeping their team members motivated to perform well.

The best way to keep employees motivated is to foster a positive employee experience and support a positive, collaborative work environment. 

Positive Employee Experience

Gallup defines employee experience as “the journey an employee takes with your organization.” This journey includes every interaction that happens during the employee lifecycle, as well as the experiences that involve an employee’s role, work environment, supervisor, and well-being.

Employee experience plays a significant role in employee motivation, employee engagement, and employee retention, but that’s not all. It also plays a significant role in customer experience. 

Having employees who can provide excellent customer service is crucial to staying profitable. According to a recent Harvard Business Review Analytic Services survey, 55% of executives said they believe it is impossible to provide great customer experience without providing great employee experience.

When an organization provides a positive employee experience, they see improvements in customer satisfaction, greater innovation, and generate 25% higher profits than organizations that do not provide a positive employee experience.

Leaders can support a positive employee experience by providing job clarity, opportunities for professional development, autonomy, regular recognition of contributions, healthy feedback, a good work/life balance, and a shared sense of purpose. 

Positive Work Environment

When leaders regularly communicate the organization’s culture and model its core values, it provides guidance for employees in their interactions with co-workers, which helps to maintain a positive work environment.

This helps to keep morale high and combats toxicity. Toxic work environments fueled the Great Resignation, with many who left their jobs citing toxic work environments as the top reason for doing so. 

Lisa L. Baker, the founder of Ascentim LLC, says leaders can address and prevent toxic situations in the workplace by clearly and consistently communicating cultural norms, which clarifies expectations, guides employee behaviors and actions, and ensures values alignment.

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Matt Tenney has been working to help organizations develop leaders who improve employee engagement and performance since 2012. He is the author of three leadership books, including the groundbreaking, highly acclaimed book Inspire Greatness: How to Motivate Employees with a Simple, Repeatable, Scalable Process.

Matt’s ideas have been featured in major media outlets and his clients include numerous national associations and Fortune 500 companies.

He is often invited to deliver keynote speeches at conferences and leadership meetings, and is known for delivering valuable, actionable insights in a way that is memorable and deeply inspiring.

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