There’s a conversation we have regularly with senior leaders. It usually starts with some version of the same sentence.
“We’ve got a great culture here.”
Sometimes it’s said with genuine pride. Sometimes it’s said a little defensively, as if anticipating challenge. However, it’s almost always said by someone who hasn’t recently asked the people around them whether they agree.
Culture is the most underestimated strategic variable in business. Not because leaders don’t care about it, most do, at least in principle, but because they consistently misread what it actually is, who shapes it and what it’s costing them when it goes wrong.
This is what we want to explore here. Not culture as aspiration. Culture as reality. And the gap between the two that so many organisations are paying for, often without realising it.
The First Underestimation: Culture Is What You Do, Not What You Say
Most leaders believe they understand their culture because they helped write the values. They know the mission statement. They approved the culture deck.
But fewer than one in three business leaders truly grasp their organisation’s culture. That’s not a failure of intelligence. It’s a failure of proximity. Leaders are often the last people to experience the culture as it’s actually lived, because everyone around them is on their best behaviour.
Culture isn’t the values on the wall. Values transform into tangible actions in the meeting after the meeting. It’s who gets interrupted and who gets heard. Furthermore, it’s whether people feel safe raising a concern, or whether they’ve learned, through experience, that it’s safer to stay quiet.
A 2025 workplace culture study found that a single point improvement in how consistently employees see colleagues living the organisation’s values leads to a 15.7-point improvement in overall culture health. Think about that. Not what leaders say the values are. What employees observe every day from the people around them.
Culture is behavioural. It is cumulative. And it is far more visible to your team than it is to you.
The Second Underestimation: The Cost of Getting It Wrong
Leaders often treat culture as a nice-to-have, important in principle, but secondary to commercial priorities. The data tells a very different story.
Global employee engagement fell to 21% in 2024 and the disengagement this reflects is estimated to have cost the world economy $438 billion in lost productivity.
Let that number land for a moment. Not just the scale of it, but what it means at an organisational level. Every team with disengaged members, every resignation that didn’t have to happen, every idea that wasn’t shared because someone didn’t feel it was worth the risk; all of it is culture, and all of it has a price tag.
Toxic workplace culture is 10.4 times more likely to drive employees away than low pay. Organisations that lose talented people to competitors and then conduct exit interviews that cite “better opportunity” are, in many cases, actually losing them to culture. Pay is an easy answer. Culture is a harder conversation to have.
61% of employees would leave their current job for a company with a better culture…even for a 10% salary bump if they feel undervalued or disconnected.
This is a leadership and business strategy problem.
The Third Underestimation: Who Actually Shapes Culture
Ask most leaders who is responsible for culture and they’ll say one of three things: HR, the leadership team, or “everyone.”
All three answers are partially right and mostly incomplete.
80% of employees say leadership has the greatest influence on company culture, but it’s how leaders behave, not just what they say, that defines workplace norms.
This is where many leadership teams are caught out. They have inclusive values and exclusive habits. They say they want psychological safety but interrupt people in meetings. Not only that, but they say they champion diverse voices but only promote people who think like them. They announce listening sessions and then don’t act on what they hear.
The trust data is stark. Trust in managers dropped from 46% to 29% in just two years, between 2022 and 2024. That is not a slow drift. That is a collapse. And it is happening at exactly the moment when organisations need their people to feel most connected, most willing to give discretionary effort, and most committed to collective goals.
Visible, human leadership, where employees believe a senior leader genuinely cares about their development, produces a modelled 20.7-point improvement in employee wellbeing and is associated with 25% higher retention rates and 30% to 40% lower turnover costs. For a 1,000-person organisation, that can represent up to £1 million in annual savings. Culture, in other words, is not just an ethical commitment. It is a financial one.
Microsoft Case Study: When a Growth Mindset Becomes a Culture Strategy
In 2014, Microsoft was a company that many had written off. Not for lack of technical capability, but for culture. Leadership was predominantly male and white, there were few policies to support women, minorities and neurodiverse talent, and a forced ranking system that made colleagues into competitors rather than collaborators.
When Satya Nadella became CEO, he walked into his first leadership meeting and asked a question that reframed everything: “Why do we exist?” When the answer focused on beating competitors, he redirected: to empower every person and organisation on the planet to achieve more. That shift in purpose was the beginning of a culture transformation.
What followed was not a diversity programme. It was a systemic rethinking of how the organisation worked and what it valued.
Stack rankings, which had forced managers to label a percentage of their team as underperformers regardless of actual output, were abolished. Continuous feedback replaced annual reviews. Hybrid working was supported rather than penalised. Neurodiversity hiring was introduced. And critically, inclusion became tied to leadership incentives, not just aspiration.
The results were measurable: women in leadership rose from 17% to over 33%, Glassdoor ratings improved from 3.7 to 4.4 out of 5, and voluntary attrition dropped significantly. Microsoft saw a 30% reduction in voluntary turnover and improved employee satisfaction across the board, along with stronger internal promotion pipelines and a culture of trust between leaders and teams.
What Nadella understood and what many leaders still underestimate is that culture is not a parallel track to strategy. It is the condition under which strategy either succeeds or fails.
As he put it: “Our biggest asset isn’t code, it’s culture.”
The Fourth Underestimation: Inclusion Is Not a Subset of Culture. It Is Its Condition.
Here is where we want to be direct. This is the part that gets glossed over most often.
Culture that does not actively include people will, by default, exclude them. There is no neutral position. The question is not whether your culture affects your people differently depending on who they are. It does. The question is whether you are paying attention to how.
83% of Millennials are actively engaged at work when they believe their organisation’s culture is inclusive, yet for those who don’t feel included, that engagement evaporates. And 82% of UK managers entering a management position have had no formal management or leadership training, meaning the people most responsible for daily culture are often the least equipped to steward it inclusively.
According to Deloitte, organisations with inclusive cultures are six times more likely to be innovative and eight times more likely to achieve better business outcomes. These are not soft metrics. These are competitive differentiators.
And yet, too many organisations treat inclusion as a separate workstream, a DEI initiative running alongside the “real” strategy, rather than woven through it. The result is a culture that talks about belonging while structurally producing the opposite: performance systems that reward sameness, progression routes that favour particular networks, and leadership pipelines that look, year after year, remarkably similar to the one before.
Inclusion is not a programme. Leaders who underestimate that are not just missing a moral opportunity, they are leaving measurable business value on the table.
What This Means for Leaders Right Now
Culture is not broken in most organisations because people don’t care. It is underperforming because leaders have inherited assumptions about what culture is, who owns it and how much it matters and those assumptions are increasingly costly.
The research points to five things that make the most difference:
1. Make purpose tangible daily. Not in town halls. In team meetings, in decisions, in how you respond when things go wrong. When managers make purpose tangible, wellbeing rises and burnout falls, with a modelled 23.3-point improvement in wellbeing and 20% to 30% lower burnout risk.
2. Lead with visible care. People do not trust strategy alone. They trust leaders who demonstrate human concern. For their growth, their challenges and their experience of the organisation day to day.
3. Align behaviour with stated values. The gap between what an organisation says it values and what employees observe is where culture erodes. Culture drifts when it is disconnected from strategy, leading to misalignment, disengagement and decisions that contradict stated values.
4. Invest in your managers. They are the bridge between purpose and practice. When managers receive role-specific training and consistent support, their reported wellbeing jumps from 28% to 50% and a thriving manager is one of the most reliable predictors of a thriving team.
5. Take inclusion out of the silo. Stop treating it as a parallel initiative. Start treating it as a lens through which every people decision: hiring, promoting, developing. That is when culture becomes genuinely inclusive, rather than aspirationally so.
A Final Thought
The leaders we admire most are not the ones who have the most polished culture narrative. They are the ones who are willing to sit with the discomfort of asking “what is our culture actually like for the people who don’t look or think like me?”…and then doing something with the answer.
Culture is not what you intend. It is what people experience.
And in 2025, with engagement at historic lows, trust in free fall and talent increasingly choosing organisations based on culture over compensation, the cost of underestimating this has never been higher.
The good news is that it can change. Quickly. Meaningfully. When leadership decides it matters enough to act.
At Edge Of Difference, we help organisations, especially within leadership, to co-create the culture employees want to work in. Download our resource to take make culture your strategy, not just your end goal. Turn your differences into action by booking a call with us today.
