March 9, 2023

How does organisational culture affect talent retention?

A study by ISDM and Ashoka University's CSIP shows that social purpose organisations with a people-centric culture and collaborative work atmosphere are better positioned to attract and retain talent.


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5 min read

Aftab works in a managerial position at a fairly large Indian nonprofit. While his job allows him to work from home on most days, Aftab finds himself travelling to his workplace almost daily. His tasks and responsibilities are extensive and require constant communication with his team and others. During lunch, he prefers to sit down with his colleagues and talk about whatever is on his mind. Aftab has found that his colleagues welcome this engagement and take out time to talk about personal and professional issues, offering a supportive ear to one another. Some time ago, the nonprofit launched an initiative under which a large group of employees organises a potluck lunch for the workplace a few times a month. The responsibility to organise this lunch is not enforced on any individual, and all are welcome to attend and contribute.

Organisational culture constitutes certain mental models, which are the values (diversity, equity, and inclusion) espoused by the organisation. It also comprises visible artefacts such as structures and practices, and semi-visible artefacts such as the work environment, power dynamics, and relations within the organisation. Organisational culture thus defines the social fabric of an organisation.

Indian School of Development Management (ISDM) and Ashoka University’s Centre for Social Impact and Philanthropy (CSIP) collaborated on a study on talent management practices prevalent in Indian social purpose organisations (SPOs). The study seeks to be a reliable source of data to understand aspects such as lack of talent in the field, recruitment rationale, and methods for determining appropriate compensation in organisations. The findings of the report are derived from more than 90 in-depth interviews and four quantitative surveys conducted with SPO leaders and employees across the country. Our aims were to define talent; understand how organisations identify, attract, and integrate talent within an organisation; map the impact of individual goals and motivations of said talent; and recognise the challenges related to talent management within organisations.

The report shows that a healthy organisational culture has a positive impact on talent attraction and retention. Factors such as workplace environment and power dynamics significantly affect the morale and well-being of employees. The report also found that an open and people-centric culture attracts employees to the office workspace. Variables such as leadership styles significantly affect the motivation levels of employees within an organisation. Therefore, a cohesive organisational culture allows teams to collaborate and find innovative approaches to problem-solving. It also guides personnel in adopting the ‘right’ approach to their work. These findings from the report are discussed at length in this article.

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1. Peer relationships influence employee retention

Creating and maintaining relationships with one’s peers within the organisation ensures high individual morale. It also affirms appropriate and respectful inter- and intra-team dynamics concerning the tasks at hand. The general workplace environment has a considerable effect on team relationships and well-being. One-third of the survey respondents in our study mentioned that their relationships with peers and colleagues influence their continuous engagement and retention with the organisation.

2. A positive work environment fosters well-being

The social fabric of an organisation, which includes the quality of relationships between different actors and the physical environment in which the talent performs, can affect employee motivation. Work environments where the personnel are valued and supported in terms of their mental well-being and are able to maintain a stable work–life balance have been found to lead to high talent retention. Our research shows that a warm, welcoming, and close-knit team culture makes personnel feel comfortable in the workplace and preserves their enthusiasm for working alongside their peers.

Positive team relationships positively affect employee motivation and commitment. An interview participant in our study said that she enjoys coming to work and appreciates how her colleagues engage in friendly banter. She also trusts that her colleagues will “do anything to ensure things are getting done on the ground”.

3. Organisational values have wide-ranging effects

The importance of establishing and being mindful of organisational values cannot be underestimated. Aspects such as the organisational belief in adopting principles of diversity, equity, and inclusion in the hiring and selection processes are mental models that constitute the foundation of an organisation’s culture. These engendered values generally percolate from the top to the bottom and are highly influenced by the actions of the organisation’s founding leadership. The values espoused by an organisation shape its interactions with its internal and external stakeholders, and help guide its talent towards adopting the necessary approach to performing their tasks. Our research confirms that, for SPOs, upholding the values and culture associated with the organisation is a key parameter of employee performance.

A stack of lego blocks_organisational culture
A cohesive organisational culture allows teams to collaborate and find innovative approaches to problem-solving. | Picture courtesy: Pexels

4. Organisational culture heavily affects retention

Practices centred around developing organisational culture positively affect the attraction and retention of talent within an organisation. Our research reveals that organisational culture influenced the continuous engagement and retention of 60 percent of survey respondents working in SPOs. At the same time, the presence of a robust organisational culture emerged as the key reason for 52 percent of the survey respondents to continue working in the development sector.

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The integration of the components of organisational culture into talent management practices can help SPOs improve talent motivation and commitment to cause. Doing this enhances attraction and retention while driving innovation and productivity. Regular team-building activities can ensure that personnel maintain a connection with one another and are able to form productive teams. Similarly, providing safe spaces for individuals to share their opinions, successes, and failures can help SPOs boost collaboration, cross-learning, problem-solving, and innovations to address complex social issues.

5. Employees are attracted to a people-centric leadership style

Power dynamics also play a key role in talent attraction and retention. The attitudes and behaviour displayed by leaders matter significantly to professionals working in the development sector. And the style of leadership at a particular organisation considerably affects the motivation levels of the organisation’s talent and their continued association. As a result, a leadership style that is participative (listening to teams, allowing disagreement, taking collective decisions), trusting (believing in talent capability), accessible, appreciative, and supportive (allowing personnel to take initiatives) can prove effective in retaining an organisation’s talent. Our research has found that a participative and encouraging style of leadership is also what attracts ex-employees back to their former organisations. Therefore, adopting an empathetic and people-centric style of leadership can help SPOs attract and retain talent. In contrast, a micromanagement-oriented style of leadership is associated with higher rates of talent attrition in organisations.

6. Both intra- and inter-team collaborations are essential

Findings from the study indicate that to boost intra- and inter-team collaborations and opportunities for the exchange of ideas, the presence of an open and people-centric culture—where individuals feel free to express their opinions and are not judged for them—is essential. Peers get along well with each other as they learn to respect the diversity of individual backgrounds and opinions within their groups. This may lead to a greater degree of collaboration between individuals and teams, assisted by a free-flowing exchange of knowledge and information.

According to the finance and operations head of an SPO, making the effort to build a culture of smooth and timely interaction between different teams is of great importance. Such interactions bring out invaluable insights that inform and create organisational culture. Since it is difficult to find many opportunities for such interactions, it is important to structure them in a manner that enables ease of dialogue and discussion, which can help enhance the process of learning from one another.

Often, such an environment in the workplace allows for creativity to emerge within the talent. Further interactions within such spaces may bring forth innovative solutions, and can help personnel in learning and developing a problem-solving attitude towards fulfilling their tasks.

Overall, a healthy organisational culture, including a positive work environment and strong interpersonal relationships, can have a positive impact on talent in the social sector. Peer relationships, team dynamics, and the physical work environment, all these influence the morale and motivation of organisational talent. Therefore, creating and maintaining a positive organisational culture can lead to greater satisfaction and commitment among employees and ultimately lead to new ideas, collective problem-solving, and higher retention rates within the organisation.

Know more

  • Access all the reports based on the study here.
  • Read this article to learn about the barriers that keep women from advancing to leadership roles in social purpose organisations.
  • Read this article to learn more about what organisational culture really means.

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Satender Rana-Image
Satender Rana

Satender Rana joined the Knowledge and Research Centre at ISDM after completing an MSc in Development Management (Applied Development Economics) from London School of Economics. Satender has worked with the World Bank, UNDP, International Rice Research Institute, Ministry of Rural Development, National Thermal Power Corporation, and Sparsh. He founded Devnomica, a development research and consultancy company, to enable companies, governments, and SPOs in making evidence-informed policy decisions to create positive social impact.

Siddharth Gandotra-Image
Siddharth Gandotra

Siddharth Gandotra has a master’s degree in film and media studies from B R Ambedkar University, Delhi, and a bachelor’s degree in history from Kirori Mal College, University of Delhi. He uses qualitative research based on theoretical models to build effective interventions within society. Siddharth’s research interests include media literacy, critical studies, visual anthropology, and communications.