The impact of leadership on organisational climate and engagement

Engagement is a big-ticket item in most organisations and rightly so given the compelling evidence linking engagement to high performance. Gallup research consistently shows that organisations with higher performance fare better on 11 organisational health metrics including profitability, customer engagement, workplace safety, and retention. 

When we are engaged, it’s like a spark has been lit. We’re energised, we take ownership, and we are psychologically invested in our work and teams. Organisations that can ignite this feeling not only create a climate that feels good, they create a company culture where people want to do their best work.

Whilst desirable, engagement is not commonplace. So, what leads to a highly engaged workforce? Gallup estimates that managers account for at least 70% of the variance in employee engagement scores. Ensuring you identify and develop great leaders is therefore a great place to start if you’re looking to enhance your engagement. In terms of development, one of the most effective catalysts to this is to help leaders understand the climate they create, both as individuals and as leadership teams.

What is leadership climate?

Simply put, leadership climate is how it feels to be led by you. It’s the emotional impact of leadership behaviours and the extent to which they lead with emotional safety. Research that we’ve conducted here at Talogy shows that leadership climate predicts up to 50% of engagement, psychological safety, and organisational agility. So to drive employee performance and maximise engagement, leaders need to be aware of and intentionally create a positive environment.

When developing leaders, we often ask them to reflect on their own experiences of being led and the impact it had on them. We start with having them recall the qualities of those leaders they would jump at the chance to work for again. In doing so the same adjectives come up time and time again: caring, good listener, had my back, was honest, firm but fair, offered clear feedback, and humble to name a few. These all point to the importance of leading with emotional safety and the impact that it has on your team.

On the flip side, when asked about those leaders they would think twice about working for again, some common themes emerged as well. These individuals were often described as in it for themselves, inauthentic, micromanager, critical, and undermining. The key difference between leaders who left a positive impression and those who did not was humility and whether as leaders they genuinely cared.

Despite the importance that employees place on their leaders truly caring about them, only 58% reported that managers take an interest in their lives. This is why it’s important for leaders to understand the emotional tone they are setting for their employees – specifically the ways they are igniting engagement vs unintentionally diminishing it – and most importantly what they can do about it. Measuring and developing a positive organisational climate that your leaders create is therefore the missing link to driving engagement.

Awareness is key in effective leadership climates

Most leaders don’t set out to create a negative climate and may be completely unaware of the impact they might be having. Often the first signal that something may be wrong is when they are told engagement scores are low for their area. Time and investment can be wasted exploring a whole range of costly engagement levers including pay and benefits and progression opportunities and in doing so, organisations may miss the power of leveraging a positive climate created by its leaders.

All change starts with awareness, however it’s challenging to give upward feedback to leadership teams about the climate they are creating. By its very nature there is often a lack of emotional safety to do so. Raising awareness of the climate that leaders are creating is critical at all levels of the organisation, especially senior positions. The pressure to meet quarterly goals, manage shareholder expectations, cut costs, and navigate uncertain economic conditions can leave senior leadership teams focusing too much on results and not enough on people-centred leadership. Understanding the climate they are creating can help senior teams put simple and effective behaviours in place that ensure they are keeping the employee at the heart of all that they do. 

Over time, the leadership climate helps embed the norms and expectations that define the organisation’s culture. One way to keep a finger on the pulse of the organisation is to survey your employees about how it feels to be led by the senior leaders. This will allow you to better understand where the gaps exist between the current conditions and the culture you’re seeking to create.

These culture goals will differ from one organisation to another, but often include aspects like greater collaboration, agility, innovation, or customer focus. For example, following efforts to raise awareness of their organisational climate, senior leaders in a large construction firm that we work with here at Talogy saw a 15% uplift in their leadership climate leading to a 12% increase in customer satisfaction, reduced turnover, and increases of over 10% in engagement, restoring trust with both customers and employees.

How to improve organisational climate

Whether looking to improve or maintain the current climate within your organisation, it can be helpful to have structured ways for people to share their feedback. Tools such as Talogy’s leadership climate indicator are designed for this very purpose. This approach focuses on the behaviour of leaders as a key factor in determining the emotional climate within the organisation. Here people can honestly share feedback about leadership behaviours that are driving engagement (and those that are not), as well as offer specific advice and ‘how-tos’ for leaders and leadership teams. 

Having worked with these tools over a period of time, I have witnessed how powerfully they can impact organisations. By leading with emotional safety, leaders can create a more positive climate, often through simple switches of focus, and leadership practices that can make a huge difference in engagement, psychological safety, and performance. Take David who came to coaching to explore how to increase engagement in his team. His 360 feedback helped him see his strengths in driving results was coming across as demanding – and at times aggressive – and his impatience and frustration showed. Coupled with a tendency to interrupt others and move things along too quickly meant his team felt disregarded and disempowered – not easy things to tell your manager.

Through exploring this feedback and reflecting on the climate he wanted to create, he turned things around. He worked hard on his listening, asking more questions and in doing so demonstrating the missing element of humility. The result was his team started to give him positive feedback, encouragement, and support which led to better engagement and team performance.

Or take Sarah whose engagement scores were lower than those of her peers. Her 360 feedback showed she was seen as detached and her direct reports shared they needed more communication and evidence that she cared. Raising her awareness meant that Sarah had to challenge her belief that communication was ‘interference’ and make small changes that made a big difference to how engaged and motivated her team felt.

Leveraging the impact of a healthy culture

Measuring climate can be a particularly powerful tool to enable both organisational and cultural change. It reflects the tone, values, and behaviors modelled by leaders, influencing how employees interact, make decisions, and approach their work. A positive leadership climate is characterised by trust, support, and open communication. It promotes a healthy, collaborative, and innovative culture whereas a negative climate can lead to fear, low morale, and a toxic culture.

By identifying the impact leaders have on their employees through the emotional climate they create and exploring this feedback with a skilled coach or facilitator, they can be the catalysts to ignite engagement and fuel high performance in their teams.