Over the years, I've had countless conversations with business owners, managers and employees about workplace culture.
What's interesting is that when people talk about culture, they often talk about it as if it's something separate from the people leading the business.
They talk about values, policies, wellbeing initiatives, employee engagement programmes and team-building activities.
All of these things have their place.
Culture within SME’s
For SMEs, culture is often much simpler than that. It's largely shaped by the people who lead others every day. In fact, if I were to ask someone about the culture of their workplace, I suspect they wouldn't start by talking about the employee handbook or the wellbeing strategy.
They would probably tell me about their manager. They'd tell me whether they feel listened to. Whether they feel trusted. Whether they feel comfortable speaking up. Whether they feel supported when things get tough. Because that's how people experience culture. Not through policies, but through people.
And in SMEs, that effect is amplified.
Unlike larger organisations, there are often fewer layers between leadership and employees. The owner might sit a few desks away. The manager may work alongside the team every day. The conversations are more direct, the relationships are closer, and the impact of leadership is felt much more immediately.
Leadership Impact
That's why I think leadership has one of the biggest influences on wellbeing, culture and performance in any small business.
The research certainly points us in that direction.
Gallup has found that managers account for around 70% of the variance in employee engagement. That's a remarkable statistic when you stop and think about it. It suggests that the daily experience employees have with their manager matters enormously.
And when we look at research around psychological safety, we see a similar story. Studies by Harvard professor Amy Edmondson, along with Google's well-known Project Aristotle, found that high-performing teams are built on environments where people feel safe to contribute, ask questions, share concerns and make mistakes without fear of blame or embarrassment.
- When people feel safe, they engage.
- When they engage, they contribute.
- When they contribute, teams perform better.
It's not complicated, but it does require intention. What I find particularly fascinating is that culture is rarely shaped by the big moments. It's shaped by the small ones.
- The manager who takes five minutes to check in with a team member who's been unusually quiet.
- The leader who admits they got something wrong.
- The supervisor who asks for ideas rather than always providing the answers.
- The business owner who remains calm and respectful during a challenging period.
These moments may seem insignificant at the time. But repeated over weeks, months and years, they become the culture.
Of course, the opposite is also true. A leader who consistently cancels one-to-ones. A manager who reacts badly to mistakes. A supervisor who dismisses concerns or discourages feedback. These behaviours send messages too.
Whether intentional or not, leaders are constantly teaching people what is acceptable, what is valued and what is safe.
That's why I've become increasingly convinced that wellbeing cannot be separated from leadership.
We often think of wellbeing as something an organisation provides.
A wellbeing programme.
A benefits package.
A mental health initiative.
And while these things are valuable, they can only go so far.
If someone works in an environment where they feel unheard, unsupported or constantly under pressure from poor management, no amount of wellbeing initiatives will fully compensate for that experience.
Leadership, Self Awareness and Reflection
The everyday behaviour of leaders matters more than many of us realise.
Perhaps that's why one question has stayed with me recently:
How do people feel after interacting with me?
Not what do they think of the business.
Not whether they understand the strategy.
Not whether they attended the wellbeing workshop.
But how do they feel after spending time with me as a leader?
Do they leave feeling encouraged?
Trusted?
Valued?
Motivated?
Or do they leave feeling uncertain, stressed or reluctant to speak up?
It's a simple question, but I think it gets to the heart of what leadership really is.
As leaders, we influence far more than results.
We influence energy.
We influence confidence.
We influence wellbeing.
And ultimately, we help shape the culture people experience every single day.
For SME leaders, that's both a privilege and a responsibility.
Because in small businesses, people may not always remember the strategy, the targets or even the policies.
But they will remember how their leaders made them feel.
And perhaps that's where culture really begins.
Want to have a deeper conversation around workplace wellbeing, performance and retention within your organisation? Book a free consultation with me:
https://calendly.com/contact-xai/30min?month=2026-07
References
- Gallup. State of the Global Workplace and manager effectiveness research, reporting that managers account for approximately 70% of the variance in employee engagement.
- Edmondson, A. C. (1999). Psychological Safety and Learning Behavior in Work Teams. Administrative Science Quarterly, 44(2), 350-383.
- Google Re:Work. Project Aristotle, identifying psychological safety as the most important characteristic of high-performing teams.
- CIPD. Health and Wellbeing at Work research highlighting the critical role of line managers in supporting employee wellbeing and creating healthy workplace cultures.
- McKinsey Health Institute. Research examining the connection between leadership, wellbeing, employee experience and organisational performance.
