We are used to think that hiring a new person, if he is valid, is new power for the company. Firing or not firing an employee avoid problems, increase performance and frees a place that can be replaced with someone better. Promoting a person is recognising his work that has been done.
All of this is true (and I can close here the post…) but… (… and I can reopen it)

It is not just it. All those actions have a huge impact, in a way or the other, on culture. If you don’t fire a bad employee, whatever is the reason, even if it is very good, is having a negative impact on the company culture. It is like saying “we accept that a bad performer is part of our squad and we do nothing about it”. While it is clear the impact on productivity of a bad team player, the mistake that some people make about this message is to think that other team members will eventually emulate that behaviour. My experience is that this is not happening, and I could possibly expect that from lazy, pessimistic, unmotivated team members, but let me say, if you are not a good team player and you move from being average to be bad and then you are possibly fired, your life won’t be great, while if something is making you think that you will never get fired, you don’t need a bad example for becoming a bad team player.

What is usually happening with such a message is that the best performers feel a lack of good culture, feel that quality and performance are not really important, and that they will never be estimated enough, that the environment is not at their level and they go away. Not only, but they will never ask directly why a bad performer is not fired, but they will try anyway to give a feedback, undermining the position of their manager.
In some companies there is this mindset that if you say one million words about a topic, people will be convinced that you are right. No way, people get only tired and they think the manager has no reason and he is weak. Maybe you get what you wanted, but in the worst way possible. There is no way to convince a person that you are right if the truth is in front of his eyes, especially if he is a good performer, therefore probably an intelligent person. Yes, because good performers can give up on single discussions, but every time the risk is that they will give up on you.

Hiring the wrong people also affects the culture. While unfortunately even the biggest companies with the most complicated hiring process have false positives, lot of companies are more interested in the technical challenge than in the behavioural interview. This maybe because it is complex to establish who is a great fit for your culture.
There is not too much more to say about that: it is much better a person with lot of lacks in his knowledge that he can fill while he is working, like from 1 to 10 a person that is a 6 as a specialist but it is a 7 as a team player than a person that is a 7 as a specialist but he is a 6 as a team player. And sometimes we care only about having a 6.5 specialist ignoring that he is a 3 as team player.

Similar in terms of culture, but different under lot of aspects, is the promotion. Promoting a person set the threshold of what we think it is the perfect employee. Culture is written on the promotion letters. I remember in one of my previous company that a Team Leader was promoted to senior manager. He was absolutely a lovely person, but he was trying to defend whoever was previously one of his peer. In the company, that I would define as small, at least the IT department, there were TWO leaders out of SIX who were bullying their team members.
This situation, that was kept at bay (not resolved) by the previous senior manager, degenerated with this one. In few weeks that became unmanageable, and when the first two member resigned, all the castle fell, and in 5 months literally all the key members of the company quit. That for me became a great example of the impact of a promotion on the culture of a company.

If you have an employee who is an hard worker, he is always helping inside and outside the team, he tries to mentor the newcomers, he enters meetings and he is a subject matter expert, promoting him gives the idea that being a person that unblocks the others is seen as a good squad member and it is recognised. People will try to make the other’s lives better, both for the sake of helping and for enabling the financial results.
If a person is a blocker, it does not accept any task that he does not like, he keeps wasting the time of everyone with never ending meetings, he gets reported for making meetings be miserable, speaking on top of the other, he deliver easy project not following standards, not using standard security mechanisms and he is spending 90% of his time trying to show off, promoting him passes the message that this is what the company wants.

Recognising the hard work of a person is essential to keep that person motivated. And everyone needs to keep being motivated. The question is always the same: what is the risk in firing, or hiring, or promoting a person? What do we get? What do we lose? Is it fair to make the happiness of one paying it with the unhappiness of all the others? Do we prefer to celebrate someone and risk that someone else will quit?

And for any mistake, there is a person to blame. I am totally against blaming culture, I don’t mean that we have to blame someone, but there is for sure a person that is responsible, and the question is: is he responsible because it didn’t own the strength to say no, or he is pushing for a culture of some type?