5 Factors that Affect Company Culture [Complete Guide]

Company culture affects all parts of an organization. It can push a company forward to success and it can also pull it downward to its demise. It’s the organization’s “way of life” and can either be positive, neutral or negative.

There are 5 factors that affect company culture. If you believe your organization needs some improvement with its work culture, it’s important to first know these 5 factors for you to better understand and implement strategies to improve company culture. 

Neutral and negative company cultures are never enough to bring an organization to the highest levels of success. It takes having a positive company culture to be among the top of your industry.

In fact, top companies strive to sustain having a positive company culture. Large companies like Google and Microsoft invest a lot to keep their employees satisfied, engaged and committed. All these contribute to achieving and sustaining a positive company culture.

These are the 5 factors that affect company culture:

  1. Leadership
  2. Nature of Business
  3. Company Values, Policies and Work Ambiance
  4. Employee Benefits
  5. Recruitment and Selection


Leaders can make or break an organization. Even with shaping company culture, they are a major determinant. According to Forbes, “leaders are the key to shaping company culture”. While this is true, a lot of companies fail to identify good leaders.

According to Inc., just 10% of people are natural leaders. Some companies appoint leadership to employees who are excellent or are the best at their jobs. The problem with this is that being the best at work doesn’t mean being excellent at leadership.

As a result, a shocking 82% of managers are not good with leading people. This is according to Gallup. Moreover, the lack of good leadership is costing U.S. companies $550 billion each year. 

It’s important to point this out as with poor leadership, a positive company culture can be almost impossible to attain. Worse, poor leadership can transform a good company culture into an inferior one. 

To avoid this, when promoting employees to leadership positions, value potential over performance. A leadership position requires more than just excellence but also emotional intelligence.

Leaders shape company culture through their decisions and actions. By being understanding and supportive of the workforce, leaders can empower the employees to become more productive, engaged and committed. Leaders also help improve employee retention

A positive company culture is developed when these ideal habits are formed. If leaders are toxic towards the employees, the workers can become less productive and lose interest in work. Habits are what sets culture. 

Nature of Business

The nature of the organization impacts company culture through its purpose, market and operations. If the company has objectives beyond the scope of its business such as helping with promoting environmental awareness, employees can become more engaged and feel more significant with the work that they do. 

If the organization creates a meaningful change through its services and products, it can have a positive effect with how they feel about their work. 

Company Values, Policies and Work Ambiance

The values of the company extends toward its workers. After all, the employees have to abide by the principles and rules of the organization. As values such as being truthful, honest, kind and generous to others become habits, they become part of the company culture. 

Employee Benefits

Employee benefits affect company culture depending on the type of perks that are being offered to the workers. Employee benefits that promote financial security helps employees become less stressed with their finances.

In turn, they can be more focused and better perform at work. If employees are offered perks to improve work-life balance such as reduced or flexible working schedules, they can become more engaged as having a good work-life balance can help them become more satisfied with their work. 

Different perks provide different benefits in relation to company culture. Most improve productivity and engagement. Moreover, worker benefits also help with employee retention

Recruitment and Selection

Trying to build a positive company culture begins with hiring the right people. Just one wrong hire can create a significant negative impact on the workplace environment. With recruitment, remember that no hire is better than a bad hire.

Each employee has their own style of working, attitude and other traits that can be in conflict with the rest of the workers. If the new hire turns out to be a toxic employee, productivity and engagement of the other employees can decline. 

Here are statistics about bad hires collected by Hire Hive:

  • 80% of turnover is because of a bad hire.
  • 60% of bad hires will negatively affect the performance of other employees.
  • 39% of businesses report lowered productivity because of a bad hire. 

According to the U.S. Department of Labor, the cost of a bad hire can reach up to 30% of the employee’s earnings during the first year. Moreover, according to the Undercover Recruiter, bad hires are costing companies $240,000 each year. 

By knowing these 5 factors that affect company culture, you can become more aware of what you have to improve and work on. Remember that company culture is a result of habits developed in the workplace. 

Build a positive company culture by striving to implement strategies to boost employee engagement, productivity and commitment through also having good leadership, strong values and competitive employee benefits.