The Top 5 Ways Company Culture Impacts Employees

Top 5 Ways Company Culture Impacts Employees
We know from corporate culture assessment data that the way company culture impacts employees runs much deeper than surface-level perks or company mission statements.  By design or by default, your company culture:

• Is the force that guides how people behave, communicate, and get work done.
• Sets the tone for how employees experience their roles and how they show up every day.
• Is what your business strategy must go through to be successfully executed.

Company Culture Research
A recent Harvard Business School research report found that an effective culture can account for up to half of the differential in performance between organizations in the same industry. Our own organizational alignment research found that cultural factors account for 40% of the difference between high and low performing companies in terms of:

• Revenue growth.
• Profitability.
• Leadership effectiveness.
• Customer loyalty.
• Employee engagement.

When culture is aligned with business strategy, a healthy corporate culture can unleash performance and increase employee connections. When culture is misaligned or toxic, it can quickly drain employee morale, productivity, and retention.

How Company Culture Impacts Employees: The Top 5 Ways

1. Company Culture Impacts How People Think and Behave
   Culture is not just about what companies say, it’s about what they do and tolerate. It shows up in how leaders lead, how teams collaborate, how decisions are made, how information is shared, and how people are rewarded or punished. This behavioral blueprint has a powerful influence on how employees think and act.

   According to research by Chatman & O’Reilly (2016), employees quickly learn the cultural and team norms of an organization — what’s acceptable and what’s not — and adapt accordingly. For example, in cultures that prioritize innovation, employees are more likely to take calculated risks and challenge the status quo. In hierarchical or risk-averse cultures, people often default to playing it safe, even when it stifles creativity or initiative.

   Is your company culture helping or hindering the way you want employees to think and behave?

2. Company Culture Impacts Employee Engagement and Psychological Safety
   Culture directly impacts employee engagement by shaping the environment in which people do their work. A psychologically safe culture — one where individuals feel comfortable having a constructive debate, making mistakes, and giving or receiving feedback — is a key predictor of high employee engagement.

   Google’s Project Aristotle famously concluded that psychological safety was the number one factor behind high performing teams. When employees believe they will not be embarrassed or punished for speaking up, they become more engaged, collaborative, and open to learning. In contrast, toxic cultures rooted in fear, blame, or workplace politics result in disengagement, silence, and high turnover.

   Does your culture promote enough psychological team safety?

3. Company Culture Impacts Meaning
   When a company’s culture aligns with its strategy and mission, it helps employees feel that they, and their work, matters. We know from Denison culture assessment data that employees want to belong to something bigger than themselves.

   Research from the Harvard Business Review (Groysberg et al., 2018) found that cultural alignment — where employees’ personal values and the organization’s values overlap — leads to greater job satisfaction and commitment. It gives people a sense of shared purpose and direction, reducing friction and internal confusion. According to recent OC Tanner research, when employees feel connected to purpose, there is an 858% increase in the likelihood that employees will be engaged.

   This makes sense to us.  When culture and strategy are in sync, employees are more likely to connect their daily work to long-term goals. We know from project postmortem data, however, that cultural misalignment can breed cynicism and erode trust.

   Is your company culture providing enough meaning for employees to do their best work?

4. Company Culture Impacts Employee Retention and Talent Attraction
   We know from action learning leadership development programs that culture is often the deciding factor in whether employees stay or leave. In a 2022 MIT Sloan Management Review study analyzing over 1.4 million Glassdoor reviews, toxic culture was the strongest predictor of employee attrition — far more than compensation. People don’t just leave bad managers; they leave environments that fail to respect or support them.

   At the same time, companies with strong, positive company cultures become magnets for top talent. Top candidates increasingly look beyond salary to evaluate whether a company’s ethos matches their own. Culture acts as both a filter and a beacon — it either repels or attracts top talent that fits.

   Does your company culture help to attract and retain the top talent you need to execute your strategy?

5. Company Culture Impacts Performance and Accountability
   Culture influences how performance expectations are defined, communicated, measured, and managed. In performance-driven cultures, accountability is clear, and expectations are transparent. Employees understand how success is measured and how their work contributes to team and company goals.

   But not all performance cultures are equal. A high performance culture without empathy and support can lead to burnout. Conversely, a caring culture without accountability can foster workplace complacency. The most effective cultures strike a balance by having high performance standards paired with high levels of support.

   Does your culture create enough performance accountability, transparency, and support?

The Bottom Line
Company culture is more than an HR  buzzword — it’s a powerful, often underappreciated engine behind employee behavior, engagement, and performance. When culture is aligned with business strategy and authentically lived by leaders, it shapes how people think, feel, and act at work. It creates clarity, belonging, and purpose. But when culture is misaligned or toxic, it undermines morale, erodes trust, and drives good people away.

To learn more about how company culture impacts performance, download The 3 Levels of Culture that You Must Get Right to Create Higher Performance