What Has the Greatest Impact on Organizational Culture?

What Has the Greatest Impact on Organizational Culture?
Our organizational alignment research found that cultural factors account for 40% of the difference between high and low growth companies in terms of revenue growth, profitability, leadership effectiveness, customer loyalty, and employee engagement.  But what has the greatest impact on organizational culture?  First, let’s define culture.

Organizational culture is how people within an organization interact, make decisions, and work toward shared goals. A healthy corporate culture that is aligned with strategic priorities inspires employees, aligns teams, and drives business outcomes. Conversely, a toxic culture or a misaligned culture can derail even the most promising organizations.

While many factors contribute to shaping corporate culture, we know from organizational culture assessment data that one cultural lever has the greatest impact: leadership behavior.  Why?  Because leaders have a direct impact on how and why things truly get done in an organization.

Leadership Behavior: The Greatest Impact on Organizational Culture
We know from leadership simulation assessment data that the most successful leaders are both highly responsive to market shifts and highly adept at balancing cultural stability with organizational innovation. While foundational values and leadership principles should remain steady, cultural practices must adapt to changing circumstances. This flexibility ensures relevance and alignment with broader organizational goals and market realities.

As the architects of organizational culture, a leader’s actions, decisions, and communication styles signal what is valued, acceptable, rewarded, and punished within the organization. While most leaders can’t directly speak to every employee, employees often take their behavioral cues from leaders, and those behaviors cascade throughout the organization.

For example, if leaders prioritize transparency and consistently share critical information, it fosters a culture of trust and openness. Conversely, if leaders engage in workplace politics or avoid accountability, they inadvertently create an environment of distrust and employee disengagement.

7 Research-Backed Ways Leadership Behavior Impacts Workplace Culture
Leadership behavior influences:

1. Decision-Making Processes
   We know from decision making training that whether leaders encourage collaboration or impose unilateral decisions sets the tone for how empowered employees feel.
2. Conflict Resolution
   We know from 360 degree feedback data that leaders who model constructive debate promote psychological team safety, while those who avoid or escalate conflicts perpetuate fear, division, and back-channeling at work.
3. Recognition and Feedback
   We know from change management training that how leaders proportionately and visibly recognize achievements or deliver constructive feedback reflects the organization’s values and priorities.
4. Employee Engagement and Empowerment
   We know from employee engagement action data that employees feel empowered to share ideas, take initiative, and influence outcomes when leaders foster autonomy, embrace diversity of thought, and provide the necessary resources for success.
5. Core Values and Beliefs
   We know from action learning leadership development programs that while leadership sets the tone, an organization’s stated core values and the extent to which they are lived out day-to-day have a profound impact on culture. Active and reinforced values act as a compass, guiding behavior and decision-making.  However, there is a critical distinction between aspirational values and actual ones. For values to shape culture effectively, they must be consistently reinforced through policies, procedures, and actions.

   When there is alignment between lived values and visible behavior, employees experience clarity and purpose. When misalignment exists, it erodes trust and engagement.  According to research by Salesforce, over 7 in 10 employees feel motivated to do their best work when they feel connected to their company culture and values.  It is the job of leaders to foster that connection and clear line of sight to contribute.

6. Business Practices
   The way organizations get work done shapes culture. Changing business practices changes cultures.  For example, a recruiting process that effectively hires for cultural fit ensures that new hires align with the organization’s values, while new employee onboarding programs serve as a crucial period to acclimate employees to cultural norms. Similarly, every business process, technology, and workflow either helps or hinders your ability to live your values and execute your strategy.
7. Communication, Information Flow, and Storytelling
   We know from communication essentials training that how leaders choose to communicate determines whether their messages matter.  How an organization communicates internally and externally reinforces cultural and team norms. Storytelling is particularly powerful in strengthening culture.

   Leaders who share stories that highlight desired behaviors — like customer-focused innovation or team collaboration — embed those values into the organization’s collective consciousness. Additionally, open, two-way communication channels empower employees to feel heard and valued, reinforcing a culture of inclusion and respect.

The Bottom Line
Leadership behavior is the single most influential factor in shaping organizational culture, acting as both a catalyst and a compass. Organizations that prioritize alignment between leadership actions, stated values, and strategic priorities foster high performing cultures that make sense to the people AND the business.  How well do your leaders stack up against the seven leadership levers that impact culture?

To learn more about whether your leaders are having the greatest impact on organizational culture, download the Top 5 High Performance Culture Warning Signs