4 External Forces That Shape Company Culture

Organizational culture is largely formed by internal factors, among them a company’s mission, its business goals, the way it wants to treat its workforce and its approach to making and selling products. 

External forces also influence how culture develops and changes over time. Many times, organizations can respond to external forces without considering how they will affect the overall culture. 

Here are four examples of external elements that shape company culture and how leaders can respond to and harness those forces for good.

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Technology Advancements 

Technology has changed company culture more than any other factor in the last few decades. The rise of hybrid and remote work, for instance, forced many organizations to adapt to technological advancements and modify their culture. 

This adaptation has profoundly influenced productivity and efficiency in workplace culture by providing ways for team members to address and resolve issues more promptly. For example, intuitive AI and project management software such as Asana and Jira streamline workflows and promote cultures of productive creativity and development. Along similar lines, e-learning platforms have allowed companies to extend continuous education to their employees, which helps grow a culture of support and career growth. 

In addition, employee engagement tools like Motivosity and HR tools such as BambooHR help manage employee engagement and encourage positive change through performance reviews and anonymous employee feedback surveys. These programs help organizations build a culture of recognition and development, which studies have shown can boost employee satisfaction and retention. 

Social and Cultural Trends 

Following the civil rights uprisings in the summer of 2020, spurred by the murder of George Floyd, many companies made changes to their cultures, including a stronger focus on DEI initiatives. 

This is just one example of how societal events and trends act as catalysts for organizational change and the formation of culture. These changing expectations have led companies to implement more in-depth diversity training and consider the greater needs of their employees and customers.

Shifting customer expectations and other factors, such as regulatory evolution and climate change, can also push companies to be more proactive with corporate social responsibility initiatives. These could be as simple as introducing in-office recycling receptacles or as bullish as partnering with an accredited nonprofit to bolster philanthropic efforts. 

Societal events and cultural trends often highlight areas that require greater attention from leadership. This extra attention to specific areas eventually leads to changes in practices, procedures, hiring and training, all of which can shift an organization’s overall culture. 

For example, an organization seeking to grow into a culture that is more diverse could implement professional development programs for its employees to prepare them for future leadership roles.

Similarly, adding the role of chief people officer to the HR team could help it remain on track to establish a more diverse workforce and inclusive culture well into the future.

Economic Shifts 

Changes in the economy, such as economic booms, recessions, depressions or inflation, can lead companies to shift how they operate and can positively or negatively influence culture as a result of how and when those shifts take place. 

Companies may be more risk averse during economic downturns. Innovation may soar during times of economic growth because more funding is available. Leadership styles, hiring choices and retention challenges can all arise during economic changes and are factors in shaping company culture. One way or another, culture is affected when employees behave in response to these trends.

For instance, high turnover can disrupt team cohesion, according to a recent article from Concord Leadership Group. Layoffs can also negatively affect morale for employees who survived the layoff. 

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Workforce Demographics 

The diverse perspectives of a varied workplace demographic help create a more inclusive, innovative and resilient company culture overall. 

A more diverse workforce can lead to 35 percent more productivity, and diverse teams make better decisions for the organization overall 87 percent of the time. In a recent CNBC survey survey, 80 percent of respondents said they wanted to work for a company that valued diversity and inclusion.

Generational differences have been making headlines in recent years, and it seems like companies that embrace them are thriving. Studies show that 89 percent of people feel that generational differences in the workplace benefit their organization. Respondents said that the opportunity to learn from people of a different generation was one of the main positive benefits. Different generations, such as Generation X and Generation Z, also have different work values, communication styles and technological proficiencies that can be used to a company’s advantage. 

Gender composition can also affect company culture. For example, organizations that hire and promote more women into leadership positions may create a more empathetic and collaborative culture. Women CEOs lead with more empathy, adaptability and diversity than their male peers, according to a 2021 S&P Global survey of more than 8,500 companies. As a result, qualities that could have been viewed as soft in the past, such as intuition and compassion, are now recognized as positive attributes of company leadership and overall culture. 

Understanding and responding strategically to external factors enable organizations to build resilient and adaptive cultures. The willingness and ability for a business to evolve in step with societal and cultural changes will become a critical component of long-term organizational success.