Company Culture Matters Most in a Cooling Labor Market
Culture leads during downturns, promotions in boom times
Culture and values ratings are the top contributors to how employees rate their companies. Employees’ perception of company culture consistently explains the largest share of variation in overall ratings.
However, what employees value shifts with the state of the economy. For example, when the labor market was particularly tight during the Great Resignation, career opportunities and senior leadership mattered the most. In a cooler job market, culture and long-term business outlook take the lead.
Employee priorities vary widely by industry. In fields like Environmental Services, culture and diversity and inclusion matter most. In more traditional sectors like Public Services, those same factors carry less weight.
What do employees value most in their workplace—and how do those priorities evolve over time? In previous work, we have shown that culture and values consistently rank among the most important drivers of employee satisfaction, particularly for working parents, which highly contributes to employee retention. We have also shown that employee sentiment is far from static: employees are highly affected by changes in macroeconomic conditions.
This week, we dig deeper into what drives overall employee sentiment by quantifying the relative importance of different workplace factors. We examine which aspects of the employee experience—like culture, career opportunities, and compensation—contribute most to how workers rate their companies. The goal is to help employers take the guesswork out of employee satisfaction and design targeted strategies that align with what employees actually value.
To understand what aspects of the employee experience most strongly influence how workers rate their companies overall, we run a regression of overall sentiment ratings on sub-categories of satisfaction, such as culture and values, career opportunities, and senior leadership, while controlling for industry characteristics and time effects. The results show that culture and values stand out as the most powerful driver of overall ratings: a 10% increase in culture and values sentiment rating is associated with a 2.5% increase in the overall rating. While many factors matter, employees seem to care most about whether their company’s culture aligns with their values.
How much did each sub-category contribute to the overall rating for each employee? While regression coefficients tell us the average marginal effect of each factor—how much a one-point change in culture and values or senior leadership would shift overall ratings, all else equal—Shapley values help us understand how much each factor actually contributed to employees’ overall ratings in practice. Think of the Shapley decomposition in this way: for every review, we break down the overall rating into contributions from each underlying dimension. Using this approach, we find that culture and values ratings once again emerge as the most important driver, accounting for about 17.8% of the variation in overall ratings. Compensation and benefits follows, contributing around 12.3%. This method gives us a more intuitive picture of which factors consistently shape how employees evaluate their companies, especially given that many of these features are correlated. Interestingly, factors like work-life balance and diversity and inclusion come last in the ranking, contributing the least to the variation in overall sentiment despite their prominence in workplace conversations.
What employees value the most is not fixed; it shifts with the broader economic context. To explore this, we re-ran the same Shapley value decomposition, splitting the sample into two distinct periods: the Great Resignation, when the labor market was exceptionally tight and job opportunities were ample, and the post-Great Resignation era, when the labor market had cooled amid rising interest rates. The results show a clear shift in priorities. During the Great Resignation, employees placed the greatest weight on career opportunities, senior leadership, and compensation, consistent with a job market where workers had more bargaining power and were actively exploring new roles. In contrast, in the cooler labor market that followed, culture and values emerged as the most important factor, followed by compensation and benefits. When external opportunities become scarcer and job hopping is less of a possibility, employees place more value on cultural fit and the long-term trajectory of their company.
We also explore how the importance of different workplace factors varies by industry. For each sentiment sub-category, we identify in which industries these factors have the highest and lowest Shapley contributions to the overall ratings. The contribution of culture and values, which emerged as the most important factor overall, shows particularly striking variation across industries. The Environmental Services industry has the greatest contributions from culture and values. On the other hand, Public Services ranks lowest in contributions from culture and values, suggesting that in more traditional or operationally focused sectors, culture may play a less central role in shaping employee satisfaction. Environmental services also shows the highest contributions from diversity and inclusion, and the lowest in work-life balance. These patterns offer a more nuanced view of what matters most to workers in each sector and where different industries are succeeding or falling short.
Work culture is not just a buzzword, it is a central pillar of employee satisfaction. Especially in uncertain times, employees turn inward, seeking a workplace that reflects their values, colleagues who support and inspire them, and management that leads with purpose. Understanding and nurturing culture is not just good for morale—it’s a strategic imperative.
