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Types of Organizational Culture: Which One Gets Results?
A critical role of any company’s leadership is to examine their organization’s work culture and intentionally create an environment that helps employees thrive. But what types of organizational culture are best? Professors Robert Quinn and Kim Cameron identified four types of organizational culture based on in-depth analyses. They found that while every company’s culture is different, almost 90 percent of organizations worldwide fit into one or more of the types of company culture they identified.
What is organizational culture?
Organizational culture is the shared values, attitudes, and practices that characterize an organization. Think of it as your company’s unique personality. The different types of corporate culture directly affect employee mental health and well-being, which in turn shapes the collective culture.
Business founder, professor, and author Michael D. Watkins outlined in Harvard Business Review a number of factors that contribute to organizational culture including:
- Patterns of behavior, or how things get done on a daily basis
- Incentives such as pay, status, and career advancement
- Beliefs and attitudes about the workplace
- Company values or the “why” of the work
- Behavioral norms and taboos within the group
- The criteria that determine the “right fit” for new employees
- Subcultures that may exist within the main organizational culture types
- Cultural shifts and changes that happen naturally with time
Why is organizational culture important?
Culture matters a whole lot to your employees. It also affects your company’s bottom line. Toxic work environments cost businesses billions in turnover and lost productivity. Here are some of the reasons why organizational culture is important.
Attracting and retaining talent
The importance of organizational culture is clear when it comes to talent acquisition and employee retention. Over one-third (38 percent) of employees reported that a negative culture at work makes them want to leave their current job, while 65 percent said company culture is an important factor when deciding to stay at a job. According to a 2019 survey by Glassdoor, more than half of workers consider corporate culture more important than salary, and three-quarters evaluate culture before even applying for a job. And if they don’t like what they find? About 35 percent of employees say they’d pass on their ideal job if they didn’t feel good about the corporate culture types they observed.
Employee engagement and experience
Employers with positive work environments reportedly enjoy 72 percent higher employee engagement. In one survey, almost half of employees said the types of workplace culture impact their experience at the job more than the actual workspace or available technology.
Employee productivity
On average, satisfied employees are more productive. In fact, it’s measurable, with 12 percent gains in productivity for those who enjoy a strong organizational culture. (Unsatisfied employees are actually 10 percent less productive, on average.) About three-quarters of U.S. employees say their strong organizational culture has enabled them to do excellent work and better serve their customers.
What are the 4 types of organizational culture?
There are many ways to categorize the different types of work culture, and not all employers fit easily into a category. However, there are four broadly recognized types of company culture that can be helpful in understanding what kind you might have, or want to have. All types of organizational culture have pros and cons and many companies have a blend of multiple kinds.
Type 1: clan culture
Clan culture is all about team spirit among employees. This type of company culture prioritizes employees’ needs and emphasizes communication and collaboration. If you’re in an organization with clan culture, you may feel that you and your teammates are part of a workplace “family.” Clan culture can often be found in small businesses and start-ups, as well as industries that are typically stable, such as oil and gas or insurance.
Benefits of clan culture
- Employees who feel happy and cared for at work are more likely to be productive and support company growth.
- The close-knit bond between workers nurtures strong communication and the sharing of ideas and feedback.
- Because they emphasize care for the entire team, companies with clan culture tend to have work environments where employees experience a high degree of social support, which promotes overall well-being.
Organizational culture examples: clan culture
Google – Google has accomplished the impressive feat of connecting with individual employees across a large workforce. It’s hard to create that family atmosphere in such a large group, but Google has risen to the challenge as a leading example of clan culture by prioritizing open communication, leadership training, and internal mobility.
Zappos – This online retailer’s 10 core values include building open and honest relationships with communication and a positive team and family spirit—all hallmarks of clan culture.
How to build clan culture
- Focus on getting to know one another at work and as people with broader lives.
- Make rewards more communal, such as team bonuses or prizes.
- Encourage feedback.
- Lead brainstorming exercises.
- Create psychological safety so team members feel they can speak up. When you get feedback, act on it so employees know you heard them and care.
- Offer consistent reminders of your organization’s mission and how employees’ individual work contributes to it.
Type 2: adhocracy culture
Derived from the term “ad hoc,” an adhocracy culture contributes to a flexible working environment that stays nimble to meet the demands of the present moment. It’s characterized by adaptability and comfort with change. Routine and long-standing traditions hold far less sway in companies with adhocracy culture than they might in other places. Adhocracy culture is common in highly competitive industries with a strong demand for innovation, such as technology.
Benefits of adhocracy culture
- Companies with adhocracy culture tend to encourage bold moves and risk-taking, which can pay huge dividends.
- It eases the fear of failure; failure is seen as part of the exploratory process.
- Since many employees need or want flexibility in a job environment, adhocracy culture may help organizations attract top talent.
- The rapidly shifting nature of work in an adhocracy culture can be a joy for those who get bored easily.
- Following trends is more important than ever in a world that is constantly being shaped and reshaped by changing technology and ideas. `
Organizational culture examples: adhocracy culture
Amazon – Its power structure is decentralized and it’s willing to experiment and face the possibility of failure. Because the company chases so many creative ideas, it can always find something that works.
Genentech – Agility is a key feature in Genentech’s adhocracy culture. Long hailed as a great place to work, the company prides itself on flexibility and pushing scientific boundaries, while employee reviews frequently mention innovation and a strong drive to outperform competitors.
How to build adhocracy culture
- Make sure employees from different teams and disciplines have regular opportunities to share ideas to avoid silos.
- Reward the behavior you want to see. If you want more risk-takers and bold ideas, consider how to reward that in a way that will incentivize more employees to display these behaviors.
- When you hire for an adhocracy culture, it’s important to be upfront with job candidates about your type of corporate culture. You want team members who are adaptable and aren’t married to doing everything “by the book,” so use the interview process to find people who are likely to thrive in that environment.
Type 3: market culture
Market culture focuses on outperforming the competition and growing profit margins. It’s an environment that pushes employees to deliver results. Aggressive leaders are common in this type of organizational culture. Market culture is common in competitive industries like technology, fast-paced start-ups, and companies that employ large sales and marketing functions to drive profitability.
Benefits of market culture
- It’s a great profit-driver. Because the focus is on getting great results and beating the competition, market cultures are more likely to capture a big piece of the industry pie.
- Market culture is likely to have its eye on upcoming trends so it can beat competitors to the punch.
- Employees are motivated to work hard. Market cultures tend to draw ambitious people who like a competitive challenge.
Organizational culture examples: market culture
Tesla – Founder Elon Musk has been quoted as saying, “Constantly think about how you could be doing things better,” and that embodies Tesla’s results-driven outlook. Employees are given leeway to do their jobs as they see fit, so long as it generates good results.
Apple – Founder Steve Jobs was well-known for pushing for strong results and innovative thinking to keep Apple’s brand at the top of the market.
How to build market culture
- Develop a clear-cut strategy for compensating employees based on results. Compensation for high performers could include pay, recognition and awards, or professional development opportunities.
- Set clear goals and KPIs, then regularly highlight the employees who hit them. Strong performers should be considered for leadership roles, as market culture relies on talented leaders. You may want a leadership development plan in place.
- Make sure that the people you hire are up for the challenge of working in a market culture. They should be ambitious and willing to measure themselves against specific goals. Employees who need the nurturing environment of, say, a clan culture, may not thrive in this competitive atmosphere, while others are just itching for the challenge.
Type 4: hierarchy culture
A hierarchy culture has a clear chain of command and relies heavily on rules and processes. Generally, managers in a hierarchy culture are more authoritative and employees have less leeway in deciding how to do their jobs. Hierarchy cultures are common in large, traditional companies as well as high-risk industries like finance, health care, and government.
Benefits of hierarchy culture
- Some employees appreciate predictability. They want to know the expectations placed on them and not worry about sudden changes out of left field.
- A hierarchy culture’s clear chain of command can often simplify decision-making.
- In an environment where the chain of command is spelled out, it’s easier to identify what “moving up the ranks” looks like. This offers a clear-cut career path for those who want to stay with you long-term.
Organizational culture examples: hierarchy culture
Government organizations – These often have inflexible policies for how to handle any given situation, and the chain of command is usually crystal clear.
Health care – Because health care providers hold the lives of patients in their hands, health care must make safety its top priority. The best way to do that is with established protocols and adherence to rules.
How to build hierarchy culture
- Create an organizational chart. This not only communicates how decisions will be made but also functions as a map for employee career advancement.
- Managers should be clear with their team members about expectations and goals, both individually and as a team. Employees need to know that they’re following a plan.
- Your compensation strategy should be orderly and closely mirror the hierarchy of your organizational chart. Make it clear what someone has to do to reach the next level of compensation.
Changing organizational culture to fit your workforce
After considering these examples of organizational culture, evaluate where you are now and where you want to be. Where does your company fall within this framework? If you have a hierarchy culture, are there opportunities to incorporate more of a market or adhocracy mindset to welcome fresh ideas? If you lean toward market or adhocracy culture, ask yourself if there’s an opportunity to create more of a clan culture by building structure and community in your workplace.
If you recognize the need to rebalance or improve your culture, start by evaluating the impact of work on your employees’ mental health and well-being. Specialized assessments can reveal how your team members are doing and the types of organizational culture shifts that would best serve your workforce. You can also get expert recommendations on how to change organizational culture in a way that aligns with your values and mission and resonates with your employees.
Culture can shift over time, so what you worked hard to create years ago may be different today. That’s why it’s important to continually reassess your workplace and decide if changing organizational culture should be a priority. With support, you can cultivate the environment you want to see, and both your people and business will benefit. Learn more steps you can take today to improve your company culture.
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8 of November 2022 - 10 min read
Mental health at work
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