12 Types of Organizational Culture You Should Know
Organizational culture is the glue that keeps organizations together. Knowing the different types of organizational culture helps you understand how to shape the culture at your organization as the organization develops over time. Let’s dive into the different types of organizational culture, their main characteristics, and their advantages and disadvantages.
Want to find out the steps you need to take to transform your culture when it’s no longer benefiting your organization? Check out our full guide on Cultural Transformation here.
Contents
What is organizational culture?
Four types of organizational culture
Other types of organizational culture
How to choose the right organizational culture for your business?
HR’s role in shaping organizational culture
What is organizational culture?
The word ‘culture’ has its origins in the Latin word ‘colere’, which means to tend or cultivate. Simply put, organizational culture is how leadership tends to, cultivates, or takes care of its business, stakeholders, and employees. Culture can be defined as the consistent organizational behaviors of employees and leaders (norms).
Organizational culture facilitates the achievement of an organization’s strategic objectives, attracts the right employees, and makes those employees who may not fit stand out. It is also marketed to customers and key stakeholders. Organizational culture often mirrors the organization’s core values and directly reflects the organization’s leadership.
The culture can be observed in how decisions are made – top-down or bottom-up; and whether employees are confident to express independent thoughts and feelings without fear of being repudiated. It materializes through its benefits plans and whether employees are recognized and rewarded for excelling at their work.
Organizational culture is not static. It continuously evolves both through deliberate organizational development interventions and cultural transformation process, as well as organically.
Culture is vital to the overall success of organizations. A strong organizational culture can help increase net profit by as much as 85% over a five-year period. What’s more, organizations with thriving cultures and strong workplace communities experience:
- 66% less employee burnout
- 63% longer employee tenure
- 456% higher odds of perceived inclusion.
The culture of an organization also impacts employee engagement. Employees who say the culture at their organization is positive are 3.8x more likely to be engaged. In turn, high employee engagement favorably affects organizational performance.
Four types of organizational culture
The best-known classification of types of organizational culture is the Competing Values Framework. Kim Cameron and Robert Quinn at the University of Michigan identified four distinct types of organizational culture.
Organizational cultures are classified based on two types of competing values: flexibility vs. stability and an internal vs. external focus.
The four organizational cultures Cameron and Quinn identified are:
- Adhocracy culture – The dynamic, entrepreneurial Create Culture.
- Clan culture – The people-oriented, friendly Collaborate Culture.
- Hierarchy culture – The process-oriented, structured Control Culture.
- Market culture – The results-oriented, competitive Compete Culture.
Every organization has its own mix of these four organizational culture types, with one culture typically dominating. The larger the organization, the bigger the possibility that there may be more than one culture in the organization. This may be beneficial to the organization, but it may also be disadvantageous or challenging when attempting to have a cohesive culture in a regionally and globally dispersed organization.
Let’s have a look at each organizational culture type and how to develop them in more detail.
Adhocracy culture
Adhocracy is a combination of the words ‘Ad hoc’ and bureaucracy. Therefore, organizations with an adhocracy culture are flexible and not inhibited by bureaucratic procedures and policies. There is an emphasis on constant innovation and improvements, the pace is usually extremely fast, and the status quo, though it may be working, will be challenged.
Most start-up and tech companies like Apple, Google, and Facebook are driven by adhocratic culture because it provides them the latitude to be innovative. This is critical to their brand and success in a market that is constantly changing and highly competitive.
However, when start-ups become large tech giants like these organizations, an adhocratic culture will become less feasible throughout the entire organization. There will be some functions or business units that will need more structure, and moving slower may actually be better for the organization, for example, in the areas of ethics and compliance. Therefore, the adhocracy culture may be relegated to specific units to ensure the organization remains innovative and competitive in the market.
Developing an adhocracy culture
Depending on your industry, it might not be easy to develop an authentic adhocracy culture that also includes a high-risk business strategy. However, implementing strategy and brainstorming sessions allows employees to share big ideas that can help drive performance. Rewarding successful ideas encourages teams to think outside of the box, too.
Clan culture
‘Clan’ is a group of close-knit and interrelated families or a group of people with a strong common interest. Clan cultures are common in small or family-owned businesses that are not hierarchical in nature. Employees are valued regardless of their level and environments are supportive.
Companies like Tom’s of Maine, Redmond (Real Salt), and Chobani may be described as clan cultures that prioritize their employees.
This culture aims to work collaboratively in teams by making sure all employees feel like equals. They feel comfortable providing honest and open feedback. Apart from teamwork, there may be a strong emphasis on mentorship and apprenticeship as competencies and values are passed on from one generation to another. There is usually high employee engagement in this culture, which makes for excellent customer service. However, the downside to this type of culture is that it is difficult to maintain it as the organization grows. Operations may lack focus and fluidity as the organization grows.
Developing a clan culture
To cultivate a clan culture within your company, your first step is to turn to your employees. Communication is vital to a thriving clan culture, so let your team know that you’re open to feedback. Find out what they value, what they’d like to see change, what ideas they have to help push the company further. Step two: take their thoughts into account and put them into action.
“Organizations need two things to get from mission and vision to impact: one is a strategy to drive employees on what to focus on, and the other is an intentionally-designed culture, to guide employees on how to work as individuals and as teams,” says consultant, coach, and culture change facilitator Lisa Schmidt.
“Many organizations are overly focused on the what (results) and pay little attention to the how (values+behaviours). As employees seek greater meaning and purpose from work, companies that place importance on balancing both will not only become magnets to talented jobseekers, they will also build a workforce happy to provide discretionary effort in service of the mission and vision,” adds Schmidt.
Hierarchy culture
The hierarchy culture is a prevalent corporate culture in the US. It is defined by structure, established procedures, and levels of authority. Employees in this culture know precisely where they fit in the chain of command – who’s accountable to them, who they report to, and what the rules are. It is imperative in this culture to do the right thing.
Duties are clearly defined, and operations tend to be streamlined. Financial institutions, health insurance organizations, and oil and gas companies all have a hierarchy culture. This type of company culture enables them to manage risk better, be stable and be operationally efficient. However, it may hinder them from being innovative, agile, and responsive to sudden changes in their markets and industries. They might lack the flexibility needed in today’s and future markets.
Developing a hierarchy culture
The first step to establishing a hierarchy culture is to button up your processes. If the chain of command has some gaps, fill them. Consider every team and department to ensure they have clear long- and short-term goals.
Market culture
Market culture is all about profit margins and staying ahead of the competition. It is results-oriented with a strong external focus to ensure customers are satisfied. Examples of companies driven by a market culture are Tesla, Amazon, and General Electric.
Having top-notch products or services is critical to the success of these organizations, so there is a constant demand to be more creative and get new or improved products to the market before their competitors. While this type of culture may secure the longevity of the business, employees often burn out from the high expectations and constant demand to produce. There may also be less emphasis on the employee experience or employee satisfaction.
Developing a market culture
A market culture is tied to the company’s bottom line. Therefore, start by evaluating each position within your organization. Calculate the ROI of every role and ascribe reasonable benchmarks for production. Consider rewarding top performers to encourage similar work.
Other types of organizational culture
Cultures can be dissected and described in more granular ways. The reason is that each organization is uniquely shaped by its vision, mission, and leadership. Groysberg, Lee, Price, and Cheng identified the following additional organizational cultures in their research published in Harvard Business Review (2018).
- Purpose culture – Company leaders and employees share altruistic values of changing the world and ensuring global resources are shared with those who live the margins.
- Learning organizational culture – Focuses on research, innovation, creativity, learning and development.
- Enjoyment organizational culture – Having fun and a sense of humor is what defines this culture.
- Results organizational culture – Characterized by meeting targets, achieving goals, and is performance-driven.
- Authority organizational culture – Is defined by strong leadership and confident employees. It is a competitive working environment where employees strive to be the best in their field.
- Safety organizational culture – May be risk-averse where leaders thrive on fostering safety through planning and taking calculated or little risk and doing what has worked in the past.
- Order organizational culture – Is usually defined by rules, procedures and where employees have very defined roles.
- Caring organization culture – Will be characterized by an environment that cares for its employees and where there may be strong engagement and loyalty.
How to choose the right organizational culture for your business?
Consider your organizational goals, your team’s working styles, and the changes your business is going through to determine the most appropriate culture. Regardless of the organizational culture you choose, it has become increasingly critical for organizations to provide a positive employee experience and be agile to succeed in today’s labor market.
You can use Organizational Cultural Assessment Instrument (OCAI) based on the above-mentioned Competing Values Framework. It will help you understand what your current and preferred workplace cultures are. That way, you can start forging your path toward your desired workplace culture.
Here’s what the results of your culture assessment could look like:
Other culture frameworks you can look into include The McKinsey 7S Framework, The cultural iceberg model and Hofstede’s model.
Cultural transformation is a process of changing your organizational culture to realign the culture to the organization’s vision, mission, and core values to achieve its strategic objectives.
HR’s role in shaping organizational culture
As mentioned before, leadership plays a critical role in shaping culture. HR also has an important role in shaping culture and influencing leadership. According to Gallup, “HR leaders are responsible for aligning managers and employees with the aspired culture, fostering a sense of ownership for that culture and maintaining accountability throughout all levels of the company. Therefore, HR must be educating and equipping leaders and managers to model cultural values and to own their roles in fostering the desired culture.”
An organization’s culture manifests itself through the entire employee life cycle, in the areas such as:
- the recruitment process and recruiters
- employee onboarding into the organization and business units
- performance management
- skills development
- how employees are disciplined
- and the decisions made from the results of employee engagement surveys.
Jennifer Patterson, Strategic HR Consultant at Patterson Consulting Group, notes how important managing the full employee life cycle is to organizational culture.
As key influencers, HR shapes organizational culture by:
Collecting and providing feedback
HR should always be actively listening to employees and providing feedback to leadership. Employee pulse and engagement surveys, employee focus groups, and one-on-one interviews are all valuable methods through which HR can stay in touch with employee sentiments.
35% of employees say the culture at their organization has changed dramatically in the past three years, so HR needs to help leaders and managers to keep up-to-date with how employees perceive organizational culture. That way, the organization can maintain a culture that is conducive to productivity, performance, and engagement.
HR is also increasingly using predictive analytics to predict future outcomes from existing and historical data, e.g., who is likely to leave the organization based on engagement feedback. HR can then take the necessary steps to customize its engagement with specific employees. Providing employee feedback and responding to it is especially important to organizations with a clan culture.
According to the culture change facilitator Lisa Schmidt, it’s vital that HR acts on the feedback. “Too often, feedback is requested from employees, and instead of seeing this as a clear path to improvement, leaders parse the data trying to figure out which employee said what in the verbatim comments, and the feedback results in nominal — if any — responsive actions to address identified gaps,” Schmidt notes.
“In my view, direct and clear feedback from employees to management is a gift as it points at what should be looked at and acted on.”
Embracing Diversity, Inclusion & Equity
There are different opinions as to where Diversity, Equity and Inclusion (DEI) or Diversity, Equity, Inclusion and Belonging (DEIB) should be located in the organization’s structure – as part of the HR department or as a standalone unit. It depends on the size of the organizations and the resources available to invest in this area.
Regardless of where its place is, HR still has a role in ensuring organizations are attracting diverse candidates and utilizing inclusive hiring practices. They help create inclusive environment at work by being equitable to diverse perspectives, personalities, and backgrounds of employees. As gatekeepers, who HR allows in and out of the organization does impact the culture of the organization. Bringing inclusion into the full employee life cycle, from hiring through development and promotion to leaving, is one of the key HR trends for 2023.
Many organizations with an adhocracy culture are very diverse because there is a recognition that diversity and inclusivity often result in innovation and creativity.
Being change champions
We seem to be in the constant of change. It is the new normal in most, if not all, organizations. While change can be uncomfortable, and there is often resistance to it from employees, it is the role of HR to champion these changes.
One of the keys is effective communication. “Communication of change is the biggest challenge during organizational culture transformation. Tenured employees and new employees need to understand what is the organization’s culture, why it is changing, and how this will impact employees and the business,” explains Jodi Brandstetter, CEO & Lead Facilitator of By Design Brainery, an online learning platform for HR and Talent professionals.
During a digital transformation or organizational culture change, HR is expected to assess its own processes to determine what can be streamlined or automated to improve efficiency and the employee experience in the organization.
An adhocracy culture should not have an HR department that is weighed down with bureaucratic procedures. When an organization with a market culture wants to increase its customer share in the market and improve customer satisfaction, HR must ensure the right employees are hired, have the right skills, and receive competitive compensation.
This may require HR to conduct a compensation analysis to determine how it can change and improve its compensation structure to be competitive in the market. A competitive reward and recognition system can motivate employees to attract new customers and ensure their satisfaction.
Developing & applying policies
HR must develop policies that support employment laws and reflect and shape the organization’s culture. The HR department oversees a consistent application of these policies to ensure a culture of equity and inclusion. It helps provide a sense of predictability, stability, and safety to its employees. This is very important to organizations with a hierarchy culture.
Over to you
Organizational culture has a significant impact on how your company approaches work and business, its brand, and whether it achieves its organizational objectives. With the knowledge of different types of organizational culture, you understand which type your organization aspires to have and what you need to change to get there.
HR leaders also know they are influencers and change agents in shaping organizational culture. Most importantly, HR understands what HR initiatives would be most beneficial to its organization based on their current culture or the culture to which their organizations aspire.
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