Types of Organizational Culture

Organizational culture is a strong determinant of whether a company is successful. Culture affects the ways in which employees are recruited, trained, and engaged.

It also determines the types of employees the company will attract, the nature of their relationships with colleagues and superiors, and whether they will commit themselves to company values over the long term.

Four types of organizational culture were identified from extensive research in the 1980s by business professors Kim Cameron and Robert. E Quinn.

The pair noted that no culture should be labeled as either “good” or “bad” and found that 90% of organizations exhibit one or more of the four different types.

With that in mind, let’s describe these types below.

Aspect	Explanation
Definition	Organizational Culture refers to the shared values, beliefs, behaviors, and norms that characterize an organization. It is the social fabric that guides how individuals interact within the organization and influences decision-making, employee engagement, and overall organizational identity. A strong and positive culture can lead to improved employee morale, productivity, and alignment with organizational goals.
Key Concepts	– Shared Values: Culture is defined by the common values held by members of the organization. – Beliefs and Assumptions: It includes core beliefs and assumptions that shape how things are done. – Norms and Behaviors: Culture dictates the accepted norms and expected behaviors within the organization. – Socialization: New employees are socialized into the culture through onboarding and interactions. – Impact on Performance: Culture impacts performance, innovation, and decision-making. – Changeability: Culture can be changed over time but often requires significant effort.
Characteristics	– Distinct Identity: A unique culture gives an organization a distinct identity. – Alignment: A strong culture aligns employee behaviors with organizational goals. – Employee Engagement: Positive cultures often result in higher employee engagement and job satisfaction. – Stability: Cultures can be stable over time, persisting through changes in leadership or personnel.
Advantages	– Employee Retention: Positive cultures often lead to higher employee retention rates. – Increased Productivity: Employees in a healthy culture tend to be more productive and motivated. – Enhanced Innovation: Culture can foster an environment of innovation and creativity. – Stronger Teams: Teams in organizations with a shared culture often work more cohesively. – Attracting Talent: A positive culture can help in attracting top talent. – Effective Decision-Making: A well-defined culture can lead to more effective decision-making.
Challenges	– Resistance to Change: Changing an established culture can be challenging and meet resistance. – Cultural Misalignment: Misalignment between individual and organizational values can lead to disengagement. – Inertia: Cultural inertia can hinder innovation and adaptability. – Cultural Conflicts: Differences in subcultures can lead to conflicts within the organization.
Applications	– Cultural Transformation: Organizations may initiate cultural transformation efforts to align culture with strategic goals. – Employee Onboarding: Culture is often integrated into employee onboarding programs. – Leadership Development: Leadership development often includes training on fostering and managing culture. – Mergers and Acquisitions: Culture plays a crucial role in mergers and acquisitions as two organizations come together.
Use Cases	– Netflix: Netflix has a unique culture that encourages employee autonomy and innovation. – Zappos: Zappos is known for its strong company culture centered around customer service. – Google: Google’s culture emphasizes creativity, collaboration, and a flexible work environment. – Southwest Airlines: Southwest’s culture is focused on employee satisfaction and delivering quality service.
Implications	– Employee Behavior: Culture shapes employee behavior and influences how they interact within the organization. – Decision-Making: Culture can impact decision-making processes and priorities. – Innovation: A culture that encourages risk-taking and innovation can lead to creative solutions. – Organizational Identity: Culture defines an organization’s identity and reputation. – Competitive Advantage: A unique culture can serve as a competitive advantage in attracting and retaining talent.

Clan culture

Clan culture is an organizational structure that can best be described as “one big happy family”.

These companies nurture and mentor their employees in a supportive, team-based environment where the opinions of each individual are valued.

Communication is prioritized in the clan culture and for this reason, is often paired with a horizontal structure to remove barriers between employees and the C-Suite.

This culture is also action-oriented, welcoming of change, and supremely flexible in nature.

Benefits

Unsurprisingly, clan cultures are associated with higher levels of employee engagement, motivation, fulfillment, and performance. Their flexibility also allows for market responsiveness.

Drawbacks

The “family-style” corporate culture can become difficult to maintain in large organizations.

This is exacerbated by the horizontal leadership structure which can cause daily operations to become unfocused and lacking in direction.

Market culture

Organizations with a market culture are primarily concerned with profit margin and staying ahead of the competition.

The culture is best exemplified by companies like Amazon and Tesla that are results-oriented and externally (customer) focused.

Central to the market culture is an ability to consistently develop innovative products and services before competitors.

Internal competition between employees is encouraged with individuals rewarded and celebrated for their accomplishments.

Benefits

Employees who demonstrate high performance are rewarded handsomely with financial bonuses or career advancement. This has obvious benefits for organizational success.

Drawbacks

However, the market culture can create an environment where employees become burned out, stressed, and adversarial. Many toxic workplace cultures arise from this variant.

Adhocracy culture

The adhocracy culture is based on the term ad hoc, a Latin phrase meaning “for this”.

This culture can often be seen in start-ups that embody the “move fast and break things” philosophy. In other words, culture is invented and shaped as the company evolves.

The adhocracy culture creates an entrepreneurial work environment where employees are encouraged to be risk takers and pursue creative ideas.

Benefits

Adhocracies promote innovation, creativity, risk-taking, autonomy, and organizational growth. Employees who are encouraged to explore new avenues also feel safer and more contented within their roles.

Drawbacks

The flipside of increased employee autonomy is that the organization may lose stability and experience a low ROI on many initiatives. Employees who have never been encouraged to work with total freedom may also find this culture intimidating.

Hierarchy culture

The hierarchy culture is one most individuals have worked under at one point or another.

It is characterized by top-down control, structure, and process orientation where the objective is to streamline operations and ensure every employee is on the same page.

This means that employees under a hierarchical structure know where they fit in the chain of command.

This encompasses who they’re accountable for, who they report to, and any rules that govern these interactions.

Benefits

The hierarchy culture promotes clear and consistent communication. It also tends to be consistent and predictable which affords employees greater peace of mind.

Drawbacks

On the flip side, some employees feel suffocated by the structured and reliable nature of a hierarchy. This can result in low motivation and hinder innovative ideas that could potentially help the company grow.

Case Studies

Clan Culture:

Google: Google is well-known for its clan culture, emphasizing a supportive and collaborative environment. It encourages employees to work together in teams and values open communication. Google offers a range of employee perks, from flexible work hours to recreational facilities, to foster a sense of community.
Zappos: Zappos, an online retailer, has a strong clan culture that creates a family-like atmosphere. Employees are encouraged to express themselves and their unique personalities. The company has unique onboarding practices, including a cultural immersion program, to instill its values in new hires.
Southwest Airlines: Southwest Airlines promotes a clan culture with a focus on employee engagement. The company values teamwork and fun in the workplace, which is evident in its unique company culture events, like the annual Chili Cook-Off.

Market Culture:

Amazon: Amazon embodies a market culture, prioritizing results and customer-centricity. It’s intensely focused on achieving competitive advantages through innovations like Prime, Alexa, and its logistics network.
Apple: Apple is another example of a market culture. The company’s product launches and marketing strategies emphasize its competitive edge and commitment to delivering innovative and cutting-edge technology products.
Microsoft: Microsoft’s market culture revolves around its competitive nature in the software and technology industry. It has a strong emphasis on product development, especially its Windows and Office suites, to maintain a competitive edge.

Adhocracy Culture:

Facebook: Facebook thrives on an adhocracy culture that encourages employees to take risks and explore new ideas. The “move fast and break things” mentality encourages rapid innovation and experimentation.
Netflix: Netflix is known for its adhocracy culture, particularly in its approach to content creation. The company empowers employees to make decisions and take creative risks in developing and producing original content.
SpaceX: SpaceX, Elon Musk’s aerospace company, embraces an adhocracy culture in the space exploration industry. It encourages its employees to push the boundaries of space technology and take on ambitious projects like the development of the Starship rocket.

Hierarchy Culture:

IBM: IBM has a strong hierarchy culture, characterized by clear processes, roles, and a well-defined chain of command. The company emphasizes order, predictability, and adherence to standardized procedures.
Walmart: Walmart is an example of a hierarchy culture in the retail sector. The company’s focus on operational efficiency, inventory management, and supply chain optimization relies on a structured and hierarchical approach.
General Electric (GE): GE has historically maintained a hierarchy culture. The company’s divisions and business units operate within a structured framework, emphasizing process control and performance metrics.

Key takeaways:

Four types of organizational culture were identified from extensive research in the 1980s by business professors Kim Cameron and Robert. E Quinn. These four types were embodied by 90% of all organizations in one form or another.
In a clan culture, the company nurtures and mentors its employees in a supportive, team-based environment where all opinions are valued. The opposite of a clan culture is the hierarchy structure, which is characterized by top-down control, predictability, rigidity, and structure.
Companies such as Amazon and Tesla embody the market culture with a core focus on results and customers. The adhocracy culture, on the other hand, creates an entrepreneurial work environment where employees are risk takers and free to pursue creative ideas.

Key Types of Organizational Culture:

Clan Culture:

Description: A supportive, team-based environment that values open communication, mentorship, and employee opinions.
Characteristics: Horizontal structure, flexibility, action-oriented, emphasis on collaboration.
Benefits: High employee engagement, motivation, fulfillment, and performance; market responsiveness.
Drawbacks: Difficult to maintain in large organizations, potential lack of focus and direction.

Market Culture:

Description: Profit-oriented culture focused on competition, results, and innovation.
Characteristics: External (customer) focus, internal competition, reward for high performance.
Benefits: High rewards for performance, innovation, competitive advantage.
Drawbacks: Employee burnout, stress, adversarial atmosphere, potential toxic culture.

Adhocracy Culture:

Description: Entrepreneurial culture that encourages risk-taking, innovation, and creativity.
Characteristics: Fast-paced, creative freedom, autonomy, fluidity.
Benefits: Innovation, creativity, risk-taking, autonomy, growth, employee satisfaction.
Drawbacks: Instability, low ROI on some initiatives, potential intimidation for employees unused to such freedom.

Hierarchy Culture:

Description: Structured, process-oriented culture with top-down control and clear chains of command.
Characteristics: Clear communication, predictability, structure.
Benefits: Clear communication, predictability, reliability, sense of order.
Drawbacks: Potential for stifling innovation, low motivation, resistance to change.

Type of Organizational Culture	Description	Key Characteristics
1. Hierarchical Culture	Traditional, top-down structure with a clear chain of command and strict roles	Centralized decision-making, formal procedures, limited employee empowerment.
2. Clan Culture	Family-like environment where employees are closely connected and collaborative	Strong sense of belonging, mentorship, teamwork, informal communication.
3. Adhocracy Culture	Dynamic and creative culture that encourages innovation, risk-taking, and agility	Emphasis on experimentation, flexibility, and adaptability, less formal structure.
4. Market Culture	Competitive and results-oriented culture focused on achieving business goals	Drive for achievement, customer-centric, emphasis on performance and results.
5. Bureaucratic Culture	Rigid and rule-driven culture with strict adherence to policies and procedures	Emphasis on stability, predictability, and consistency, resistance to change.
6. Collaborative Culture	Emphasizes teamwork, cooperation, and consensus-building among employees	Open communication, shared decision-making, collective responsibility.
7. Innovative Culture	Culture that promotes creativity, experimentation, and the pursuit of new ideas	Encouragement of out-of-the-box thinking, tolerance for failure, learning from mistakes.
8. Customer-Centric Culture	Focus on understanding and meeting customer needs and delivering exceptional service	Customer empathy, responsiveness, customer feedback-driven improvement.
9. Results-Oriented Culture	Strong emphasis on achieving measurable outcomes and meeting performance metrics	Clear goals, accountability, rewards for achieving results.
10. Learning Culture	Encourages continuous learning, skill development, and knowledge sharing among employees	Investment in training and development, openness to new information and perspectives.