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.
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.
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.
In a functional organizational structure, groups and teams are organized based on function. Therefore, this organization follows a top-down structure, where most decision flows from top management to bottom. Thus, the bottom of the organization mostly follows the strategy detailed by the top of the organization.
In a flat organizational structure, there is little to no middle management between employees and executives. Therefore it reduces the space between employees and executives to enable an effective communication flow within the organization, thus being faster and leaner.
Project portfolio management (PPM) is a systematic approach to selecting and managing a collection of projects aligned with organizational objectives. That is a business process of managing multiple projects which can be identified, prioritized, and managed within the organization. PPM helps organizations optimize their investments by allocating resources efficiently across all initiatives.
Harvard Business School professor Dr. John Kotter has been a thought-leader on organizational change, and he developed Kotter’s 8-step change model, which helps business managers deal with organizational change. Kotter created the 8-step model to drive organizational transformation.
The Nadler-Tushman Congruence Model was created by David Nadler and Michael Tushman at Columbia University. The Nadler-Tushman Congruence Model is a diagnostic tool that identifies problem areas within a company. In the context of business, congruence occurs when the goals of different people or interest groups coincide.
McKinsey’s Seven Degrees of Freedom for Growth is a strategy tool. Developed by partners at McKinsey and Company, the tool helps businesses understand which opportunities will contribute to expansion, and therefore it helps to prioritize those initiatives.
Mintzberg’s 5Ps of Strategy is a strategy development model that examines five different perspectives (plan, ploy, pattern, position, perspective) to develop a successful business strategy. A sixth perspective has been developed over the years, called Practice, which was created to help businesses execute their strategies.
The COSO framework is a means of designing, implementing, and evaluating control within an organization. The COSO framework’s five components are control environment, risk assessment, control activities, information and communication, and monitoring activities. As a fraud risk management tool, businesses can design, implement, and evaluate internal control procedures.
The TOWS Matrix is an acronym for Threats, Opportunities, Weaknesses, and Strengths. The matrix is a variation on the SWOT Analysis, and it seeks to address criticisms of the SWOT Analysis regarding its inability to show relationships between the various categories.
Lewin’s change management model helps businesses manage the uncertainty and resistance associated with change. Kurt Lewin, one of the first academics to focus his research on group dynamics, developed a three-stage model. He proposed that the behavior of individuals happened as a function of group behavior.
Airbnb follows a holacracy model, or a sort of flat organizational structure, where teams are organized for projects, to move quickly and iterate fast, thus keeping a lean and flexible approach. Airbnb also moved to a hybrid model where employees can work from anywhere and meet on a quarterly basis to plan ahead, and connect to each other.
eBay was until recently a multi-divisional (M-form) organization with semi-autonomous units grouped according to the services they provided. Today, eBay has a single division called Marketplace, which includes eBay and its international iterations.
IBM has an organizational structure characterized by product-based divisions, enabling its strategy to develop innovative and competitive products in multiple markets. IBM is also characterized by function-based segments that support product development and innovation for each product-based division, which include Global Markets, Integrated Supply Chain, Research, Development, and Intellectual Property.
Sony has a matrix organizational structure primarily based on function-based groups and product/business divisions. The structure also incorporates geographical divisions. In 2021, Sony announced the overhauling of its organizational structure, changing its name from Sony Corporation to Sony Group Corporation to better identify itself as the headquarters of the Sony group of companies skewing the company toward product divisions.
Facebook is characterized by a multi-faceted matrix organizational structure. The company utilizes a flat organizational structure in combination with corporate function-based teams and product-based or geographic divisions. The flat organization structure is organized around the leadership of Mark Zuckerberg, and the key executives around him. On the other hand, the function-based teams based on the main corporate functions (like HR, product management, investor relations, and so on).
Google (Alphabet) has a cross-functional (team-based) organizational structure known as a matrix structure with some degree of flatness. Over the years, as the company scaled and it became a tech giant, its organizational structure is morphing more into a centralized organization.
Tesla is characterized by a functional organizational structure with aspects of a hierarchical structure. Tesla does employ functional centers that cover all business activities, including finance, sales, marketing, technology, engineering, design, and the offices of the CEO and chairperson. Tesla’s headquarters in Austin, Texas, decide the strategic direction of the company, with international operations given little autonomy.
McDonald’s has a divisional organizational structure where each division – based on geographical location – is assigned operational responsibilities and strategic objectives. The main geographical divisions are the US, internationally operated markets, and international developmental licensed markets. And on the other hand, the hierarchical leadership structure is organized around regional and functional divisions.
Walmart has a hybrid hierarchical-functional organizational structure, otherwise referred to as a matrix structure that combines multiple approaches. On the one hand, Walmart follows a hierarchical structure, where the current CEO Doug McMillon is the only employee without a direct superior, and directives are sent from top-level management. On the other hand, the function-based structure of Walmart is used to categorize employees according to their particular skills and experience.
Microsoft has a product-type divisional organizational structure based on functions and engineering groups. As the company scaled over time it also became more hierarchical, however still keeping its hybrid approach between functions, engineering groups, and management.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
