January 26, 2023
A strong organizational culture is the backbone of your company, but it is something that many often overlook. Your company culture is the shared values, practices, and attitudes of those in your company, and it impacts every aspect of your business. A 2019 Glassdoor study found that 77% of adults evaluate company culture before applying, with 73% saying they wouldn’t apply if the company’s values don’t align with their own. From employee motivation and satisfaction to your financial success, organizational culture is a vital part of your business.
In this article, you’ll learn all about what organizational culture is, what the four types of organizational culture are, why it matters, and what you can do to better your own company’s culture.
What is Organizational Culture?
Firstly, it’s important that you understand exactly what organizational culture is. The name may seem self-explanatory, it’s a little bit deeper than it seems. To put it simply though, organizational culture can be defined as the collection of values, traits, practices, and behaviors that influence the daily actions of everyone at the company.
It’s important to keep in mind that organizational culture is not the same as a mission statement or goals. Your mission statement and goals may be related to your company culture, but your culture is something separate. A better indicator of your company culture is how people react to different situations, such as how you adapt to changes in customer demand, how a manager responds to employee questions, how a CEO navigates a crisis, etc.
Now that you know what organizational culture is, it’s time to move on to the various types of organizational culture and what they mean for your company.
What Are the Four Types of Organizational Culture?
There are four types of organizational culture that have been identified, and each of them has its own pros and cons. Understanding each of these will help you make a more informed decision about which one is best for you, so let’s take a closer look at them
As the name suggests, clan culture is a very people oriented culture that places an emphasis on teamwork, collaboration, and communication. It often gives the company a family-like vibe that encourages employees to work together, communicate with higher and lower level staff members, and be flexible.
This type of organizational culture is most common in smaller companies such as start ups, as the family-like set-up works best with smaller teams. Team building activities are also common since they encourage employees to bond, communicate, and work together.
Strengths of Clan Culture
- High employee satisfaction, engagement, and morale.
- Adaptable and flexible.
- Very collaborative, which can drive innovation and success.
Weaknesses of Clan Culture
- Difficult to use in larger organizations.
- Can result in a lack of direction in the long term.
- Requires lots of involvement to keep going.
Unlike clan culture, adhocracy culture is much more focused on taking risks and innovating. These companies place a high value on creativity, individuality, and ideas. Furthermore, they encourage employees of all positions to share their ideas and help push the company forward, constantly adapting to the current market.
These companies often have brainstorming sessions, pushing employees to bring their creativity to the table. Big tech companies frequently use this model since they’re focus is on coming up with the best new tech possible.
Strengths of Adhocracy Culture
- Increased innovation and adaptability, which can boost profits.
- Highly motivated employees.
- More professional development for employees.
Weaknesses of Adhocracy Culture
- Risks have the potential to not pan out.
- Can create competition between employees.
Market culture is one of the more traditional types of organizational culture, placing most of the emphasis on profit margins and growth. Companies with a market culture are focused on the bottom line and their ROI (return on investment). Employees each serve their specific role in the greater organization, and there is a clear separation between lower level employees and management. These companies are highly focused and driven towards their goal of higher profits.
Strengths of Market Culture
- Highly profitable.
- Focused towards a clear, unified goal.
Weaknesses of Market Culture
- Risk of employee burnout.
- Employees may end up not feeling valued.
- Potential for poor work-life balance.
Hierarchy culture is what most think of as the classic organizational structure; there is a boss at the top and a clear chain of command all the way down. These companies have a clear hierarchy, with each employee having a clearly defined boss above them. They often have strict guidelines and procedures for how things function, whether that be dress codes or sending emails.
Though you may think this type of organizational culture would be limited to older, larger, more established companies, many newer companies both large and small have this type of culture as well. That being said, many younger people find this sort of structure dated and limiting.
Strengths of Hierarchy Culture
- Very organized with a clear hierarchy.
- Avoid risk and tend to be stable.
Weaknesses of Hierarchy Culture
- Can limit creativity.
- Often have a hard time adapting.
- Employees may feel left out or underappreciated.
How to Identify the Culture Within Your Organization
Before you can focus on improving your company culture, you have to identify the culture within your organization. It may sound like a big undertaking, but it’s not as hard as it seems if you know what to look for.
Firstly, you need to take a step back and assess your company. How does your CEO handle crises? What are your company’s goals and values? How freely do people communicate and share ideas across departments and organizational levels? Does your company place an emphasis on employee training or team building? Asking questions like these can help you zero in on how your company operated day to day. However, this is only a starting point.
One of the best ways to assess your company culture is by talking to your employees. They are the heart and soul of your company, so see what they have to say. Employee feedback is incredibly valuable, and it is a great way to see how your employees view your company. Whether you have one-on-one meetings, do an anonymous survey, or have group meetings, get your employees’ input on your company culture and the employee experience.
Another thing you can do is identify weaknesses or issues within your company, as they may point you towards what type of organizational structure you have. For example, if you are dealing with a lot of disruptive behavior, it may indicate you have a hierarchical or market culture that is placing too much stress or competition on employees. These types of organizational cultures often can lead to a toxic work environment.
Lastly, don’t be afraid to take advantage of tools that can help you identify your type of organizational culture. Something like the StrengthsFinder program can help you identify your company’s strengths, allowing you to figure out which culture you have and which would work best for your company.
Impact of Organizational Culture on Employee Engagement and Performance
Organizational culture can have a big impact on employee engagement and performance. According to a Deloitte study, 88% of employees and 94% of executives believe a distinct workplace culture is important to success. Meaning, organizational culture impacts every action throughout a company, so it has impacts on all employees.
Focusing on employees, it’s no secret that people are going to be more motivated and dedicated if they feel like they are appreciated and valued. If an employee feels like they are a key part of the team, they are more likely to do a better job, be motivated, and stay with the company. The data backs that up as well, with a 2018 TinyPulse survey finding that employees who don’t like their company’s culture are 24% more likely to leave for another company.
From a management and leadership perspective, organizational culture has a big impact as well. Being a manager or leader can be stressful, but having a clearly defined culture can make that easier. Whether you have a hierarchical culture with a clear chain of command or a clan culture focused on collaboration and communication, an organizational structure can allow you to more effectively manage your team(s) and know exactly what role you play in the company.
Future of Organizational Culture
As always in the world of business, organizational culture is constantly changing. Although the future of organizational culture is impossible to predict, but there are some clear trends that will likely play a big role in the future. Let’s take at things gaining popularity now and what they may mean for the future of organizational culture.
Technology and Remote Work
Technology and remote work are already starting to play a role in organizational culture, and they will almost certainly play an even greater role in the future. A SHRM survey of 1,700 workers found that 48% will “definitely” look for the ability to work remotely in their next job. With such a large percentage of the workforce wanting the ability to work remotely, it will surely impact the types of organizational structures used in the future.
The Globalized World
Tying into technology, our digital world has helped make our society and marketplace increasingly global. More and more companies are hiring remote workers from all over the world, and more companies are doing business outside of their own country. As a result, organizational culture in the future will have to adjust to accommodate varying cultural norms and practices across the world.
Build Your Organizational Culture
Finally, organizational culture is an incredibly important part of your business that impacts the day-to-day operations of your organization. From low level employees to the CEO, corporate culture influences how everyone in your company works and communicates. A clearly defined and strong organizational culture will help your company thrive and be successful.
Start focusing on your organizational culture today and get in touch with us. We have a large selection of team building events and other events that can help you identify and improve your type of organizational culture, motivate your employees, boost morale, and more, so start working on your company culture today.