4 Types of Organizational Cultures to Use as Inspiration

Why Is Organizational Culture So Important?

Organizational culture is crucial to employee retention and the overall job satisfaction of your employees Globally, 90% of workers who rate their work culture as “average” have thought about quitting. Comparatively, of workers who rate their work culture as “good,” only 32% have thought about quitting—that’s quite the gap! 

4 Types Of Organizational Culture

Here’s the truth: it’s impossible to perfectly categorize your company culture into a single class—your organization is made up of a myriad of individuals, values, and subgroups that all affect one another. Still, to simplify and better understand your workplace, these four main types of organizational cultures are a great start to defining your company’s environment, habits, and behaviors.

• Clan culture focuses on cross-functional teams and collaboration across the organizational structure.
• Adhocracy culture encourages ownership. Employees take initiative, innovate and make quick decisions on their own.
• Market culture focuses on results by placing a high value on beating competitors
• Hierarchy culture places a high value on structure and processes to create consistency and scalability

Typically, organizations will have a unique blend of the four main types of culture, plus a blend of subcultures throughout different departments. Once you’ve classified your culture, carefully read through the pros and cons to get an idea of what characteristics you and leadership support, and how it reflects the  core values of your company. 

Type 1: Clan Culture

Words to describe clan culture: Collaborative, people-oriented, family-like

About clan culture: Clan culture is characterized by a high degree of loyalty, a strong sense of responsibility and the expectation that the team’s interests are taken into account. Employees feel accepted, valued and included. Team members prioritize team-building activities, social interactions, wellness and connecting with each other outside the workplace. In this type of culture, leaders praise effective behavior and collaboration. 

Clan cultures are often formed organically in organizations with small teams and tight-knit groups. Startups and small companies frequently display this type of culture and excel at creating that company harmony from the ground up. Organizational structures are usually horizontal, meaning the company only has a few levels of hierarchy, like the CEO and two other levels of management. This places more focus on cross-functional teams and collaboration instead of a disproportionate focus on authority; plus, with a shorter chain of command, communicating with leadership is quicker and more effective.

Pros of clan culture: Clan cultures often have high employee engagement and team members feel like their work-life wellness is prioritized. Team dynamics lend themselves well to brainstorming and innovative solutions since every member feels comfortable sharing their ideas. Clan cultures encourage loyalty and dependability, which results in each individual doing their part to accomplish a common goal. With less emphasis on authority, leaders tend to take on a mentorship role, which can inspire feelings of security and creativity in team members.

Cons of clan culture: Perhaps the most notable limitation of clan culture is its scalability. As organizations grow, it becomes increasingly difficult to maintain clan cultures. Bigger organizations often have more levels of hierarchy and stricter processes may not allow for fluid collaboration. Since teams are so invested in each other as individuals, teams also may turn tasks that are best for a single individual to take on into collaborative projects that take longer than they need to. It may also be difficult for clan cultures to make decisions effectively. Organizations with clan culture need to remember the importance of authority and still offer a chain of command so that, when it comes time to making decisions and getting tasks accomplished efficiently, there is someone directing traffic, ensuring everything is on track, and offering a sense of leadership and surety.

Developing a Clan Culture: The best way to develop a clan culture in your organization is to seek employee feedback and act on that employee feedback. Consider sending out an employee engagement survey that asks your employees to provide insight on aspects of your culture such as collaboration, communication and leadership.

Type 2: Adhocracy Culture

Words to describe adhocracy culture: Innovative, entrepreneurial, risk-taking

About adhocracy culture: Adhocracy culture, also sometimes called “create culture,” encourages employees to take initiative, innovate and make quick decisions on their own. In this culture, team members are encouraged to take ownership of projects and make decisions without needing to run everything through with a manager. Project owners are given the freedom to execute on ideas in the way they deem most suitable for the organization. Teams aren’t limited by strict processes and procedures and risk-takers are often rewarded when their efforts are successful. Adhocracy is often found in start-up companies and ventures that require a lot of flexibility and adaptability from their employees.

Adhocracy cultures often prize the John C. Maxwell quote, “Fail early, fail often, but always fail forward.” By focusing on advancement, creativity, and growth, adhocracy tends to take an entrepreneurial approach to business, which can be exciting and lucrative, but also challenging and risky at times.

Pros of adhocracy culture: Companies with an adhocracy culture are often extremely innovative, allowing them to see rapid growth, high-profit margins, and even a level of notoriety among competitors. This type of organization is also able to adapt quickly to market changes and customer needs since they thrive on flexibility and creativity.

From an employee standpoint, all members are invested in their work and are inspired by the challenge to break the mold. They feel safe to explore new ideas and push the boundaries of existing processes. Plus, individuals have a lot of freedom to nurture their own careers, with frequent opportunities for team members to learn new skills and participate in professional development activities.

Cons of adhocracy culture: Adhocracy culture can be intimidating for employees with less experience in the field. The fast-paced work and frequently changing priorities can overwhelm and stress out team members who haven’t worked in this type of environment before and instead crave a sense of stability. This type of culture also has the potential to develop competition between employees as the pressure to innovate grows, which can stifle collaboration and paradoxically make your teams less productive or creative.

Developing an Adhocracy Culture: To create an adhocracy culture, focus on implementing plenty of brainstorming sessions that allow employees to freely share big ideas that may help drive revenue and growth in your overall business strategy. It’s also helpful to recognize and reward your “out-of-the-box” thinkers to incentivize other employees to share their big ideas.

Type 3: Market Culture

Words to describe market culture: Competitive, results-oriented

About market culture: If your company falls into this culture, you’re emphasizing one primary goal: results, results, results. Market culture is also known as “the competitive culture” because it focuses on the bottom line and puts a high value on beating competitors. Market cultures are typically found in large global organizations with vertical hierarchical structures. Employees are rewarded for producing measurable results that track back to the organization’s main priorities.

Pros of market culture: Team members are highly motivated and work very hard to succeed. Employees are typically very good at identifying problems and finding solutions, making them an excellent asset for companies in a competitive environment. Organizations with market cultures often see high profitability due to the consistent efforts of each individual toward a common goal. Being so in sync can be good for camaraderie and ensures your teams are working like a well-oiled machine.

Cons of market culture: Since team members feel pressure to produce results, burnout is a common side effect. Since every outcome needs to be tied to a KPI, team members may find it difficult to find a greater purpose behind their work that motivates them as an individual. The need for constant production can also create less space for professional development activities. There may be more fulfillment from a business perspective, but there may not be a lot of personal fulfillment at an individual level.

Developing a market culture: Because market culture is so results-oriented, be sure that each employee understands the metrics that contribute to the success of their role or team. You may also consider implementing an employee recognition program to reward top performers and encourage others to produce similar results.

Type 4: Hierarchy Culture

Words to describe hierarchy culture: Efficiency, stability, process-oriented

About hierarchy culture: Hierarchy culture is often found in large organizations with clear chains of command. There is a high value placed on structure and processes that creates consistency and repeatability. Every decision is made based on existing procedures and teams are expected to follow procedural guidelines exactly. This type of organization may have a more formal dress code than other organizations, looking for uniformity and professionalism in the workplace. Leadership rewards top performers with promotions and team members work with the goal of securing this type of recognition.

Hierarchy cultures also place a strong emphasis on training. New employees understand very clearly what they are expected to do and have a reliable source of authority and support. During onboarding, you likely review your organizational chart and let employees know who they should contact for various questions.

Pros of hierarchy culture: The focus on procedures often results in a very stable working environment with a lot of clarity, which can be especially helpful for people new to the workforce. The overarching goals of the organization don’t change frequently, so employees know exactly what is expected of them and what they need to do to meet those expectations. This level of security and predictability allows team members to focus on producing quality work rather than worrying about competing with other individuals or trying to keep up with changing priorities. Employees tend to be very efficient and reliable with their work.

Cons of hierarchy culture: Hierarchy cultures can be extremely structured, making it difficult for employees to break out of the mold or take the initiative. The rigid structure of hierarchy culture also makes it difficult for employees to collaborate across teams since there are very distinct boundaries between departments. You’ll see a lot of consistency, but you’ll also see lower levels of innovation, creativity, and even excitement in individuals.

Developing a hierarchy culture: To develop a hierarchy culture, focus on forming rules and policies that support the organization’s long-term goals and objectives. You should also spend time establishing and communicating a clear chain of command that separates employees from leadership.

One type of culture isn’t strictly better than the other, but wherever yours falls, it’s essential to be aware of your strengths and your blind spots so you can better protect your business and employees from falling into an unhealthy work environment. Remember: company culture is foundational to the success of your business and the happiness of your employees.

Is employee wellness a strength or a weakness under the culture classification you identified? No matter what type of culture you have, your employee benefits are a huge influence on creating a healthy and productive environment. Luckily, you don’t have to figure it out all on your own. Talk to a wellbeing specialist today to discover new ways to take care of and engage with your employees.