Organizational Culture: Why is it important?
Your business identity is a unique combination of organizational cultures. Here’s how to identify them and take advantage of their strengths.
From recruiting the right people to hitting your targets, organizational culture plays a pivotal role. But it’s not a case of ‘one size fits all’. Your corporate culture is unique to you and underpins your identity as a business.
According to the Harvard Business Review, ‘Great culture should provide continuous alignment to the vision, purpose, and goals of the organization.’
Taking this as a starting point, it means workplaces need cultural flexibility and ongoing evolution. Leaders need to aim for and encourage the most creative and productive workplace culture – or usually a combination of cultures – for their business. This is why understanding the different types of organizational culture and their strengths and weaknesses is so essential.
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Why does cultivating a positive workplace culture matter?
Toxic workplaces are costing businesses billions, according to a 2020 report by SHRM, the Society for Human Resource Management in the US. Nearly half of the employees in its survey said they had thought about leaving their current employer due to an issue with company culture. And almost one in five had left a job for precisely that reason within the last five years.
Managers are also aware of the value of having a working environment that works. The National Bureau of Economic Research revealed that 9 out of 10 senior executives believe improving their corporate culture (and overall employee experience) would increase their organization’s value. Compare that with just the 16% who see their culture as being where it should be.
Where did the idea of organizational cultures come from?
Elliott Jaques, a Canadian psychoanalyst and management consultant, is most frequently named as the man behind the concept of culture types, which he introduced in his 1951 book The Changing Culture of a Factory. But it was 30 years later when the idea took off.
Since then, it’s played out in many different ways, with academics, psychologists and authors creating their own categories in line with their personal experience and research. The resulting insights offer business leaders some powerful ways to engage with, evaluate and develop their own particular culture.
What are the 4 types of organizational culture
There isn’t a finite list of corporate cultures, but the four styles defined by Kim Cameron and Robert Quinn from the University of Michigan are some of the most popular. These are Clan, Adhocracy, Hierarchy and Market. Every organization, so the theory goes, has its own particular combination.
1. Clan culture
A hallmark of many small businesses, start-ups and family-run organizations, Clan culture has an inward focus. It nurtures those who work within the company and emphasizes interpersonal relationships, communication and collaboration. By doing so, it aims to create one big happy family.
The advantages of a Clan culture
Replacing traditional organizational hierarchies that adopt a more horizontal structure, Clan culture breaks down barriers and results in strong, tight-knit teams. Mentoring relationships flourish, people share knowledge, and leaders readily turn to their people for feedback and ideas. It’s also a model that embraces change – think of the flexibility of start-ups.
The clan model is a happy one. And happy, engaged employees who feel valued, supported and respected are more likely to go the extra mile – which is good for people and good for business.
For companies relying on remote working or with a high proportion of frontline or deskless workers, like salespeople and other offsite employees, this particular type of organizational culture can be hugely powerful, unifying teams and encouraging loyalty.
The disadvantages of a Clan culture
As a company gets bigger, this horizontal structure can cause limitations as it lacks the strong, decisive leadership needed to drive the business forward and provide clear direction. Leaders who try to be everyone’s best friend can find it harder to exert authority or make unpopular decisions.
The focus on individuality can also lead to personality clashes without the hierarchy often needed for decision-making. People can lose sight of where they fit in. The apparent lack of rules can open up the potential for inappropriate behavior, like discrimination.
There’s also the possibility that Clan culture creates a fear of speaking up against the group's consensus.
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2. Adhocracy culture
A culture that runs on adrenaline and thrives on disrupting the status quo. Defined by its readiness to take risks, an Adhocracy culture prizes innovation and initiative and rides the waves of change with confidence. It also fails fast and learns from mistakes quickly to make the necessary changes next time. Tech companies are a prime example: entrepreneurial, dynamic and visionary.
The advantages of an Adhocracy culture
This organizational culture aims high and frequently achieves those heights, both in terms of profit margins and employee engagement. This cultural model rewards confidence and creativity, and the door is always open for people with bright ideas, whatever their position in the company.
It’s an environment that supports the individual’s professional progression where the quality of what you bring to the brainstorm counts. Like Clan culture, Adhocracy offers excellent flexibility but adopts an outwards focus with a keen eye on the future. Adhocracy cultures will ask questions like ‘what can we do that others can’t do or aren’t doing?’
The downsides of an Adhocracy culture
Given the individualistic approach that it supports, Adhocracy can ramp up competition in the workplace. This can be highly motivating, but there’s also the danger of excessive stress and anxiety among employees who are afraid of being outdone by their peers and losing out financially or reputationally.
Equally, when a business takes risks and the stakes are high, there’s always a chance that those risks won’t pay off. And that can be damaging for individuals as well as the organization itself.
3. Market culture
The most aggressive of the organizational culture types. Expect a workplace driven by targets, deadlines and the need to get results, with staff performance closely monitored. Clan and Adhocracy cultures embrace flexibility, but Market culture needs stability to function, making it a common feature in bigger and long-established companies.
It’s also outwards focused, keeping its sights trained on the customer and how to beat its competitors. Reputation matters, as does staying one step ahead.
The advantages of a Market culture
Results, results, results. With a focus on success - and driven by ambitious leaders pushing people to achieve - teams often meet targets, exceed expectations, and help maximize profits.
This is an organizational culture that unites teams in the quest for a big win to benefit its customers or its shareholders. And it can be a rewarding environment for employees too. Not only because of the generous financial incentives on offer but also from being in a workplace that encourages ongoing professional learning and development.
The disadvantages of a Market culture
Burnout. Being constantly pushed to achieve in a highly competitive environment can significantly impact employees' health and well-being and their ability to collaborate. It can affect productivity and morale, which can have a damaging effect on the bottom line.
4. Hierarchy culture
A place for everyone and everyone in their place. There’s a formality to this particular organizational culture, with leaders at the top and an established chain of command. In essence, it’s the traditional corporate structure.
The advantages of a Hierarchy culture
Along with the clarity of roles and responsibilities comes efficiency, coordination and organization. Unlike the risk-taking Adhocracy culture, this model is all about policy, planning, process and precision. Its aim is steady growth through an incremental change where stability and a smooth-running business are the priority.
For those who like clear direction, this is the perfect working environment. The structure creates a sense of security and lays out a clear path for promotion – and the increased status and influence that comes with it. This can be very motivating for employees.
The disadvantages of a Hierarchy culture
Stability can quickly turn into rigidity. It’s perhaps unsurprising that Hierarchy culture is also known as control culture. There’s little or no room for spontaneous creativity, and without this innovative spirit, companies can be slow to adapt and risk becoming less competitive. Life experience is less important than where you sit in the hierarchy.
This model can often fail to accommodate someone’s need for flexibility – for example, around childcare or sickness. And the needs of the company must always come first. Meanwhile, recognition through promotion can bring unhealthy levels of competition.
It can cost more, too. Multiple layers of upper management can also mean higher costs to the business, putting pressure on budgets spreading financial incentives being more thinly across the rest of the organization.
How can you change your organization’s culture?
Identifying your current cultural type is the first step. What are its strengths and weaknesses? Is it keeping pace with changes in the marketplace and the wider world? For example, the rapid adoption of remote working has changed how many businesses function and shifted the focus for employees about job satisfaction and security.
Employee satisfaction surveys and self-assessments can be invaluable here, along with feedback from customers and suppliers. Examine the unspoken norms, assumptions and expectations. Look at how people behave towards each other, their daily working habits, and what your high-performing employees have in common. Your aim is to understand the way people work.
Once you know where you are, you can think about where you want to be. And you can identify which elements of the different culture types are the best fit for your vision.
5 steps to cultural transformation
Define your core values
Why do you do what you do? This includes the way you treat your people, suppliers and customers. These core values guide every action your business takes. When you know what they are, communicate them to your employees and explain what they mean for the organization and everyone in it.
Lead the way
Make sure your business leaders understand their role in the transformation. What do they need to know, feel and do to make the cultural shift successful? Are they equipped to communicate the key messages and support their teams during the transition?
Share your vision, update your teams regularly and invite feedback. The way your people work on a day-to-day basis is a defining feature of your corporate culture. People play a vital role when moving the company forwards. In the words of the 2021 Deloitte Global Human Capital Trends report: “By linking the deeds of individuals at any level to larger goals, leaders can give meaning to even the most ordinary actions.”
Recruit the right people
Corporate cultures need diversity. So the aim is not to have a workforce that all think, act and look the same. Instead, find individuals who can contribute in their own unique way while still sharing - and adding to - your organization's values.
Be consistent – and patient
Monitor and analyze progress and stay focused. Corporate culture is deeply rooted in every aspect of the business and how it functions. To quote the Harvard Business Review, changing your culture requires ‘a movement, not a mandate...’