The 4 Types Of Organizational Culture—Which Is Best?

A positive, aligned organizational culture is easy to recognize: Productivity soars, employees are satisfied and empowered, processes are clear and effective — in short, everything seems just to hum like a well-oiled machine. Many organizations stumble when trying to understand how to build a company culture. And although the importance of a healthy workplace culture is widely recognized, the truth is that most workplace cultures develop organically, not as the result of deliberate actions from leadership. Poor company culture is more than a missed opportunity — it may prevent you from achieving strategic objectives. Here’s why culture matters and how to make yours work for you.

What Is Organizational Culture?

Organizational culture is the set of shared values, norms, and practices that shape the interactions of people within an organization. Culture may be reflected in written policies, but is more likely to be expressed in unwritten rules about expectations and preferred behaviors within the organization.

In addition, as the workplace grows more diverse and the pace of business demands greater agility, leaders are increasingly recognizing the role that microcultures can play in creating culture. These are smaller subcultures that can vary across teams or departments, reflecting their unique expression of the greater organizational culture. For example, the creative department in an entertainment company will have a different microculture than the finance or technology groups at that same company. Subcultures are able to change more rapidly in response to employee or business needs, and can be excellent vehicles for driving change.

Why Is A Company’s Culture Important?

A company’s culture has broad-ranging effects on its success or failure. A poor or misaligned workplace culture can lead to low productivity, high turnover, and even negative impacts on employees' mental and physical health.

Conversely, research shows that a positive corporate culture leads to greater employee satisfaction, higher productivity, improvements in recruitment and retention and a better bottom line. According to the pollsters at Gallup, employees who feel strongly connected to their organization’s culture are more than three times as likely as their peers to be engaged at work, more than five times as likely to recommend their organization to potential employees, 68% less likely to regularly feel burned out at work and 55% less likely to be actively looking for another job. Those numbers add to one clear conclusion: leaders should be aware of and actively shape culture to align with business goals and values.

Types Of Organizational Culture

A valuable framework for identifying different types of organizational culture is the Competing Values Framework developed by Kim S. Cameron and Robert E. Quinn. This framework divides organizational cultures into four types based on two dimensions: internal vs. external focus and flexibility vs. control. Cameron and Quinn used the model to divide cultures into four categories:

Adhocracy Culture: Emphasizes innovation, flexibility and a dynamic approach to problem-solving.

Clan Culture: Emphasizes internal focus and integration, prioritizing collaboration, trust and employee well-being.

Hierarchy Culture: Centers on stability, control and internal efficiency, often featuring formalized procedures and clear organizational structures.

Market Culture: Aims for competitiveness and achievement, emphasizing external positioning and results-oriented goals.

Academics use the Competing Values Framework to understand, categorize and compare different organizations in their research into how culture impacts performance—for better or worse. Some organizations also use the CVF framework as a self-assessment tool. Let’s look at each type's characteristics, strengths, and weaknesses.

Adhocracy Culture

Adhocracy culture is dynamic and entrepreneurial. Companies with this culture focus on innovation, creativity and risk-taking. They encourage employees to experiment, think creatively and develop new ideas. These companies “move fast and break things,” as Facebook’s Mark Zuckerberg famously said.

Flexibility and adaptability are key to this organizational culture, often found in startups, tech industries and marketing. Structures are usually flat to promote agility and quick decision-making. Risk-taking and experimentation are encouraged. Employees are often given significant autonomy and responsibility.

Pros:

• This culture’s emphasis on constant innovation and creative problem-solving can lead to breakthrough products and services.
• This kind of company easily adapts to change and quickly responds to new opportunities or market shifts.
• This culture's high level of autonomy and empowerment can lead to high employee satisfaction and motivation, making it easier to attract creative and entrepreneurial individuals.

Cons:

• Adhocracies involve high risk and uncertainty, which can lead to instability and potential failures.
• Their lack of clear structure and direction can sometimes lead to confusion and inefficiencies.
• Constant innovation and change can be resource-intensive and may lead some employees to burnout.
• Adhocracies can prioritize short-term innovative projects over long-term stability and planning.

In general, Adhocracies are better suited for high-growth companies or those looking to disrupt an industry. If your company is on the cutting edge of innovation, this might be the right type of culture for you.

Clan Culture

Clan culture is like a family, where collaboration, teamwork and a sense of community rule the day. Companies with a clan culture prioritize employee involvement, commitment and morale. Leadership tends to be mentorship-oriented, with a strong emphasis on mutual trust and loyalty. The organization invests in its people, fostering a supportive atmosphere focusing on long-term employee development. There’s a strong community and shared values.

Pros:

• This culture’s strong emphasis on teamwork and collaboration can boost employee morale and engagement.
• It encourages a supportive and caring work environment with a strong sense of community and belonging.
• There are high levels of employee loyalty and low turnover rates due to a focus on employee well-being and development.
• Leadership is encouraged to act as mentors and coaches, fostering personal and professional growth.

Cons:

• Clan cultures’ intense focus on internal cohesion and traditions can make them resistant to change and innovation. They may also inadvertently squelch more diverse voices.
• Organizations with clan cultures may value consensus-driven processes, which can be slow and cumbersome.
• Focusing on internal harmony may inadvertently result in too much sameness, discouraging new and innovative thought.

Who is it for? Clan culture is a great model for non-profits, purpose-driven organizations, family companies or industries like education, where slow and steady wins the race. It is also a good culture for large legacy companies with tremendous brand equity.

Hierarchy Culture

Hierarchy culture is defined by structure and formality. Companies with this culture prioritize stability, efficiency and predictable outcomes. Roles are well-defined, procedures and control mechanisms are consistent, and the chain of command is clear. Companies with hierarchy culture may not be all fun and games, but they get the work done on time, every time.

Pros:

• These cultures provide a stable, predictable work environment with clear roles and responsibilities.
• Their well-defined procedures and policies can foster efficient, effective operations.
• The predictability and order in hierarchy cultures can yield consistent performance and quality control, which is crucial in industries like manufacturing and healthcare.
• Their transparent chain of command and expectations can reduce ambiguity and confusion.

Cons:

• Hierarchy cultures can be inflexible and slow to respond to changes in the market or industry.
• This type of culture will be less attractive to younger generations of workers, who are demanding more inclusion and engagement
• They may suffer from excessive bureaucracy and unnecessary red tape.
• This culture’s focus on rules and procedures can stifle creativity and innovation.
• Rigid structures and lack of autonomy may lead to lower employee morale.

Who is it for? The military is an obvious example of a hierarchy structure, but this culture is helpful for an organization in any highly regulated industry or where safety and reliability are paramount. Legal and financial services firms, manufacturing and industrial companies and government and private-sector organizations can all benefit from the order, accountability and predictability hierarchy cultures can provide.

Market Culture

Market cultures are results-oriented and competitive. Companies with this culture focus on achieving results and outperforming competitors. They emphasize external success and the bottom line, focusing on targets, goals and performance metrics. Employees in market cultures are driven by competition and often rewarded based on their achievements and contributions to the company’s success.

Pros:

• Market cultures’ strong focus on achieving results and meeting targets can drive high performance and productivity.
• They foster a competitive environment, which may drive excellence and continuous improvement.
• The emphasis on external success and market position can lead to strong customer orientation and satisfaction.
• Employees are often highly motivated by performance-based incentives and rewards.

Cons:

• Market cultures can be high-pressure environments that can lead to employee stress and burnout.
• Their hyperfocus on immediate results and performance metrics can lead to short-term thinking and neglect of long-term goals.
• These cultures can create a cutthroat atmosphere with internal competition that impedes teamwork and discourages collaboration.
• High expectations and pressure can result in high employee turnover if employees decide the rewards don’t outweigh the demands.

Who is it for? This “coffee is for closers” culture can be useful in sales-driven organizations and highly competitive industries. Real estate companies, retail chains, software companies, investment banks, service providers, and media and entertainment companies often thrive with market cultures.

How To Select And Build Company Culture

So, how can leaders choose and build the right company culture? The process starts with assessing and mapping the organization’s current culture against business goals. A cultural audit will help you understand where you’re starting from. Because culture can be hard to spot for people working within an organization, many leaders find it more productive to hire expert consultants.

Once a clear picture has emerged, use the framework to match strategic objectives to the cultural attributes needed to achieve them and develop a strategy and implementation plan with clear goals and metrics: What behavior are you targeting? How do you want people to act, and why? How will you follow up to ensure the changes are durable and sustainable? Next, build a team capable and motivated to execute the plan, remembering that shifting organizational culture is a marathon, not a sprint.

Reallocate resources and review HR policies, performance management systems and reward structures to support the desired culture. Involve employees in the process to ensure their buy-in and to gather diverse perspectives. Leaders must model the desired behavioral changes and champion the changes frequently and loudly. Recruit and promote individuals whose values align with the company’s cultural aspirations, offer training programs reinforcing desired cultural attributes and celebrate success.

Bottom Line

Cultural change is a long and challenging process that requires ongoing commitment, clear communication, and alignment of organizational practices with the desired cultural attributes. Still, the rewards are well worth the effort. Remember, every organization has a culture, for better or worse. With effort and persistence, you can ensure your organizational culture is pushing you forward, not holding you back.

Written by:  Tracy L. Lawrence is the founder and CEO of The Lawrence Advisory, for Forbes.