It can sound prescriptive and technical, but organizational culture is pretty straightforward — it's the culture of an organization. Culture is made up of shared values, customs, traditions, policies, social structure and the general ways in which a group of people function together.
Organizational culture includes the organization's philosophy, value system, expectations and the ways in which members work together, as well as the way leadership is organized and decision-making processes are handled. These cultural aspects can be written or unwritten and are expressed through the self-image of the company, member experiences, future expectations and the company's interaction with the world around it.
Organizational culture also encompasses the vision, goals, norms and underlying systems by which members of the organization interact. Just as there are different kinds of cultures in society, there are different types of organizational cultures, and a company's organizational culture can be fluid and changing depending on its needs and its members.
Why is organizational culture important?
Organizational culture is the foundation of an organization. In "Corporate Cultures: The Rites and Rituals of Corporate Life," authors Dean and Kennedy describe it simply as "the way things are done around here."
This is important to establish because it forms a basis of understanding about the way an organization functions. To a certain extent, every society needs a structure and a shared understanding of values, procedures, goals and expectations to be effective. When an organization has a strong organizational culture, based on clear and widely-shared values, members know how to respond to situations in line with those values, believe in the company's goals and understand how to best move toward them.
An effective organizational culture enhances the effectiveness of an organization and, ideally, the experience and purpose of its members. It makes decision-making easier, improves organizational synergy and makes the value system of a company clear to everyone within it.
What are the four types of organizational cultures?
There are four main types of organizational cultures, defined first by the business professors who conducted research on organizational culture and developed the Organizational Culture Assessment Instrument (OCAI). According to this model, every organization has a culture that is made up of primarily one or a mixture of more than one of these four types. The styles differ in their core values and the driving force of their organization's operations, as well as the functionality of the organization's leaders.
1. Clan culture
An organization with a clan culture, also called a person-focused culture, can be likened to a large family, bonded together by common beliefs and characteristics. This organizational environment is friendly and familiar, built heavily on collaboration. There is a high level of involvement among members, who believe strongly in the values held by the company. Caring for people and prioritizing needs, of both members and clients, drives this kind of organization. It is personable, involved, and heavily invested in teamwork and loyalty.
Leaders of this organization are seen as mentors and team leaders who facilitate rather than dictate or give orders. Consensus is key, and all members valued in the process of decision-making and the operation of the organization. Leaders of an organization striving to create a culture like this must invest in long-term Human Resources development and create an environment driven by communication, commitment, and personal connection — with employees, customers and everyone involved in the company's activity at every level. Also, the hierarchy of leadership should be established to be more lateral, stressing collaboration and participation from all members. The organization will likely be made up of small teams and many team leaders, working toward individual tasks together.
2. Adhocracy culture
This cultural structure is built on creative energy and adaptability. Members of the organization work dynamically to take risks and try new approaches to problems. Experimentation is valued, and there is a level of individual freedom that allows for innovation. Goals include constant change and improvement. This culture is ever-moving and adapting to what is new, different and better. Employees are encouraged to take initiative.
Leaders of this organization are considered entrepreneurs and innovators, exemplary to their employees. In order to create this kind of culture, members must be given the freedom to try — and fail — new strategies, products and approaches, establishing that the only real failure is stagnation. This culture is fast-paced, built on anticipating how the industry will change, brainstorming ways to keep up, and collaborating toward improvement.
3. Market culture
Market cultures are results-oriented and competition-driven. Values are focused on production and tangible progress. Because this type of culture is so goal-oriented, leaders are often demanding and tough, motivating competition within their companies. As the name would suggest, market cultures are profit-driven, and their culture mimics, in a way, the demands and tangible production values of the market.
Incentivizing competition is a core action of leaders of these organizations, as is creating profit-based relationships with clients and outside partners. Networking for productivity is another aspect of a market culture value, and creating these structures and relationships according to their predicted marketability will yield this kind of market.
4. Hierarchy culture
Companies that are organized with hierarchical culture are often much more formal than clan cultures, for example, with much more stratified systems of leadership and set-in-stone rules by which the organization is governed. Structure is key, and status is important. Efficiency, productivity, consistency and uniformity are valued, and there are standardized procedures by which things are done. There is a clear chain of command in leadership, and leaders are in a position of coordinating, monitoring, and organizing employees according to the company structure.
This kind of culture is more traditional — think large corporations like fast food chains or department stores. They are created through clear rules, policies, and an established uniformity that is known throughout the organization and put in place by its leaders.
How does organizational culture change?
Organizational cultures exist, primarily, to help organizations function. As an organization's needs and efficiency change over time, their culture changes with them. When the way things are done is no longer working in the organization's favor, their values, leadership structure and goals will change accordingly. While this sometimes happens organically, it can sometimes be difficult. Organizational culture is so deeply rooted in the organization's routines and daily inner workings, and members can sometimes resist change if they are used to things being done a certain way. In more hierarchical cultures, this change can be implemented by a new CEO or leader, and employees who have years of experience at the organization might resist going in a new direction.
It is important for leaders to model change within the current structure of the organization, implementing a clear vision and reasoning for new policies or belief systems that will govern the organization's new direction. In clan cultures or adhocracy cultures, these changes might be best implemented through collaborative brainstorming or framed by innovation. It's important to build an organizational culture that yields itself to adaptation and change, and this means getting everyone on board and framing the new culture in the right way.
Using organizational culture to your (and your company's) advantage:
Based on this article, which type of organizational culture does your workplace fall under? Being aware of what makes up the culture of an organization can give you the power and freedom to identify the systems behind the way your organization operates — what's working, what's not, and what you can change.
It can also help you pinpoint the kind of job you want and the kind of company you want to work for. Maybe you realize you're working in a place with a hierarchical culture, when you'd rather work for a more clan-based environment where collaboration is key and personal contribution is highly valued.
No matter the organizational culture you find yourself within, having more information about the system behind them can help you go forward, as a leader, employee, and job seeker in an informed way.