4 Different Types of Company Culture: Which One Are You?
Company culture is generally defined as a shared set of goals, values and practices that make up an organization. It influences every aspect of your business and is a priority for job candidates. Prospective employees consider things like online reviews, employee feedback and the recruiting experience when they go through the hiring process.
In fact, 52% of 90,000 respondents from 160 countries said they would turn down an enticing job opportunity if they had a poor experience during the recruitment process, found a new study released by Boston Consulting Group. A company culture that supports your team and business goals could mean the difference between onboarding a stellar candidate or losing them to the competition. That’s why you need to understand what kind of culture you have and whether it’s aligned with employees’ needs.
Different types of company culture
Almost 40 years ago, business professors Kim Cameron and Robert Quinn at the University of Michigan identified four types of company cultures. To arrive at these culture types, they analyzed data from a large number of organizations. As a result, “almost 90% of organizations worldwide can be categorized as having one or more of these culture types dominate in their organization,” according to Cameron.
Although each type is different, one isn’t necessarily better than the other. Here’s an explanation of each, along with business examples:
Clan Culture
A clan culture (also known as a collaborative culture) is characterized by its similarity to a family environment. Typical characteristics of firms with a clan culture are teamwork, employee development and consensus. These organizations are thought of as friendly places to work where employees can be their authentic selves. Loyalty and tradition are highly regarded, and managers are viewed as mentors rather than staunch, unapproachable leaders.
Example of this culture type:
Clan cultures are common in startups, small companies and family-owned businesses. One example is Zappos, an online shoe and clothing retailer. They are so committed to a positive culture that even their website states, “For all our emphasis on customer service, our #1 priority is company culture.” Known for its weird family spirit, Zappos puts happiness at the core of its culture.
Strengths of this culture type:
- High morale
- Free and open communication, and
- Encourages creativity and out-of-the-box thinking.
Weaknesses of this culture type:
- Excessive collaboration can result in too many distractions
- A very tight-knit culture may lead to pressure to conform, and
- More difficult to establish clear boundaries between leadership and employees.
Is this your company culture?
The best way to determine if your organization has a clan culture is to look at the relationships between leadership and staff. Generally, you will find few management levels. If, in addition to that, all the employees have a lot in common and consider their co-workers friends, you likely have a clan culture.
Adhocracy culture
The root of the word adhocracy is “ad hoc,” which implies something dynamic and specialized. An adhocracy culture (also known as the “create culture”) is focused on innovation. The work environment tends to be very fast-paced and high growth. Generally, employees are encouraged to come up with new out-of-the-box ideas and take risks.
Example of this culture type:
Most startups and tech companies have this type of entrepreneurial culture so they can remain competitive. Tesla is a prime example. In 2008, the company released its first electric sports car. By April 2017, Tesla was valued at a whopping $56 billion. Embracing a flat organizational structure, the company encourages flexible and fluid internal communication to problem-solve effectively.
Strengths of this culture type:
- Employees feel secure taking risks
- A high amount of growth and innovation, and
- Creative and energetic office environment.
Weaknesses of this culture type:
- The atmosphere can be highly competitive
- It may be difficult for some employees to keep up, and
- Excessive risk-taking also means a high chance of products failing.
Is this your company culture?
A creative and entrepreneurial workplace characterizes an adhocracy. Leaders within these organizations are true visionaries focused on long-term rapid growth. If your company emphasizes being at the leading edge of unique products and services, you are probably part of an adhocracy.
Market culture
Market cultures are also called “compete cultures” because the emphasis is on profitability and bottom-line results. Not surprisingly, the core values that dominate market-type organizations are competitiveness and productivity. A market culture is a results-oriented workplace where leaders are tough and demanding. Market leadership is a priority, and success is defined as outpacing the competition.
Example of this culture type:
Amazon is one company most associated with a market culture. That’s because Jeff Bezos has built an environment that is intense yet incredibly effective. The company is said to practice “purposeful Darwinism” – the idea that employee performance will increase if you create a struggle for survival. Bezos is a big fan of the word “relentless” and famously said, “You can work long, hard or smart, but at Amazon.com you can’t choose two out of three.”
Strengths of this culture type:
- Business goals are clearly defined
- Employees are highly motivated and driven, and
- Companies with this culture type can outpace the competition.
Weaknesses of this culture type:
- The constant pressure can result in employee stress and burnout
- Excessive competition internally can lead to a toxic work environment, and
- The employee experience often takes a back seat to delivering results.
Is this your company culture?
Within a market culture, market share and profit are at the forefront. Business objectives take center stage with less of a focus on community. If you find yourself being pushed daily to hit challenging targets and maximize your performance, you’re likely part of a market culture.
Hierarchy culture
A hierarchy culture (also known as a “control culture”) is characterized by work environments that are structured and process-oriented. These traditional companies can be risk-averse and rely on a clear chain of command. The power and decision-making within a hierarchy culture generally remain with those at the top, and the focus is generally on “doing things right.”
Examples of this culture type:
Industries such as oil and gas, finance, healthcare and government often have hierarchy cultures. Some examples include Wells Fargo, Goldman Sachs, Blue Cross Blue Shield and Chevron.
Strengths of this culture type:
- Goals and expectations are clear
- Employees enjoy a well-defined career path, and
- One of the most organized and stable cultures.
Weaknesses of this culture type:
- The environment can feel too rigid
- Innovation can be stifled in this culture, and
- Too much bureaucracy can slow decision making.
Is this your company culture?
A hierarchy culture is distinguished by top-down decision making and minimizing risk. There are several layers between management and employees, and responsibilities are allocated by job level. If you find yourself part of a stricter culture that likes to “play by the rules,” you’re probably part of a hierarchy culture.
The importance of understanding your company’s culture
U.S. employee annual voluntary turnover will probably jump nearly 20% this year, according to Gartner. That’s significant given that conservatively, the cost of replacing an employee can range from one-half to two times their annual salary.
But there’s a disconnect between why employers think people are resigning and what employees cite as reasons. The top three reasons for quitting identified by employers were looking for a better job, inadequate compensation and work-life balance, according to McKinsey’s research. In contrast, the top reasons given by employees were not feeling valued by the organization, not being appreciated by their manager and not feeling they belonged. Ultimately, all these reasons tie back to an organizational culture that isn’t aligned with the needs of employees.
That’s why it’s essential to identify your company culture and determine whether it’s helping to retain and attract top talent. If not, it’s time to make improvements. One way to assess your culture is using the Organizational Culture Assessment Instrument (OCAI), developed by professors Cameron and Quinn. The OCAI is an efficient tool where you distribute 100 points between four “Competing Values.” These four values correspond with the four types of organizational culture. When you complete the exercise, the framework shows where you are and where you want to go.
Of course, one of the best ways to understand your culture is by asking employees. Some ways to engage employees around this issue include:
- Conducting employee focus groups
- Administering a cultural assessment survey, and
- Creating an open forum where employees can provide honest feedback.
By intentionally creating a positive work culture, you’ll go a long way in attracting the right employees and keeping them long-term.
Employees want more than a paycheck
Remember, not every company culture will fit neatly into one of the four categories. Instead, your organization may be a blend of a few different culture types. The important thing is to be aware of where you stand today and what your goals are for the future.
Keeping employees happy requires more than just a paycheck. If you can prioritize flexibility and offer employees personal and professional growth, you’ll be able to improve productivity, retention rates and ultimately the bottom line.
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