9 Different Types of Organizational Cultures You Can Model for Success
Workhuman Editorial Team
8 min read
Having an effective corporate culture is one of the most important factors for business success. It is directly tied to the company's bottom line and can have a huge impact on how employees interact with each other, their motivation levels, and how well they perform in their roles.
But, how do you cultivate that winning culture? What does it look like?
Depending on the needs and vision of a particular organization, there are various types of organizational cultures that can be modeled for optimal success.
This article will provide an overview of nine specific types of company culture, introducing their main characteristics and offering guidelines on how to implement them in your own business.
By understanding the unique traits and benefits associated with each type, you can identify which current culture best suits your organization's needs.
Read on to find out more about the common types of culture and which types of organizations each one is suitable for.
9 types of organizational Culture
Here we'll go over the nine main types of organizational cultures, along with their specific characteristics and benefits.
1. Clan (or collaborative) culture
As its name suggests, clan culture focuses on teamwork and creating a sense of family within the organization. Employees in companies with a clan culture are encouraged to make their voice be heard and each employee is seen as a valued member of the workforce.
Employee feedback on what they'd like to see change and how they view the organization's culture is key.
This work environment of high employee engagement fosters a high level of collaboration and commitment of employees to achieving the firm’s goals. It also leads to happier, more engaged, and more productive employees. However, the lack of clear leadership can also be problematic at times.
In terms of management structure, that of clan culture is horizontal. Teams within the organization aren’t micromanaged, instead, they’re trusted to get their work done autonomously.
That being said, clan culture doesn’t mean that there are no organizational rules. It means that there are rules, but employees are encouraged to follow those rules because they believe in them, not because they’re forced to.
Clan culture works best in smaller companies such as start-ups and family-owned companies. However, huge tech companies such as Google also incorporate some degree of clan mentality in their culture.
Pros
- Stronger relationships among coworkers, creating a more “relaxed” environment
- Employees are given the opportunity to provide open and honest feedback without repercussions
- High possibility for market growth due to similar company goals
- High engagement at work
Cons
- "Employee-first" mindset makes it difficult to take charge and make tough decisions
- Can hinder productivity due to too much collaboration or unnecessary chatter
- Workplaces can become too relaxed, causing employees to abandon some of their responsibilities
2. Hierarchy (or control) culture
On the spectrum of workplace cultures, hierarchical structures lie on the opposite end of clan culture. The biggest difference between the two approaches is their leadership structure. While the structure of a pure clan culture is horizontal, those of hierarchical structures are vertical, with a clear chain of command.
This involves having clearly defined layers of management. Hierarchy-based companies have highly centralized control when it comes to the organization’s rules and operations. Companies with this culture often have strict oversight from each layer of the hierarchy over the one below it.
In some industries, such as banking and insurance, this kind of organizational culture is highly conducive to productivity and success. This is due to the clear-cut sense of direction and explicitly defined roles of each employee. This ideology is also suitable for oil and gas companies.
On the other hand, companies in industries that need innovation and creativity do not find strict hierarchical structures attractive, because they do not encourage innovation or creativity.
Pros
- Organized and efficient work environment
- Responsibilities allocated by job level
- Clear authority and boundaries between employees
- Seamless lines of communication
- Greater sense of workplace security
Cons
- Strict, "by the book" ruling hinders creativity and flexibility
- The work environment can feel stifling and impersonal
- Less focus on employee development and well-being, which can result in quick employee turnover
3. Adhocracy (or creative) culture
Adhocracy culture is often the way that companies in tech-based industries opt to go. Similarly to clan culture, adhocracies give employees the space and freedom to experiment, take risks, and come up with new ideas.
Adhocracy is one culture that best suits companies that need to constantly innovate cutting-edge, new products or services to stay competitive.
For example, start-up and tech companies need to be able to attract the premier talent in the market. When jobseekers see that a company allows them to use their skills and experience completely, they are more likely to want to work there.
A prime example of a successful corporation with an adhocracy culture is Nike.
Pros
- Constant innovation and growth
- Versatile and flexible work environment
- High risks can result in high rewards
- Leaders prioritize the professional development of employees
- High level of trust and support among employees
Cons
- Lack of clarity about the organization's goals
- Work environments can be chaotic and unpredictable
- No set rules or procedures, making it difficult for some employees to adapt
- High expense fees for unsuccessful ventures
- Employees may feel pressured to come up with new, fresh ideas all the time
4. Market (or compete) culture
Market culture involves placing the company’s bottom line above all else. Extremely results-oriented, companies that adopt this culture encourage their employees to not only compete against other companies but also among themselves.
Market culture is often adopted within the larger framework of a hierarchy culture. Individuals within the organization can move up the ladder by beating out their peers in aspects such as sales volume and efficiency. This is the culture adopted by Amazon with great success.
The advantage of market culture is that it makes employees inherently inclined to further the firm’s interests. This is because it’s also in their own interest to do so.
On the other hand, this highly competitive setting can be unhealthy and create a toxic work environment that discourages prospective employees from wanting to work there.
Pros
- Employees are given bonuses and promotions for hard work
- Competitive atmosphere encourages employees to push their limits when reaching company goals
- Constant innovation to outpace the competition
Cons
- Constant competition among employees can foster a toxic work environment
- Highly-competitive environments can cause stress and burn-out in some employees
- Demanding workplaces can result in high turnover
- Company success is tied to employee performance
5. Strong leadership culture
This kind of culture refers to having charismatic individuals at the top of the firm’s hierarchy. The leader's job is to set a clearly defined purpose and vision for the workplace and to communicate that vision to employees in a way that makes them buy into it.
In order for this culture to be effective, corporate leadership can’t just be all talk. They have to lead by example through their actions and set the tone for other employees to follow.
This culture also places a strong emphasis on employee development. This comes in the form of an abundance of training programs and mentorship for employees at the lower positions of the firm.
This is because such companies prefer to promote from within as opposed to making new hires.
Pros
- Fast-paced environment that rewards top performers
- Provides employees with ample opportunity to develop their leadership skills
- Commitment to helping employees progress their careers
Cons
- Strict competition among employees can result in a stressful environment
- Not everyone likes being pushed to become leaders
For more information on how a strong culture can build up employees and their resiliency, check out this white paper. Read it now!
6. Customer-first culture
Traditionally, companies have created products and services first and then tried to create demand for them through their marketing efforts.
However, more and more companies nowadays are shifting towards basing their operations and R&D on market research. This involves conducting surveys to find the gaps in the market in terms of what customers need and then striving to meet those needs.
The number one priority of a firm with a customer-first culture is to maximize customer satisfaction in every way possible.
This isn’t limited to just the firm’s product offerings, but it also includes how its employees interact with customers. A great example of this is Xerox, who understood the importance of people-to-people relationships in relation to developing customer satisfaction. With this mentality, they were able to regain their lost market share in the 80s.
Another great example of a firm that has successfully adopted a customer-first culture is Trader Joe’s. This grocery store chain has one of the highest customer satisfaction scores in the US because its employees will go to great lengths to satisfy customers.
Pros
- Loyal customer base
- Promotes a happier, more engaged workplace
- Fosters innovation by trying to always improve the customer experience
Cons
- Can have negative financial impacts such as always accepting returns
- Not sustainable for price-focused companies
7. Role-based culture
Role-based culture is another type of corporate culture that doesn’t place much stock in hierarchy.
Instead, the roles and responsibilities of employees in companies that adopt this culture are based on each employee’s expertise and skill set.
A role-based culture is designed to put employees in positions where they’re most likely to be successful and efficient in getting the work done.
This is in direct conflict with hierarchical structures, because an employee can be assigned to lead a critical project instead of their manager, for example. This decision is based on the merit of their expertise in the matter at hand.
Pros
- Employees take ownership of the decisions and work assigned to them
- Employees have a clear role and purpose
- Higher qualifications equal higher wages
Cons
- Employees with high qualifications can be difficult to find
- Managerial positions don’t hold much weight, which can lead to entitled employees
8. Task-based culture
As opposed to role-based cultures, task-oriented cultures assign tasks according to skill set rather than job titles or expertise. Employees are tasked with a variety of responsibilities, beyond what they initially signed up for.
For such a company to succeed, employees need to wear multiple hats and demonstrate an excellent knowledge of the industry as a whole. They must be willing to carry out tasks outside their given profession.
Task-oriented cultures are often seen in small businesses or start-up companies that don't have a lot of employees.
Pros
- Employees have the capacity to carry out different tasks
- Little regard for hierarchies, so employees are treated the same regardless of position
- Employees fulfill more than one staff position, removing the need to hire additional staff (pro for the employer, con for the employee)
Cons
- Employees might feel overworked and taken advantage of
- Performance might be lacking in some areas
9. Purpose culture
This type of organizational culture is more prevalent in non-profit organizations as opposed to companies focusing on their bottom line.
It involves creating a work environment in which employees are working for a common cause that is often non-monetary. This could be something such as human rights or environmental sustainability.
Pros
- Focuses on giving back to the community
- Employees work towards a greater cause, giving them a sense of purpose
- Employees united by similar goals of sustainability and communalism
Cons
- May cause a groupthink mentality, which can result in dysfunctional or irrational decision-making
- Reduced profit margins due to giving back to the community
The role of corporate culture
Culture is extremely important in shaping how a business is viewed both by its employees and the public. It also has a major impact on how the company functions internally and the paths it takes as a whole.
To understand how workplace culture plays such a vital role in company success, let's dive into the finer details:
Increased profitability
Having a great culture isn't just good for morale. It also plays a major role in your bottom line. Corporations that score in the top 25% for employee experience report almost 2x the return on sales and 3x the return on assets.
Brand image
Workplace culture is an essential component in the coherence of its brand image and identity. In order for the image the firm portrays to be credible, the way it operates must be in line with the company values implied by that image.
Employee attitude
At the end of the day, an organization is a product of the people that work in it.
Therefore, if a firm’s employees are happy and satisfied with the way things are done in the workplace, they’re more likely to be productive. One study by the University of Warwick found that happy employees are 12% more productive on average, and reached as high as 20% over the control group.
They’re also more likely to want to stay put and not seek employment elsewhere. In fact, employees who have a sense of meaning and purpose, and who's values align with the company's, are 4x as likely to love their jobs.
Sense of direction
Having a sense of direction for the company is paramount to cultivating an effective and productive organizational culture.
This includes the words used to describe your company culture. By establishing a mission and vision statement, companies are able to articulate their core values and align employee activities with the desired organizational goals.
This allows employees to understand their role within the organization and create a collective understanding of how the company should move forward in order to be successful.
One IBM study of more than 23,000 employees found that employees who feel their work is consistent with organizational values are 50% more likely to report a positive employee experience.
How to choose and build a corporate culture
When selecting and constructing a corporate culture, it is essential to take a variety of factors into consideration. These include the company's mission and vision, desired customer experience, employee interactions and preferences, values, norms, and external influences such as competition or industry trends.
A great way to gauge how your employees are responding to your organizational culture is through regular employee feedback.
One of the main things you need to determine is what culture gives your company the best chance to succeed. This will in large part be decided by the nature of the industry you operate in.
For example, if you operate in the tech industry or any other industry that requires your organization to be highly innovative to stay competitive, you’ll want to adopt a culture that’s conducive to that.
Fostering a Clan or Adhocracy culture that creates an environment where employees work hard to develop new ideas would be an ideal fit.
Building an effective company culture starts from the top. As a business leader, you’ll need to first clearly establish the vision and values for your organization.
Company leaders then need to communicate these values and diffuse them throughout the organization in a way that will encourage buy-in from team members.
The best way to do so is to lead by example. Employees are more likely to view the company culture as credible if the example set by management is a positive one.
FAQ
Here are some commonly asked questions (and the answers to them) regarding organizational culture:
What are the main 4 types of organizational culture?
The four distinct types of organizational culture are:
Clan: Also referred to as collaborative culture, this approach involves creating a sense of a closely-knit family in the workplace.
Adhocracy: Organizations with an adhocracy culture place an emphasis on giving employees the space to think outside of the box and allowing them to take risks with the goal of innovation.
Market: Places profitability above all else.
Hierarchy: Vertical management structure with strict control.
How many types of company culture are there?
Although there are four primary types of company culture that exist, there are other types that are derived from them. They include role-based culture, purpose culture, customer-first culture, and task-oriented culture.
All of these derived types combine some elements from each of the four types mentioned above.
What are the elements of corporate culture?
No matter the type of workplace culture, they all have three elements in common. Those elements are vision, values, and practices.
A firm’s vision is essentially the purpose that the company strives for. It’s on this vision that company values are based. These values are what determine how the company will fulfill its purpose. Practices involve the company actually implementing its vision and values.
Conclusion
There are many different types of culture that organizations choose to adopt, with a lot of opportunities to create cultures that optimize success.
While every company is different and there is no one-size-fits-all approach, it is important to consider the nine different types of organizational culture and try to create an environment that will lead to long-term success.
It’s possible to craft a culture with clear goals and values, an atmosphere of collaboration and innovation, proactive problem-solving, and an emphasis on employee development and satisfaction.
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