Article

The 4 Types of Organizational Culture & How to Design Change

January 31, 2024

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Emily May

We admit big words like “organizational culture” can be intimidating. However, these concepts aren’t as daunting as they sound, in fact, we boil them down to their most simple form so that you can apply these concepts to your organization with ease.

In this guide, we will review the four main types of organizational culture and explore how to implement change within your current or desired team dynamic.

What Is Organizational Culture?

Organizational culture refers to the values, beliefs, and behaviors that shape a company's unique work environment. These characteristics heavily influence how a business operates, impacting employee satisfaction, productivity, communication, retention rates, and profitability.

The four main types of organizational culture are:

  • Adhocracy culture
  • Clan culture
  • Hierarchy culture
  • Market culture

Each type has its distinct features, norms, and management styles that influence the overall dynamics and success of the organization.

Adhocracy Culture

An adhocracy organizational culture provides ample space for employees to innovate. This flat team structure celebrates an entrepreneurial mindset rooted in flexibility, creativity, and risk-taking. 

For example, many startup companies build out their processes as they grow without previously established formal procedures. The lack of structure and hierarchy gives each team member room to experiment with new ideas and have a voice in high-level decision-making, which can result in the development of unique products and customer solutions. It also creates an environment of ultimate autonomy, where employees may prioritize their own projects or work from home. 

The ideal candidate for an adhocracy organizational culture enjoys taking the lead, adapts quickly, and thrives in ambiguity.

Clan Culture

A clan organizational culture is characterized by collaboration, employee development, and teamwork. Leaders who leverage this framework maintain and boost morale by fostering community within their team. 

For example, the implementation of weekly standups, frequent team-building events, and one-on-one mentorship meetings are commonplace in a clan working environment. Thanks to these activities, employees develop close relationships with one another, opening lines of communication and support. The ability to lean on trustworthy colleagues encourages positive sentiments and satisfaction within an organization.

The core values of a clan culture include:

  • Loyalty
  • Tradition
  • Creating a sense of belonging

A clan company culture carries many advantages that may be associated with a positive work environment – contributing to high morale, teamwork, and retention rates.

Hierarchy Culture

Hierarchy culture can be distinguished by its formal structure that establishes stability and control in the workplace. This team adheres to a clear chain of command and defined levels of authority, where procedures are predictable, defined, and efficient.

A large corporation with standardized processes and a robust management system is a prime example of a hierarchy culture. Employees are organized in a clearly ordered system and report to leaders within their area of expertise. 

Common characteristics of a hierarchy culture include:

  • Detailed career paths for advancement within the organization
  • Mentorship
  • Clear communication
  • Established decision-making processes 
  • Efficient operations

Hierarchy culture can sometimes limit creativity and autonomy, so adding a healthy dose of flexibility to this working style will offer a more positive employee experience. 

Market Culture

A market culture is results-oriented, competitive, and fixed on achieving goals. These organizations value employee achievement and customer satisfaction above all else. Leaders in a market culture will motivate their teams to outperform the competition and deliver outstanding products to their customers. 

Common characteristics of a market culture include:

  • Urgency to make sales and acquire new customers
  • An emphasis on performance and profit metrics
  • Bonuses and incentives to motivate employees
  • Competition

In this business-forward environment, measurable results are celebrated and can sprout competitiveness among colleagues. While maintaining market focus is crucial, integrating employee well-being programming and culture investment can stabilize the approach.

Changing Organizational Culture

Every organizational culture can benefit from change. Whether your leadership team is still deciding on a direction or your workplace has previously established cultural values and processes, consistent improvement feeds your team members, your customers, and the bottom line. 

Key indicators that may signal a critical need for change in organizational culture include a mismatch between culture and strategy, lagging behind competitors, and difficulties in communication and well-being among the team. These factors can impact employee engagement by creating a lack of clarity, motivation, and trust among employees. 

When employees feel aligned with the organization’s culture and goals, it leads to:

  • Higher engagement 
  • Increased productivity
  • Business growth & success

In the second half of this article, we outline the necessary steps business leaders can take to achieve cultural transformation.

Assess the Current Culture

Understanding your organization's current culture is essential in cultivating effective, long-term change. Performing an in-depth assessment provides a comprehensive overview of employee sentiments and dynamics, identifying key strengths and weaknesses within your team. These data points will serve as a roadmap to your broad vision and corresponding goals.

Strategies to assess current organizational culture include:

  • An anonymous employee survey containing questions about employee engagement, leadership accessibility, transparency, and workplace wellness.
  • Hosting team culture meetings to create a comfortable space for colleagues to share pain points collectively.
  • Inquiring about employee feedback in one-on-one meetings.
  • A SWOT analysis that identifies strengths, weaknesses, opportunities, and potential threats.

There is no one-size-fits-all approach to analyzing workplace culture; however, combining multiple data collection methods will produce the most accurate and actionable results. The more information you have to work with, the better.

Set a Vision and Goals for Cultural Transformation

Having an overarching vision and clear goals encompassing short and long-term objectives is crucial for cultural transformation. You’re currently at point A, your vision is point B, and your goals provide a roadmap for the in-between. It's important to note that cultural change efforts can become hindered without a clear direction forward.

When setting goals, be sure they are specific and measurable to track progress throughout the transformation journey. For example, a short-term goal could be to increase diversity in the leadership team by 20% within the next year, while a long-term goal could be to create a workplace culture where open communication and collaboration are the norm. 

Invite your team to be part of the goal-tracking process and brainstorm ways to reach these desired numbers as a group.

Commit to Change as a Leadership Team

Leadership teams play a crucial role in driving cultural shifts within an organization. From the top down, they share the desired tone and direction with team members, shaping the values, beliefs, and behaviors that define company culture. To leverage influence most effectively, all company leaders must be on the same page in their commitment to cultural transformation. 

One way for leaders to solidify their dedication to organizational change is through designing a culture change initiative utilizing the Strategic Fitness Process. An SFP program requires a deep assessment of the existing culture, aligning the organization's strategic goals with its values, and creating actionable steps to drive momentum toward shaping the organizational culture.

No matter the strategies leaders decide to employ, a delicate balance of open communication, stakeholder alignment, and talent elevation is the recipe for success. 

Identify Core Values That Align With The Future

Core values are the fundamental beliefs and principles that guide an organization – they shape your team's priorities, attitudes, and actions. When deciding on core values, be sure they align with your established vision and business model for a cohesive path forward. 

Some examples of core values include:

  • Productivity
  • Diversity
  • Community
  • Respect
  • Innovation

Leaders should brainstorm ways to reinforce these values at every level within their organizations – from communication styles to processes. 

Invest in the Employee Experience

Employee experience and engagement are the crux of company culture. Leaders should strive to create a strong culture that reflects the organization's fundamental core values at every touchpoint.

Strategies to enhance employee experience and engagement include:

  • Fostering open communication
  • Providing opportunities for growth and development
  • Recognizing and rewarding employees
  • Creating a positive and inclusive work environment

Employee experience and engagement strategies are unique to each team culture, but they all contribute to employee retention, satisfaction, performance, and the greater organizational culture. 

Conclusion

Organizational culture is a defining factor for every company – it impacts overall success and how internal teams feel at work. Leaders who consistently leverage their core values as a guiding light are likely to have more positive outcomes internally and externally. By identifying the current characteristics of your organization, your vision for the future, and your goals for a path forward, your team can harness the power of cultural transformation. 

To learn more about how to shape cultural change as an organization leader, browse through our Leading with Agility certification classes. To learn more about driving cultural change as a consultant or coach, take a look at our Enterprise Agile Coaching certification classes. Let us help you foster a work culture that produces happier employees and customers.

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TAGGED AS:
Leading Change, Enterprise Agile Coaching, Coaching Agile Transformations, Agility in Leadership, Leading with Agility

About the author

Emily May | ICAgile, Marketing Specialist
Emily May is a Marketing Specialist at ICAgile, where she helps educate learners on their agile journey through content. With an eclectic background in communications supporting small business marketing efforts, she hopes to inspire readers to initiate more empathy, productivity, and creativity in the workplace for improved internal and external outcomes.

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