Different types of organizational culture can make or break your company’s success. They have the power to turn a good business into a great one or hold it back from reaching its full potential.
Imagine walking into two different companies—one is buzzing with energy, collaboration, and shared purpose, and the other is stagnant, disconnected, and demotivating. The difference? Organizational culture.
Understanding the unique types of organizational culture is essential regardless of what type of company you’re running.
This guide will help you decode the four types of organizational culture that are most common in today’s fast-paced business world. You’ll learn all about what organizational culture is, what the four types of organizational culture are, why it matters, and what you can do to better your own company’s culture.
What is Organizational Culture?
Organizational culture refers to shared values, practices, and attitudes of those in your company, and it impacts every aspect of your business. From employee motivation and satisfaction to your financial success, organizational culture is a vital part of your business.
A 2022 study from OnHires found that 77% of adults evaluate company culture before applying for a job. Likewise, 84% of recruiters say that matching the type of organizational culture to what the applicant is seeking is a key factor when recruiting.
In an episode of the Team Building Saves the World podcast, Chief of Culture & Community at New Level Work Wendy Hanson shared her own insights on applicants showing interest in company culture. She said that today’s applicants will pose direct questions like:
“Tell me about the culture in this company. You know, what does it look like?”
The Culture of an Organization Isn’t the Mission Statement
Sometimes, organizational culture is confused with a company’s mission statement or goals, but they’re not the same thing. Your mission statement and goals may be related to your company culture, but your culture is something separate.
A better indicator of your company culture is how people react to different situations. For example, how you adapt to changes in customer demand, how a manager responds to employee questions, or how a CEO navigates a crisis.
What Are the Four Types of Organizational Culture?
There are four main types of organizational culture, and each of them has its own pros and cons. Understanding each of these will help you make a more informed decision about which one is best for you, so let’s take a closer look at them
1. Clan Culture
As the name suggests, clan culture is a very people-oriented culture that places an emphasis on teamwork, collaboration, and communication. It often gives the company a family-like vibe that encourages employees to work together, communicate with higher- and lower-level staff members, and be flexible.
This type of organizational culture is most common in smaller companies such as start-ups since the family-like setup works best with smaller teams. Team building activities are also common since they encourage employees to bond, communicate, and work together.
Strengths of Clan Culture
- High employee satisfaction, engagement, and morale.
- Adaptable and flexible.
- Very collaborative, which can drive innovation and success.
Weaknesses of Clan Culture
- Difficult to use in larger organizations.
- We may need more direction in the long term.
- Requires lots of involvement to keep going.
2. Adhocracy Culture
Adhocracy culture is much more focused on taking risks and innovating than clan culture. Companies with this organizational work culture place a high value on creativity, individuality, and ideas. They encourage employees of all positions to share their ideas and help push the company forward, constantly adapting to the current market.
These companies often have brainstorming sessions, inviting employees to bring their creativity to the table. Big tech companies frequently use this model since they’re focus is on coming up with the best new tech possible.
Strengths of Adhocracy Culture
- Increased innovation and adaptability (which can boost profits).
- Highly motivated employees.
- More professional development for employees.
Weaknesses of Adhocracy Culture
- Risks have the potential not to pan out
- Can create competition between employees.
3. Market Culture
Market culture is one of the more traditional types of organizational culture in business. This option places most of the emphasis on profit margins and growth. Companies with a market culture are focused on the bottom line and their ROI (return on investment).
Employees each serve their specific role in the greater organization, and there is a clear separation between lower-level employees and management. These companies are highly focused and driven towards their goal of higher profits.
Strengths of Market Culture
- Highly profitable.
- Focused towards a clear, unified goal.
Weaknesses of Market Culture
- Risk of employee burnout.
- Employees may end up not feeling valued.
- Potential for poor work-life balance.
4. Hierarchy Culture
Hierarchy culture is what many think of as the most classic of the organizational culture types. Companies with a hierarchy culture have a boss at the top and a clear chain of command all the way down. Each employee has a clearly defined boss above them, and there are usually strict guidelines for how things function, whether that be dress codes or sending emails.
Though you may think this type of organizational culture would be limited to older, larger, more established companies, many newer companies, both large and small, have this type of culture as well. That said, many younger people find this type of organizational work culture dated and limiting.
Strengths of Hierarchy Culture
- Very organized with a clear hierarchy.
- Avoid risk and tend to be stable.
Weaknesses of Hierarchy Culture
- Can limit creativity.
- Often has a hard time adapting.
- Employees may feel left out or underappreciated.
Which of the 4 Types of Organizational Culture Does Your Company Use?
Before you can focus on improving your company culture, you have to identify the type of organizational culture you have now. And it’s not as hard as it sounds.
You’ll start by taking a step back to assess your company. To do this, ask yourself questions like:
- How does your CEO handle crises?
- What are your company’s goals and values?
- How freely do people communicate and share ideas across departments and organizational levels?
- Does your company place an emphasis on employee training or team building?
The answers to these questions can help you zero in on how your company operates day to day. If this doesn’t give you a clear answer right away—and even if it does—your next step will get a bit more in-depth.
Ask Your Employees!
Talking to your employees is one of the best ways to assess which of the four types of organizational culture your company uses.
Employees are the heart and soul of your company, and their feedback is incredibly valuable. It can provide insights into the current type of organizational culture and any changes they’d like to see.
This is a great way to see how your employees view your company. Whether you have one-on-one meetings, do an anonymous survey, or have group meetings, ask for your employees’ input on your organizational work culture and the employee experience.
Identify Weaknesses
It’s often helpful to identify weaknesses or issues within your company, as they may point you toward what type of organizational structure you have.
For example, if you are dealing with a lot of disruptive behavior, it may indicate you have a hierarchical or market culture that is placing too much stress or competition on employees. These types of organizational cultures often can lead to a toxic work environment.
Use the Resources Available to You
Don’t be afraid to take advantage of tools that can help you identify your type of organizational culture. Something like the StrengthsFinder program can help you identify your company’s strengths, allowing you to figure out which culture you currently have.
You can use that information to decide if one of the other types of organizational culture would work better for your company and employees. Then, you can engage in other programs like The Big Picture to help improve communication and collaboration while commemorating a change for the better in your company.
How Does Organizational Culture Impact Employee Engagement and Performance?
Organizational culture can have a big impact on employee engagement and performance. According to TeamStage, 88% of job seekers and 94% of entrepreneurs say that a healthy company culture is vital for success.
Different types of organizational culture impact every action throughout a company, which in turn impacts all employees.
Speaking of employees, it’s no secret that people are going to be more motivated and dedicated if they feel like they are appreciated and valued. If an employee feels like they are a key part of the team, they are more likely to do a better job, be motivated, and stay with the company.
The data backs that up as well. For example, did you know that 48% of workers in 2024 say they’ve quit a job because of bad company culture?
How Does the Culture of an Organization Impact Leadership?
Organizational culture has a big impact on management and leadership as well. Having a clearly defined culture can make these roles easier and less stressful.
Whether you have a hierarchical culture with a clear chain of command or a clan culture focused on collaboration and communication, an organizational structure can allow you to more effectively manage your teams and know exactly what role you play in the company.
Future of Organizational Culture
As with many things in modern business, organizational culture is constantly changing. Although the future of organizational work culture is impossible to predict, there are some clear trends that will likely play a big role in the future.
Let’s take at things gaining popularity now and what they may mean for the future of organizational culture.
Technology and Remote Work
Technology and remote work are already starting to play a role in organizational culture, and they’ll likely play an even greater role in the future. A 2022 SHRM survey of 1,700 workers found that 48% will “definitely” look for the ability to work remotely in their next job.
With such a large percentage of the workforce wanting the ability to work remotely, it will surely impact the types of organizational culture used in the future.
The Globalized World
Tying into technology, our digital world has helped make our society and marketplace increasingly global. More and more companies are hiring remote workers from all over the world, and more companies are doing business outside of their own country.
The types of organizational culture in businesses everywhere will have to adjust to accommodate varying cultural norms and practices across the world.
It’s Time to Build Your Organizational Culture
Your organizational culture influences every interaction, decision, and outcome within your business. There’s no time like the present to build the culture you and your teams want to see, whether you’re looking to strengthen your existing dynamics or transform your company from the ground up.
If you’re ready to elevate your organizational culture, we’re here to help. At TeamBonding, we’ve created several team building programs and events that can help you identify and improve your organizational culture.
Contact us today! Let’s turn your company culture into a competitive advantage.
