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Organizational Culture: what is it & how to build one [2022]

This post highlights types of organizational culture and how to turn yours into a business asset.

Emma Collins
April 23, 2022
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We could not stress enough the value of a strong organizational culture, especially in the current business environment. It helps companies attract the best talent and keep their top performers from leaving. You will also see its effects trickle down to your bottom line as your employees become more engaged and productive. 

Here are some numbers that can help give you a better idea:

According to Deloitte, 94% of business owners and 88% of job seekers believe that company culture is key to their growth. These statistics are very important as they reflect how strongly all stakeholders feel about the subject. In an article posted by TeamStage, there was a study showing how organizations with engaged workers are 202% more productive than those with demotivated workers. 

Still, while it is clear to everyone that an organization's culture is crucial and must be optimized, the number of businesses that actually succeed is lower than you might think. Based on a survey done by the Institute for Corporate Productivity (i4cp), only 15% of the organizations that responded feel that they have achieved the ideal culture change. To help you make the transition, we’ll talk more about what organizational culture is and how it looks in the actual workplace.        

What is Organizational Culture?

You have probably heard it many times and in various forms, but do you really know what it means? 

Organizational culture — also known as company culture, corporate culture, or workplace culture — is the collection of beliefs, expectations, and objectives of a company. 

It sets the tone for the whole organization, establishing a set way of thinking or doing things to be shared to a large extent by (ideally) all of the employees. New employees who want to be a part of the organization must also be able to adapt to this culture before being fully accepted. 

A team leader giving positive feedback during a meeting with other employees presents

Some people may confuse it with the company’s mission statement or business goals, but these terms do not mean the same thing. However, they may help define your overall organizational culture in one way or another.   

While the term “organizational culture” might be new to some people, it has actually been around since the 1950s. It received very little attention for decades and did not become a popular topic of discussion for organization theory until the 1980s. 

So what suddenly changed?

One of the many drivers of the sudden surge of interest was the growing demand for new ideas and HR models that enable effective management. Work morality was developing quickly at the time, and the need for expressivity and involvement increased along with it. The emerging labor landscape demanded an expansion of the cultural perspective of organizations. 

What Are the Different Types of Organizational Culture?

It is true that no two businesses are the same, and that the culture of the organization changes over time. Just the same there are generally four main types of organizational culture that any company, including yours, might fall under.  

In an article posted by Builtin, two researchers came up with the classification based on 39 different attributes and two key dualities. The first was flexibility and discretion against stability and control. The second was internal focus and integration against external focus and differentiation. 

While other schools of thought might suggest that there are more types of corporate cultures out there, it is evident that the approach outlined in the Builtin article has an influence on the other variations. So in this article, we’ll limit our discussion to the four main types. 

Clan Culture

Clan culture is characterized by a strong focus on the members of an organization. The workplace is highly collaborative and consists of individuals who communicate freely and all feel valued. 

Several employees grouped together giving a high five

In simple terms, a company that has a clan culture looks like a big family. The rank-and-file employees are like siblings, and the executive-level managers are the parents. There is a horizontal organizational structure that helps remove the barrier between the two groups, and there are plenty of mentorship opportunities that maximize the growth of the staff. 

Given how closely knit this type of organization is, its level of employee engagement is very high. However, the clan culture is very hard to maintain as a company scales up and takes on more employees. 

Adhocracy Culture

A company with an adhocracy culture puts a higher premium on innovation and adaptability. Its employees are always looking to come up with the next big thing, allowing the organization to stay ahead of the curve and the competition. 

One distinguishing characteristic of this type of company is that it values individuality. It encourages its employees to think outside of the box and not hesitate in bringing any idea to the table. 

The adhocracy culture makes an organization dynamic and fosters a creative work environment, exposing new opportunities for growth and potential resources to tap into. However, this model is inherently risky as new ventures can either succeed or hurt the business. 

Another drawback of this culture type is that it inspires competition instead of collaboration and integration.

Market Culture

In the market culture, companies prioritize profitability and are always focused on the bottom line. More often than not, there is a clear distinction between leadership roles and other team members. 

Nevertheless, the expectations from each position are clear, and their individual objectives are aligned with the bigger business goals. They are all results-oriented and obsessed with reaching quotas and hitting targets instead of internal satisfaction.   

Employees working at a community desk looking at desktop computers

Companies that adopt the market culture are often highly successful and profitable. However, it creates a fast-paced and highly competitive work environment, which could lead to employee burnout if not managed well.      

Hierarchy Culture

As its name implies, hierarchy culture is a very formalized and structured work environment. There is a clear chain of command, and there are procedures that determine what everyone does in different work situations. 

There are different management tiers on top of the distinction between leadership roles and the employees. More often than not, this separation between various roles is indicated by the dress code that each employee has to adhere to. 

While the hierarchy culture sounds very rigid, it does come with a lot of benefits, especially if implemented well. It provides a clear direction for each member of the organization, making it easier for them to achieve the overall objective. 

That being said, companies with a hierarchy culture have little room for creativity, so it is harder for them to adapt to sudden changes in the marketplace. 

Why Is an Organization’s Culture Important?

Even after organizational culture entered the consciousness of more and more people, there was a time when it was viewed exclusively as a responsibility of the human resources department, which was a wrong way of looking at things. 

Instead, organizations should make it an integral part not only of their business strategy but their very DNA — that is how important company culture is. 

Why?

Creating a workplace with a great culture energizes your employees and makes them feel better about their role in the company. In short, it increases employee engagement. 

The Power of Employee Engagement

In an article by Gallup, employees who are more engaged are 41% less likely to be absent from work and 17% more productive. 

Aside from having a big impact on productivity, the right company culture can increase an organization’s employee retention rate. In the same report by Gallup, there is a 24% reduction in turnovers for high-turnover organizations. 

Employees raising their hands cheering

In industries where turnovers are low, businesses with highly engaged employees have significantly fewer turnovers — a reduction of 59%. 

To be clear, the threshold for the annualized turnover in this report is 40%. High-turnover organizations are those who are above it, while low-turnover organizations are on the lower side of the line. 

Attracting the Best Talent With the Right Culture   

Even before a potential hire joins your company, you can already see the effects of your organizational culture. In an article posted by Business News Daily, company culture is one of the biggest considerations for 77% of job hunters today. 

In the same article, it says that 65% of millennials in the US and the UK value work culture over employee compensation. 

Simply put, the right culture can help you attract the best talents, make your workforce happier, more productive, and less likely to leave, all of which have a positive impact on your business.     

What Are the Characteristics of Organizational Culture?

Each organization — like the people in it — has its own personality. Having said that, organizational culture consists of seven distinct characteristics. Different businesses value each of them in varying degrees, and therein lies the uniqueness of each workplace culture.   

Let’s take a closer look at the characteristics that define an organizational culture:

Innovation

Companies that are on the high end of this spectrum value innovation and are more open to risk-taking if it allows their employees to come up with groundbreaking ideas and initiatives. 

Those that place a low value on innovation are just fine with their employees doing the same things in the same manner that they were trained to do them. This approach is safer, but it leaves less room for improvement. 

Attention to Detail

This characteristic is all about accuracy. A company that pays a lot of attention to details encourages its employees to carry out each task with precision to generate reliable and predictable results. 

Emphasis on Outcome

A team reviewing business stats

Organizations that put emphasis on the outcome are focused on the results and are flexible when it comes to the how. In other words, employees are encouraged to do whatever it takes to get the job done.   

Emphasis on People

Organizations that value this characteristic look at their decision making process closely and how it impacts all the employees. They treat all workers with respect and dignity and believe that the interests of the company and employees go hand-in-hand.  

Teamwork

The teamwork characteristic is evident in workplaces where employees are encouraged to operate in groups instead of individually. This approach is built on the premise that collaboration and positive relationships drive better results. 

Aggressiveness

The aggressiveness characteristic shines in a highly cutthroat environment. It encourages its employees to be assertive, especially when pursuing a competitive advantage over rival companies.  

Stability

Predictability, guidelines, systems — these are just some of the elements that determine the stability of an organization. Highly stable companies are bureaucratic in nature why those on the other end of the spectrum implement a more free-flowing approach. 

9 Signs of Good Workplace Culture

It is easy to read and talk about organizational culture, but can you spot it if you look at an actual workplace? If not, here are the signs of a healthy culture in the workplace. 

  1. Your company’s cultural values are clear, and everyone knows them
  2. You draw the attention of highly qualified applicants
  3. You have a tradition of workplace excellence
  4. Your company has a healthy employee turnover rate 
  5. The conflicts in your organization are resolved in a positive manner
  6. Office politics in the workplace are kept to a minimum
  7. There is a high level of trust between employees, including leadership roles and staff
  8. You invest a lot of resources in training
  9. Your company is doing well financially

SurveySparrow identified seven companies with excellent organizational culture, and Nike was one of them. 

Working women walking and laughing together in the office

All it takes is one look at Nike’s workplace, and you will realize how energetic the employees are. Who wouldn’t be if your company is willing to shut down the office one whole week for a “quick” mental health break? 

And yet, there’s more to Nike’s current culture than happy employees. The company aims to achieve greatness both inside and outside of work, and this goal is clear to all members of the organization.   

5 Signs of Bad Organizational Culture

If there are ways to identify a good organizational culture, a bad one also has telltale signs. Here are some of the things that you should look out for:

  1. The shared values of your company are not clear, especially to the employees
  2. Even your managers are not sure what your core values are and could not lead by example
  3. The turnover rate in your company is high
  4. Many of your employees are late or absent for various reasons
  5. When your employees do report to work, they often have to do overtime, even during weekends. 

If you see any of these symptoms in your office, you should sound the alarm bells immediately. 

Creating an Organizational Culture That Leads to Success

There is no question that good company culture is key to business growth. However, building it takes a lot of work. 

You could leverage technology by using the best HR software available today, but the important thing is to be consistent and not give up. It is normal for people and organizational behavior to drift from time to time. But if you continue to be clear about the expectations and provide guidance where needed, you will be creating the recipe for success.

Throughout time, global cultures have shifted, splintered, uprisen, and altered in myriad ways to reflect the values of their people. From a business perspective, how does this translate to the workplace? Organizational culture is a system of shared values that can shape employees’ performance, behavior, and beliefs.

However, it’s not a stale system. We like how leadership author Abdi Osman Jama put it: “An organization is a living culture that can adapt to the reality as fast as possible.” Over time, a company and its culture can — and should — constantly learn and develop alongside its members.

One of the primary reasons that culture should evolve is to keep employees engaged in their work. However, the percentage of "engaged" workers — those who are highly involved, enthusiastic, and committed to their workplace — is just 35 percent, according to a 2019 Gallop study.

Increasingly, human resources is playing an important role in engaging employees in order to nurture company culture. Many executives already see the value. According to an article in SHRM, leaders from around the world say that enhancing employee engagement is one of their top five global business strategies.

Survey of employee engagement amongst businesses
Company leaders agree that engaging employees is a business priority.

Types of organizational culture

Engaging employees hasn’t always been a top concern among executives. It was only in the early 1980s that the concept of culture began gaining traction in the world of work. Organizational scientists started realizing that understanding and defining company values — those previously unnamed assumptions, expectations, and collective memories — helped create cohesion and momentum.

In this era two prominent organizational scientists, Robert E. Quinn and Kim S. Cameron of the University of Michigan at Ann Arbor, developed four types of organizational culture: Clan, Adhocracy, Market, and Hierarchy.

  • Clan cultures operate like families through nurturing mentorship and collaboration.
  • Adhocracy cultures are dynamic and entrepreneurial. Employees are risk-taking innovators who value growth and trendsetting.
  • Market cultures are results oriented. People focus on competition and measurable achievement.
  • Hierarchy cultures are formalized and focused on long-term goals. Employees value structure, stability, and efficiency.

Quinn organizational culture types
A company’s culture reflects its values and leadership style.


Companies still rely on this framework to develop their unique corporate culture. It’s worth noting that the right culture for any given organization will be the one that fits its direction and strategy for confronting issues and challenges over time. Some organizations favor frequent and fast change, while others prefer incremental development.

HR teams need to remember that employee engagement isn’t set in stone — it can alter over time. For example, take Gallup’s decades-long organizational studies. Of hundreds of companies, many have improved employee engagement considerably over time; some have gone from less than 20 percent engagement to more than 70 percent. These organizations have homed in on creating “high development cultures” in which employees have the opportunities to develop their strengths and purpose into a career.

Developing organizational culture

To begin, a company’s leaders should ask their employees, customers, board members, and other key stakeholders their perspectives on two sets of values: the company’s current core values and its aspirational values. Do they encourage mentorship? Are they results oriented? Do they work in quick sprints? Do they desire more or less of anything in particular? After gathering information, executives can coalesce this information into a starting point for shared values.

Following this process, it’s important that leaders initiate the attitudes, beliefs, and behaviors they want to see across the organization. In this way, managers switch from a culture of “boss” to “coach” as they lead by example.

To help support a strong ongoing culture, HR needs to step up, too, in shaping and communicating the organization’s values and desired behavior. This can be accomplished by acquiring compatible new hires, talking about the company culture with current employees, and reinforcing behavior through peer-to-peer recognition that ties back to values. HR can keep an eye on progress by using tools to gather input throughout the employee lifecycle.

Dashboard of Culture IQ people data
Tools like CultureIQ, above, provide organizations with data-based, people-driven insights that link culture to strategy.

Turning culture into an asset

While organizational change is constant, your company can take continual steps toward defining its purpose and brand — that is, why it exists and how it wants to be known. Over time, aligning your team members with your workplace culture will become a competitive advantage.  Here’s how to turn your organization’s culture into an asset.

1. Hire for cultural fit.

A strong culture fit can yield greater job satisfaction, longer tenure, and improved performance. To show candidates what you’re all about, integrate your culture into your employer brand messaging, job content, and interview processes.

To reach external talent, use career sites and social channels to broadcast your organizational culture. Prospects want a closer look at the day-to-day life at the company. Beyond job listings, your career page should highlight your company values and current employees through in-depth and specific stories. Telling job seekers about your company culture helps ensure that those who apply are opting in to the shared values and behavior.

Another important way to bolster organizational culture is by hiring from within. HR can encourage employees to pursue opportunities by providing internal mobility tools that teach them about career opportunities and allow them to express their interest in different roles.

The last point here is to stay operationally focused. Just like when managing your assets via a CMMS, managing your people requires the right tools and process.

2. Communicate with your workforce.

Employees who feel included in decision-making are more motivated and engaged. According to an article in Forbes, a Tinypulse survey found transparency is the top factor contributing to employee happiness. You can utilize employee engagement software to help develop a culture of trust and inclusion.

Tinypulse feedback dashboard
Feedback tools like TINYpulse, above, encourage the whole team to provide input.


3. Prioritize belonging.

Feelings of safety and rapport can improve communication, collaboration, and alignment. It’s important to keep in mind that subcultures will likely develop among different departments and groups of people. Diversity should be championed and woven into a company’s overarching culture.

Benefits of a strong organizational culture

Once you’ve defined your culture and hired people who align with your values, you can encourage them to follow their instincts and get involved with their colleagues. Having a strong organizational culture is good for employees, too. It allows them to:

  • Understand how to respond to challenging situations as they arise.
  • Believe that their response is correct.
  • Trust they will be rewarded for exhibiting the organization's values.

In essence, developing company-wide goals and approaches gives employees a master plan. With this information, they have the space to do three very important things: perform better, be more autonomous, and remain loyal to your organization.

Remember, you don’t need to do the work alone. Be sure to check out our lineup of the best employee engagement software to make sure your culture keeps you sticking together — and evolving — into the future. 

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Emma Collins

Emma runs a digital marketing agency as the Chief Content Officer while continuing to pursue her passion for writing. She loves creating guides and tutorials about technology, sales, HR, digital marketing, and more. Emma loves playing games, watching anime, and cheering for her favorite football teams during her spare time.

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