Organizational culture influences the success of your company, directly affecting the sort of candidates you attract and the employees you hold onto. Understanding what makes your organization’s culture unique allows you to showcase it effectively in your recruitment marketing materials. It also helps you define authentic core values and a meaningful mission statement. Since there are several different types of organizational culture, it’s important to find the one that aligns best with your organization’s goals and values
What Is Organizational Culture and Why Is It Important?
Organizational culture, or company culture, is the shared values, attitudes and practices that make up the identity of an organization. It largely shapes employee behavior and interactions within a company.
What Is Organizational Culture?
Organizational culture, also known as company culture, refers to the shared values, attitudes and practices that characterize an organization. It’s the personality of your company, and it shows up in the way employees do their work, interact with each other and represent your company to the broader world.
There are thought to be four main types of organizational culture — including clan culture, adhocracy culture, hierarchy culture and market culture — which we’ll cover in more detail below.
Why Organizational Culture Matters
Organizational culture is linked to employee satisfaction, recruitment, retention and overall business success.
Improves Employee Recruitment
Having a strong organizational culture helps attract the right candidates. According to a 2019 Glassdoor study, 77 percent of adults would evaluate a company’s culture before applying to an open position, and more than half of respondents said organizational culture is more important than compensation.
Improves Employee Engagement and Retention
Organizational culture is a key factor in retaining and engaging employees. According to a 2022 EY survey, 92 percent of employees said organizational culture impacts their decision to stay with an employer. And a 2024 Gallup poll revealed that employees who strongly agree with feeling connected to their organization’s culture are four times as likely to be engaged at work.
Improves Business
Organizations with a positive workplace culture often benefit in business too. Many see higher average annual returns and increased profits. Companies on the 2024 Fortune 100 Best Companies to Work For list, based on employee experience and workplace culture, outperformed the market average by 3.68 times in 2023.
4 Types of Organizational Culture
The four main types of organizational culture are clan culture, adhocracy culture, market culture and hierarchy culture. These types come from Robert E. Quinn and Kim S. Cameron of the University of Michigan, who investigated the qualities that make businesses effective.
From a list of 39 attributes, the researchers identified two key polarities: (1) internal focus and integration vs. external focus and differentiation, and (2) flexibility and discretion vs. stability and control. These qualities are visually represented within the Competing Values Framework, which is part of the validated and widely-used Organizational Cultural Assessment Instrument.
Although there are several types of organizational culture, Quinn and Cameron’s four types are generally accepted and appear to influence any variations. These four types of organizational culture are neither good nor bad, but they do provide frameworks that company leadership can lean on.
1. Clan Culture
A clan culture is people-focused in the sense that the company feels family-like. This is a highly collaborative work environment where every individual is valued and communication is a top priority. Clan culture is often paired with a horizontal structure, which helps to break down barriers between the C-suite and employees, and it encourages mentorship opportunities. These companies are action-oriented and embrace change, a testament to their highly flexible nature. Companies that follow clan culture include startups and small organizations.
Primary Focus: Mentorship and teamwork.
Motto: “We’re all in this together.”
Advantages of Clan Culture: Clan cultures boast high rates of employee engagement, and happy employees make for happy customers. Because of its highly adaptable environment, there’s a great possibility for market growth within a clan culture.
Disadvantages of Clan Culture: A family-style corporate culture is difficult to maintain as the company grows. Plus, with a horizontal leadership structure, day-to-day operations can seem cluttered and lacking direction.
2. Adhocracy Culture
Adhocracy cultures are rooted in innovation and adaptability. These are the companies that are on the cutting-edge of their industry — they’re looking to develop the next big thing before anyone else. To do so, they need to take risks. Adhocracy cultures value individuality in the sense that employees are encouraged to think creatively and bring their ideas to the table. Because this type of organizational culture falls within the external focus and differentiation category, new ideas need to be tied to market growth and company success. Companies with adhocracy culture include tech giants like Google, OpenAI and Apple.
Primary Focus: Risk-taking and innovation.
Motto: “Risk it for the biscuit.”
Advantages of Adhocracy Culture: An adhocracy culture contributes to high profit margins and notoriety. Employees stay motivated with the goal of breaking the mold. Plus, with a focus on creativity and new ideas, professional development opportunities are easy to justify.
Disadvantages of Adhocracy Culture: Risk is risk, so there’s always a chance that a new venture won’t pan out and may even hurt your business. Adhocracy cultures can also foster competition between employees as the pressure to come up with new ideas mounts.
3. Market Culture
Market culture prioritizes profitability. Everything is evaluated with the bottom line in mind; each position has an objective that aligns with the company’s larger goal, and there are often several degrees of separation between employees and leadership roles. These are results-oriented organizations that focus on external success rather than internal satisfaction. A market culture stresses the importance of meeting quotas, reaching targets and getting results. Larger companies are often leaders of the market culture pack, as the goal of a market culture company is to be the best in its industry.
Primary Focus: Competition and growth.
Motto: “We’re in it to win it.”
Advantages of Market Culture: Companies that boast market cultures are profitable and successful. Because the entire organization is externally focused, there’s a key objective employees can get behind and work toward.
Disadvantages of Market Culture: On the other hand, because there’s a number tied to every decision, project and position within the company, it can be difficult for employees to meaningfully engage with their work and live out their professional purpose. There is also risk for burnout in this aggressive and fast-paced environment.
4. Hierarchy Culture
Companies with hierarchy cultures adhere to the traditional corporate structure. These are companies focused on internal organization by way of a clear chain of command and multiple management tiers that separate employees and leadership. In addition to a rigid structure, there’s often a dress code for employees to follow. Hierarchy cultures have a set way of doing things, which makes them stable and risk-averse.
Primary Focus: Structure and stability.
Motto: “Get it done right.”
Advantages of Hierarchy Culture: With internal organization as a priority, hierarchy cultures have clear direction. There are well-defined processes that cater to the company’s main objectives.
Disadvantages of Hierarchy Culture: The rigidity of hierarchy cultures leaves little room for creativity, making these companies relatively slow to adapt to the changing marketplace. The company takes precedence over the individual, which doesn’t necessarily encourage employee feedback.
More Examples of Organizational Culture
Outside of the four main categories of organizational culture, there are a few more worth noting.
Purpose Culture
Purpose culture focuses on a company’s mission and core values. These aspects drive the culture. Often companies with this culture will have a mission of changing an industry or community for the better. One example of this can be seen in Patagonia’s mission statement: “We’re in business to save our home planet.”
Coaching Culture
In a company with a coaching culture, senior leadership is responsible for mentoring their employees and ensuring that individuals advance in their careers. Various coaching techniques — such as providing assessments on specific projects or one-on-one meetings where expectations and personal goals are discussed — typically drive this style of culture.
Accountability Culture
Accountability culture means that everyone within the organization, including the CEO and senior leadership, are held responsible for their own actions and performance. This can look like employees taking ownership of their mistakes and openly questioning how they can learn from them, as well as recognizing colleagues when they have excelled in their role.
Learning Culture
Companies with a learning culture put a special emphasis on learning and development opportunities. These organizations often have company-wide workshops and encourage employees to learn skills outside of what is immediately required for their role, providing stipends for various educational opportunities.
How to Improve Organizational Culture
Improving organizational culture is an ongoing process that can have a long-lasting impact on any organization. Cultural transformation goes beyond offering lucrative perks, and requires leaders to take intentional actions that engage with employees at all levels. These are a few tips to help improve organizational culture:
Define Your Core Values
Start by defining or reassessing your company values. If you don't have any defined values, this is the perfect time to set them. Core values should align with your company’s mission and resonate with both employees and leadership. When values are well-defined, they guide business decisions, shape employee behavior and reinforce company identity. Promoting core values also helps foster a culture of unity throughout the organization.
Foster Transparent Communication
Transparent communication is essential for building trust and improving employee satisfaction. When employees feel informed, heard and valued they are more likely to be engaged and feel connected to the organization. Transparency also plays a critical role in employee retention. To foster transparent communication, establish open-door polices, prioritize top-down communication and offer meeting hours for employees to connect with leadership. These practices can help create a safe environment where employees feel empowered to voice opinions and contribute to the organization's growth.
Invest in Employee Growth and Development
New career opportunities are one of the main reasons employees leave an organization, according to the Pew Research Center. Investing in employee development not only enhances performance but also boosts retention rates and engagement. To support employee growth include, offer mentorship programs, provide upskilling opportunities and create personalized career paths.
How to Identify Your Organizational Culture
Your organizational culture says a lot about your team and what you value, and job seekers can pick up on that almost immediately. If you’re not sure where your organization lands on this list, you’re not alone. Cameron and Quinn developed an assessment tool that helps companies identify their organizational culture.
Once you evaluate your existing organizational culture, take stock of what truly matters to your organization: Where are you aligned? What are your areas for improvement?
If you think a different kind of organizational culture would work better for your company and employees, take steps to shift it. While that looks different from company to company, you’ll generally want to start by defining and assessing the current culture, financial goals, company structure, mission and core values. Then continually evaluate your culture and the progress you’ve made toward your organizational culture goals.
Frequently Asked Questions
What is organizational culture?
Organizational culture, or company culture, is the shared values, practices and attitudes that characterize an organization. It defines the overall personality and working environment of a company, and has a significant impact on employee behavior and satisfaction.
What are the 4 types of organizational culture?
The four main types of organizational culture include:
- Clan culture
- Adhocracy culture
- Market culture
- Hierarchy culture
What does a good organizational culture look like?
A good or positive organizational culture is often one that fosters mutual respect, growth opportunities and shared goals amongst employees. This kind of organizational culture also reflects a company's core values and aligns with the company's overarching mission.
What are the 7 characteristics of organizational culture?
The seven characteristics of organizational culture include:
- Innovation
- Attention to detail
- Emphasis on outcome and results
- Emphasis on people and relationships
- Teamwork
- Aggressiveness or competitive nature
- Stability
Organizational cultures are made up of all of these characteristics to some degree. However, the prioritization and value put to each characteristic will vary depending on the company and its type of culture.
What is an example of organizational culture?
An example of organizational culture is clan culture. Clan culture prioritizes collaboration and employees are encouraged to share ideas and feedback throughout the organization. Companies that use clan culture are often small organizations and startups that operate with a strong sense of community.
