What is Organizational Culture?
Organizational culture is the set of underlying beliefs, values, principles, and ways of interacting within an organization. It defines and creates a unique environment to work in. Things like an organization’s expectations, vision, philosophy, image, interactions within the office and outside of the office also define what the organization’s culture is all about. Organizational culture defines what every employee’s behavior should be and how they should interact with the rest of the organization. It defines how you feel about working for the organization. Some quotes that stress the importance of organizational culture are:
Many companies have said that they prioritize their culture because they truly believe it has an impact on their bottom line. Many companies spend a lot of time defining what they want their culture to be so that eventually they don’t even need to call it culture, as it would be part of everyone’s habits.
It is also referred to as corporate culture and it is shown in circumstances like how business is conducted, how the company treats the employees and customers, how the decisions are taken, how information flows through the hierarchy, how the employees perform towards goals, and many others. The company’s productivity and results are directly related to the culture.
Types of Organizational Culture
There are four well known types of organizational culture: Clan, Adhocracy, Hierarchy, and Market. They range from internal to external when it comes to integrations and focus. They also range from an environment of stability and control to one of flexibility and discretion. A summary of these four types of culture is shown in this picture:
Clan – Doing Things Together
In this culture, people have a lot in common and it feels like you are part of a big family. The leaders are seen as mentors and/or as a father figure and this drives loyalty and high engagement from the employees. The main values are teamwork, communication, consensus, and development. They focus on mentoring, nurturing, but more importantly, everything is done together.
Adhocracy – Doing Things First
In this culture, employees are dynamic and creative. The have a culture that accepts risk taking and that encourages innovation. The way the organization bonds is by doing experiments and trying new things. They promote freedom and initiative from the employees as having new products or services defines the success of this company. The values to success in this culture are change, agility, transformation, and innovative outputs. The leaders must create an entrepreneurial and visionary setting for this to work as this company wants to be the first to go to market.
Market – Getting the Job Done
In this culture, results are the most important thing. Employees are encouraged to compete both internally and externally, to achieve results, to focus on the goals, and to get things done. Leaders in this setting must be both hard producers and rivals as they have to be tough and have high expectations from the employees. Often the goals are related to sales, profits, market penetration, stock value, as they reflect the performance of the company.
Hierarchy – Doing Things Right
In this culture, the common themes are control and structure. The principles and procedures are well defined and everything the employees do have to follow these procedures. The structure provided via rules and policies keep the organization running and leaders encourage this. Efficiencies and predictability are important in this setting. The values that are important for these types of companies are consistency, stability, uniformity, bureaucracy, and timeliness.
Organizational Culture Examples
An example of Hierarchy organizational culture is the military. The military is an organization that clearly articulates the power and responsibilities of its employees based on rank. Each level oversees those levels below and reports to the level above. An advantage of this type of culture is that the authority and responsibility of each employee is clearly defined for success. As the communication flows from top to bottom, everyone should be clear on what is expected. However, this often creates a bureaucratic behavior that can make the flow of information and the decision-making process a slow one.
General Electric is an example of Market organizational culture. They define success by having high return on assets and corporate competitiveness. The benefit is that they hire people that want to win. The goals are clear as they are often number based (stock, market share, profit %) and it makes the success criteria measurable. The downside of this is that if an employee is not motivated by a financial version of success, they can disconnect and not generate good results.
Why is Organizational Culture Important?
The culture within an organization is an extremely important driver of the organization’s success and the employee’s overall satisfaction. Nowadays, many employees decide which company they want to work with that provides them the right fit. It is no longer just about salaries or location, but about how they can feel about working for the company. Business leaders are responsible for designing and communicating the organizational culture they want for their company. The organization’s culture is not static, it can be changed and adapted, and leadership plays a huge role in this. Once leadership communicates the vision of the company’s culture, it is important that they lead by example. If the leadership is committed to this culture, the extrinsic and intrinsic compensations to employees are often linked to this. There will never be a one size fits all within this topic. It is hard to change or create the right culture, it must be addressed for success. The company must understand its current position and go from there. This image has some simple steps on how to start the journey. Good luck!