What are the Four Types of Corporate Culture? (And How to Choose Yours)

Digital enterprises must focus on company culture. It matters.

Companies on Glassdoor’s best places to work list with the highest rated company cultures delivered close to 20% higher returns to their shareholders than similar companies over a five-year period (MIT Sloan Management Review/Glassdoor).

Over time, the idea of company culture has evolved from kegs and ping pong tables to  practical management strategies and innovative ideas. This post will examine the four different types of corporate culture then discuss how to choose and build the best option.

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What is Corporate Culture?

The term “corporate culture” is ubiquitous, it’s everywhere and anywhere. But that doesn’t mean it’s easy to define, or defined correctly. Generally, it describes the overall environment within an organization.

Inc. magazine provided a commonly used definition: “Corporate culture refers to the shared values, attitudes, standards, and beliefs that characterize members of an organization and define its nature. Corporate culture is rooted in an organization’s goals, strategies, structure, and approaches to labor, customers, investors, and the greater community.

Read more: What is Company Culture? Importance and Best Practices

— Why is it Important?

Every business has its own vision for success. Executives and founders then develop a set of goals for achieving it. Employees bring their diverse skills and abilities to the mix. These elements make up the best types of corporate culture, which sets out how the company is going to do business and treat its customers. Ideally, the company culture brings employees together and helps to propel everyone in the organization forward so that the company reaches its goals.

— The Role of Corporate Culture

1. Companies with good corporate cultures have higher employee engagement ratings.

A healthy corporate culture makes employees feel that their contributions are valued. Engaged employees are more productive in their work, which has a direct impact on the company’s bottom line.

2. A good corporate culture reduces turnover rates.

When employees don’t feel as though they fit in, they will start looking for work elsewhere. They may not feel welcome due to a negative environment at work or when the company culture does not fit with their values. A good company culture is inclusive and recognizes the value and contribution of each employee.

3. A positive company culture can help attract higher-quality candidates.

Job seekers will evaluate the corporate culture as part of making their decision of whether they want to work for a particular organization. When the culture is a positive one, it attracts top candidates and makes them excited at the prospect of working for the company.

4 Types of Corporate Culture

The following are four main types of corporate culture. We’ll examine each one in some detail without declaring whether one is better or more successful. There are too many variables and differences to consider, each company must decide what works best for their situation.

1. Clan Culture

Clan culture, also called a collaborative culture, is mainly focused on teamwork. In this type of culture, relationships, participation, and company morale are at the forefront. Managers are looked at as advisors and guides to employees, as opposed to an authoritarian “boss” who gives instructions without context or assistance and disciplines those who make mistakes.

This type of corporate culture is focused on keeping the barriers between the executive level and employees to a minimum. Clan culture is highly flexible and focused on thriving with change and taking action.

Advantages of Clan Culture

  • The team enjoys working together.
  • Communication between team members is open and effective.
  • Employees are likely to be highly engaged at work.
  • High possibility for market growth.

Disadvantages of Clan Culture

  • Difficult to maintain as a business grows.
  • Since it is a horizontal leadership structure, career paths might be unclear.
  • Productivity may be sacrificed due to too much collaboration.
  • Taking other employees’ feelings into account may lead to an inability to take charge and make tough decisions.

 

2. Adhocracy Culture

Adhocracy culture is primarily focused on innovation and risk-taking. Many successful startups are considered to have this type of corporate culture. It creates an entrepreneurial environment in the workplace in which employees are encouraged to take risks. Ideas that would be considered too unconventional for a more conservative workplace are actively nurtured and pursued in an adhocracy culture.

These companies have aspirational goals and visions. They are always looking for the “next big thing” and they need to be prepared to take risks.

Advantages of Adhocracy Culture

  • High risk, high reward. Greater potential for growth and breakthroughs.
  • Employees are motivated to use their creativity and develop new ideas.
  • Employees feel supported when suggesting new ideas.
  • More likely to invest in professional development opportunities.

Disadvantages of Adhocracy Culture

  • Potential for a lack of stability due to the number of new initiatives undertaken.
  • Risk that new ventures will not be successful and will hurt the company.
  • Junior employees may feel intimidated due to the need to work aggressively and decisively.
  • This work culture may create an environment where employees feel competitive towards each other due to pressure to come up with new, fresh ideas all the time.

 

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3. Market Culture

In a market culture, the bottom line is the main priority. Everything is gauged with the company’s profitability in mind. An organization that takes on this type of corporate culture is primarily focused on results.

Often, the language used in a market culture surrounds meeting quotas and reaching targets. It attracts people who are competitive and want to “win.” In a market culture, leaders are demanding and expect employees to perform well in a high-pressure environment.

Advantages of Market Culture

  • Employees are enthusiastic about their work.
  • The competitive atmosphere encourages all workers to work hard and reach company goals.
  • The organization is focused on profitability; this is an objective that employees can get on board with.
  • Companies with market cultures are often successful and profitable.

Disadvantages of Market Culture

  • It can be challenging for employees to engage with their work since each decision is tied to a number.
  • The constant competition this environment fosters can create a toxic work environment.
  • Employees can feel stressed at work due to constant pressure to perform.
  • It’s not uncommon for employees to become burned out because they are expected to constantly climb the ladder and deliver results no matter personal costs.

 

4. Hierarchy Culture

A hierarchy culture is one that follows the traditional corporate structure and has a clear chain of command. It has several management levels separating executives and employees. This type of company has a specific way of doing things, which may include traditional norms such as a dress code and rigid work hours. The company’s focus is on stability and reliability.

Advantages of Hierarchy Culture

  • Since this corporate culture is conservative, the company remains stable.
  • The company’s processes are clearly defined to meet its objectives.
  • Employees know exactly what is expected of them when they go to work.
  • Workers experience a sense of security knowing that expectations and working conditions are predictable.

Disadvantages of Hierarchy Culture

  • It prioritizes procedures over people which creates an inflexible work culture.
  • This culture can discourage innovation because employees are discouraged from suggesting new ways to approach things.
  • May be difficult to respond quickly to changes in the market.
  • Company goals take priority over the individual, which means little attention is paid to employee engagement.

How to Choose and Build a Corporate Culture

1. Determine the Company’s Core Values

The company’s values are the two or three words that the owner or founder would want someone to think of immediately when the company name comes to mind. These are words that will be put into action and become associated with the company brand. Whether the company is one that is focused on gaining clients’ trust through a traditional approach, is aggressive about opening up new markets, or is a start-up where everyone has a say in the next steps, it’s important to express its values in a few well-chosen words.

2. Establish Realistic Company Culture Goals

The goals around company culture should relate to diversity, inclusion and shared values. The owner needs to consider why they started the company initially and what they want to achieve. The company culture should reflect these ideas. It should be a positive message to inspire employees and others.

3. Get Employees Involved in the Process

Company culture is challenging to measure and track its effectiveness. To improve it, employees need to be involved. Collect feedback using employee engagement surveys. Make sure the results are anonymous to get their true responses. Maintain an open dialogue. Keep a pulse on employee thoughts about corporate culture.

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Author

Milton Herman
Content Writer

Category

Corporate Culture Employee Engagement Employee Experience

Published on

June 16, 2021