8 Types Of Organizational Culture (And How to Build Yours)

Ask 10 people to define “organizational culture,” and you’ll get vastly different responses. 

For example, the MIT Sloan School of Management describes organizational culture as the shared values, beliefs, and norms that influence the behavior and practices within an organization. Company cultures essentially serve to coordinate efforts, promote shared understanding, increase predictability, and codify organizational lessons about what does and doesn’t work.

At its core, company culture is how things get done around the workplace. “How” includes both the formal frameworks and the informal behaviors and patterns that lie beneath the surface. 

In this new era of remote work culture and digital transformation, leaders at every level of the hierarchy through all industries struggle to architect an organizational culture that’s right for this moment. 

How do you give your employees enough autonomy to innovate while rallying them around a common goal? How do you design an environment where employees have the drive to contribute the best of their expertise, knowledge, skills, and ideas?

On the contrary, having the wrong culture erodes the best-laid strategy and organizational development initiatives. While leaders know all too well that people and culture are essential catalysts of success (or failure), not all leaders acknowledge the need to be proactive and intuitive in building the types of company culture required to achieve their goals.

With that in mind, let’s review some key types of company culture, the impact of culture on the business, and how you can nurture culture through your workforce. 

The Impact of Company Culture on Business

Increased Profitability and Brand Image

Many enterprises falsely assume that stress and pressure somehow motivate employees to perform more, better, and faster; but these cutthroat organizations fail to recognize the hidden costs associated with this mindset.

Firstly, disengagement carries an enormous cost. Research from Gallup shows that disengaged employees experience 37% more absenteeism, 49% more accidents, and 60% more errors and defects.

That’s not all; if you treat your employees well and cultivate a friendly corporate atmosphere, your customers will see you as a reliable, considerate brand. Depending on your target audience, that could be a major boost for sales and customer loyalty.

Organizations with positive organizational cultures have realized a  four-fold increase in revenue growth. In addition, companies on Fortune's 100 Best Companies to Work For list enjoy higher average annual returns, with cumulative returns reaching 495%.

Employee Attitude and Sense of Direction

A strong company culture attracts better talent and, more significantly, retains that talent. When people feel a sense of belonging, they’re more likely to stick around for the long haul. That naturally results in lower turnover, fewer new hires to train, better camaraderie among your team, and most importantly, happy employees.

Employees are more likely to go the extra mile, too, if they are invested in your company.

Types of Organizational Culture

Many factors determine your organizational culture, including beliefs, core values, practices, and the company’s mission, industry, and size. To better understand each of these types of organizational cultures, and the rewards and recognition systems that best suit them, let’s take a closer look.

Hierarchy Culture

A hierarchy culture refers to work environments that are more structured and process-oriented, where everyone accepts their place to fulfill their mission and stay on track. Most activities and decisions are influenced by existing procedures, rather than a lot of innovation and out-of-the-box ingenuity. As such, hierarchy cultures are often associated with the traditional corporate structure, complete with lines of authority, rigid procedures, and a strong focus on stability and control.

In a hierarchy culture, company leaders are accountable for how effectively their teams operate, with a central focus on stability, results, and dependable delivery.

One advantage of the hierarchical culture is the structure it provides.

When team members are aligned around a common goal, they are driven to engage in projects and strive to achieve targets that boost the company’s revenue. However, hierarchy culture often tends to prioritize procedures over people, which can create an atmosphere that feels restrictive and even cold.

The hierarchy culture can work well for large e-commerce businesses (take Amazon as an example) because it allows for the company to be organized into smaller teams under separate management for more precise service. The military is also a great example of a hierarchy culture, as it is all about individuals working to execute certain tasks or roles within a particular rank.

Market Culture

A market culture emphasizes getting things done, plain and simple. It is typically marked by competition among employees and even between leaders. Employees are motivated by rivalry and by reaching — if not surpassing — their goals. Within a market culture, there's a collective, sometimes obsessive, focus on winning.

The major advantage is that the company is able to put its best foot forward and place itself at the forefront of performance delivery and customer success. Everyone is dedicated to beating the competition and establishing the company as a leader in its field.

The clear downside is that employees experience stress and even burnout as a result of the constant pressure.

Many big-name brands lean toward market culture, as they need to aggressively compete to achieve customer satisfaction and surpass competitors. Likewise, managers in market culture organizations value winning and working hard to beat the competition. 

Clan Culture

Clan Culture is a "family-like" culture in which the chief expectation is for team members to be friendly and respectful toward one another. Company leaders are seen as mentors instead of corporate figureheads who give instructions and reprimands.

Team-building and employee involvement are considered pillars of clan culture, facilitating a very friendly working environment where relationships, morale, participation, and consensus take center stage. 

A clan culture imposes no specific organizational structure, allowing everyone the freedom to manage their work and schedule according to their personal preferences. The objective of a clan culture is to nurture long-term cohesion and empower everyone to express themselves freely so that the company can achieve its goals. 

Weekly one-on-ones, team presentations, and all-hands meetings are other features of the clan culture, as they encourage everyone in the firm to sing from the same song sheet, from the janitor to the CEO. You can even administer Pulse surveys via a platform like Applauz to gain insight into your employees’ sentiments and ideas. 

Family-owned businesses often embrace a clan culture, fostering a close-knit, supportive environment where employees are treated like family and collaboration is highly valued.

Though clan cultures sound idyllic and supportive, too much collaboration or chatter can come at the sacrifice of productivity. Leadership might even feel reluctant to make tough decisions with regard to their company's culture at the expense of personal feelings. Further, scaling a clan culture can become a real hurdle once your company starts growing and more numbers come into play.

Adhocracy Culture

Derived from the term word ad hoc, this type of organizational culture enforces a bold, disruptive “move fast and break things” philosophy that’s been embraced by a lot of tech companies and startups. Adhocracy has been called the “create culture” in many circles. 

Companies with an adhocracy culture are the adrenaline junkies of the business world. These teams speed through developments and change rapidly with the seasons. Fully adaptive and focused primarily on future business trends, the rough-and-ready mentality of an adhocracy culture promotes dynamic product development and an urgency to keep moving with technology and market growth. 

The good thing is that this organizational culture encourages a very entrepreneurial, dynamic type of work environment, where employees are encouraged to take risks and aggressively go after off-the-wall ideas. 

Fuelled by constant innovation, creativity, risk taking, and flexibility for all staff members, adhocracy cultures tend to be fluid and ever-changing, with decisions made by those best positioned to address specific challenges. In many cases, this company culture is open and egalitarian, and everyone (in theory) has the exact same power and role. 

The benefits of an adhocracy culture are well-known, but its execution can be chaotic and unpredictable, which can make it difficult for team members to coordinate their actions and ideas. The lack of formal protocols can also make it challenging to enforce rules and regulations, which can introduce frustration and even conflict among employees.

Purpose Culture

Stakeholders want to see and reaffirm that the businesses they purchase from and invest in are helping the world thrive through their products or services. It's not enough to simply say and do the right things; businesses are to be good intrinsically, complete with a business model that makes the world around them better, whether in small or big ways.

It doesn’t mean that every company must champion social or environmental causes that have no connection to what they do; it’s about uncovering the ‘why’ you exist and how you add value beyond your company's profitability or sales. 

In a purpose-driven workplace culture, employees have a heartfelt sense of ownership of their purpose. It’s that purpose that energizes them, informs their decisions, and guides their day-to-day attitude. Team members should know who they serve, what they serve, and how to embody brand promises.

Customer-First Culture

With customer acquisition costs skyrocketing year by year, it is only logical to deliver the best possible experiences to your existing customers. Retaining customers takes less effort and cost than attracting and nurturing new leads to your business.

A customer-centric workplace culture is just what it sounds like. Instead of mobilizing around products, the organization puts the customer at the center of corporate decision-making. For example, team members might seek ways to consistently and proactively deliver a positive customer experience by designing and delivering with the customer in mind. Other strategies may include using open channels for customer feedback, collecting better customer data, and investing in more customer-centric training.

All employees need to understand the customer’s needs, grasp the emotions and reasons behind those needs, and respond promptly to solve their problems.

Many of the disruptors of the last decade – including Uber, Airbnb, and Warby Parker – can be classified as customer-first organizations. Instead of programming the customer journey around product creation and delivery, their organization was based on improving the customer experience on an intuitive level.

Role-Based Culture

Role culture is a subsect of the hierarchical culture, often found in large, bureaucratic organizations. In this culture, the approach to work is based on a person's role or a specific task that needs completion.

In such companies, stability, efficiency, and predictability are favored over individual needs, and employees are trusted to take accountability for the projects to which they’ve been assigned.

Though role cultures are marked by a lot of stability, certainty, and continuity, they may have trouble adapting to — or instigating — change.  Every change in workflow has to be meticulously considered, the consequences weighed and then documented, and employees have to be trained in those new methods.

Task-Based Culture

In the task culture, the business is to judge people's performance by their results and the number of issues they solve. Their expertise, resourcefulness, creativity, and problem-solving ability are appreciated and rewarded. This culture often has high levels of engagement and enthusiasm, and the enterprise is typically staffed by expert professionals who have an earnest desire to help it scale.

Decisions are made quickly because people can discuss the changes that are being thought about, in the teams they have, and therefore solutions get brought forward. As this cultural framework is easy to adjust within, tasked-based cultures tend to be adaptable when it comes to keeping up with competitors and their markets.

Recognizing Negative Organizational Culture

A 2024 McKinsey study indicated that over half of the employees in large organizations were disengaged. Around 10% were identified as "quitters," having already decided to depart, while 43% of them showed low levels of satisfaction and commitment.

The impacts of negative organizational culture cannot be overstated. And, because a strong organizational culture is sometimes an afterthought, many businesses fall into the trap of exacerbating a negative corporate culture and contributing to a toxic work environment.

Pinpointing the elements that make your organization's culture negative is the first step to mitigating it. Here are some warning signs:

Micromanagement

Constant scrutiny from leadership can create an atmosphere brimming with tension. Micromanagement doesn’t work; it slows down work, annoys otherwise productive employees, and ensures teams are put under unnecessary pressure.

Cutthroat, Constant Competition

Everyone enjoys a bit of friendly competition between co-workers. Unfortunately, it’s when it turns into a cutthroat, unfriendly competition that things begin to take a nosedive and wedges start to form, the tell-tale signs of a negative culture.

Bad Habits

Bad habits trickle down. If a company's management has bad work routines, this can bleed over to employees, who may believe this is the correct way of doing business.

For example, if a manager consistently comes into work late, subordinates will learn that it is acceptable to do so.

If industry standard practices aren’t adhered to when performing tasks, employees may soon become flippant as well. This lack of adherence to standards can quickly become a bad habit that spreads throughout the team, leading to a broader culture of complacency and indifference. Eventually, this will make for an incredibly negative corporate culture.

Low Office Engagement

Employee engagement, or the lack thereof, can be one of the reasons an employee chooses to move on. Unfortunately, low engagement among employees can be contagious and is one of the factors that can stunt performance overnight. The stakes of ignoring low employee engagement are staggering.

With the help of a tool like Applauz, you can uncover real-time, unbiased insights into your employees and the pain points that might signal a negative work culture. Engaging with your employees and asking them directly for feedback is often the first step to preventing a negative culture.

How to Choose the Right Organizational Culture for Your Business

In the present climate, companies must build and maintain a strong organizational culture that exemplifies their core values and is designed to weather today’s volatile business environment.

The above examples and types illustrate that there are many ways of working and definitely more than one culture to seek inspiration from. Of course, there are many frameworks for mobilizing and empowering employees to meet organizational objectives. But culture is beyond that — it’s the values, and beliefs, the norms and habits, and the symbols and languages that define your company identity from top to bottom.

Culture manifests in impulses and second natures; it becomes entrenched in every person who works there, regardless of their role. For many businesses, cultural norms have indeed become deeply ingrained over many years, even decades. While some people may embrace change, others may see current culture as part and parcel of your company's success. 

It's never too late to transform company culture, no matter where you currently stand. Culture change, though, is hard work. Think about how challenging it is to change your own habits, never mind those of hundreds of employees.

Though there is a lot of research, trial-and-error, and risk involved, here are some high-level practical steps for implementing your chosen organizational culture:

• Decide what your ideal company culture looks like

  As a business leader, start by envisioning a collaborative culture that fosters high engagement and aligns with your organization's core values.

• Compare the ideal company culture to your existing one

  Evaluate how your current culture fosters or hinders a positive employee experience and identify gaps that stand in the way of your ideal organizational culture.

• Ask employees for input and use tools like Applauz to gather feedback

  Employee feedback is a crucial component of a thriving workplace. Encourage open and honest feedback from your team to ensure that your implementing strategy reflects the entire organization's needs and aspirations.

• Encourage work-life balance to reduce stress

  When employees maintain a healthy work-life balance, they are less likely to experience burnout. This balance allows them to be more focused and productive during work hours, leading to higher quality work and the opportunity to take on more challenging tasks that contribute to their professional development and growth.

• Make sure employees know your expectations

  Clearly communicate your expectations to encourage employees to contribute effectively within an organizational culture that thrives on clear goals.

• Hire candidates for culture first

  Prioritize hiring candidates whose values align with your ideal culture, ensuring that these prospective employees fit into the positive employee experience that your company champions.

• Use digital tools (such as Applauz) to connect with employees

  Leverage digital tools to facilitate open and honest feedback. In doing so, you can build a collaborative culture across your entire organization. Listening to and acting upon employee feedback helps to build trust and reinforces a learning culture where continuous improvement is encouraged. It’s through this ongoing dialogue that your organization's culture can adapt and evolve, ensuring your company's mission can shine through.

• Recognize employee achievements

  Regularly recognize and celebrate employee achievements to maintain high employee engagement and reinforce a positive work environment.

• Remind employees that their work matters

  Show employees that their contributions are vital to the company's success, which encourages employees to stay motivated and engaged.

• Create opportunities for employees to build relationships

  Foster a culture that encourages employees to connect through professional development opportunities and team-building activities, enhancing collaboration across your organization.

Technology’s Role in Shaping Organizational Culture

Technology has the potential to create a confidential, meaningful environment between employees and leadership and enrich the overall experience; that is, if you leverage technology in a way that is true to your business identity.

For companies where communication, collaboration, trust, transparency, and other core values and behaviors take precedence, technology plays a critical part in supporting and scaling workplace cultures, especially in a remote or hybrid environment.

You can’t build your organizational culture through platitudes and promises alone.

Technology is the nervous system that drives those new ideas forward and provides the tools and processes to bring them to life. There are tools for every aspect of employee engagement and building your organization's culture — everything from enabling performance to career development, voicing concerns, and bridging gaps that you might not have even uncovered yet. 

Changing workforce engagement and organizational culture is demanding.

Consider automating certain aspects, like collecting feedback and celebrating wins, with Applauz’s full suite of engagement tools. You can improve your company’s rewards program (or build one from scratch if you’re a smaller team), stream live posts and personalized recognitions, and set up inspirational challenges. 

Take The First Step To Build Your Organizational Culture

Having examined several central types of organizational culture, including Clan Culture, Market Culture, Hierarchy Culture, and Adhocracy Culture, as well as newer types such as Purpose Culture, Task Culture, Role-Based Culture, and Customer-Centric Culture, there are indeed many pathways your business can take.

Remember, though, that such profound transformations can’t be executed through an overnight mandate by leadership. Changes need to be implemented step-by-step, starting with the collective hearts and habits of each and every employee. It’s akin to planting a seed—a quick conversation, a small note of gratitude, a free lunch, a day off, a reiteration of your company’s purpose. But before you can begin igniting the change, you need to communicate with and learn from your employees.

The best way to do that is by leveraging technology that humanizes the whole process while gathering accurate, relevant data for this organizational culture change.

And the best way to do that is by leveraging technology that humanizes the whole process while gathering accurate, relevant data for this culture change.

Additionally, in many cases, employees might feel too shy to engage directly with leadership, which can make it tough to gauge their true feelings and celebrate their achievements. Applauz offers a comfortable alternative, allowing them to share their thoughts and successes anonymously without the pressure of face-to-face interactions.

With programs custom-built for employee recognition, pulse surveys, and employee goals, companies can set up their employees for success, while laying the foundation for new processes or structures that can affect tangible change. By using these tools, you can not only keep track of the company’s Net Promoter Score (eNPS) but also take action to increase employee happiness and build a strong, effective culture. 

To take the first step to improve your company culture, contact Applauz for a demo today.