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There are four types of company culture. Do you know yours?

11 min read

23 May 2019

It’s important to understand the difference between workplace cultures in order to know which is right for yours. So what types of company culture actually are there?

Businesses around the world share common goals. One of these goals is to establish a workplace culture that motivates employees to produce their best work. Although these companies have very different outputs and function in a variety of ways, they generally fall into four types of company culture.

What is company culture and why is it important?

Company culture encompasses the shared values, beliefs, attitudes and standards that characterise a business and its employees. It influences a company’s goals, strategies, structure, behaviours and its approaches to the external world.

Jonathan Richards, CEO at specialist HR software company Breathe, adds:

“It’s not the values written on the walls, nor the office fruit bowls, bean bags or pool table. It’s also not the leadership style alone. It is all of the above and more. It is how a company cultivates its growth by offering each and every employee a voice, while encouraging healthy day-to-day attitudes, behaviours and work ethics.”

Workplace culture is important because it is a company’s foundation. What’s more, an attractive company culture has very real business benefits. A positive culture leads to improved performance and productivity. It also attracts talented people, which can increase revenue by up to 33%, as Gallup discovered.

Find out more about what company culture is here.

Company culture types

We generally accept that there are four different types of company culture. They are hierarchy, market, clan and adhocracy culture.

These culture types reflect how a company functions. On the one hand, some businesses require stability and control, whereas others perform better thanks to flexibility and discretion. At the same time, some companies have an internal focus, while others have an external focus.

4 types of company culture, organisational culture types Breathe

Source: Breathe

Of course, the difference between these binary values is gradual and many businesses fall somewhere between each ‘axis’.

What is hierarchy culture?

Hierarchy cultures occur in highly structured workplaces and have an internal focus. Processes and policies help to keep them together and running smoothly, which is essential to their success. Because of this, procedures tend to dictate what employees do and how they work.

Reliable delivery, stability, efficient execution and low costs are high priorities. As such, leaders are efficient problem solvers, whose oversight is essential to guarantee success.

A famous example of a hierarchical organisation is Ford Motor Company, with seventeen levels of management.

Pros:

  • Employees understand their responsibilities and who is in charge
  • Delivery of work is predictable, reliable and smooth
  • Higher job security encourages employees to stay in their roles longer
  • Employees are experts in their roles

Cons:

  • Career progression can be limited, with high competition for promotions
  • Teams can become siloed and interdepartmental communication difficult
  • Hierarchical companies can struggle to react to change quickly
  • Multiple layers within the business can lead to high costs and the company being seen as ‘faceless’

What is market culture?

Market cultures are competitive, results-based environments with a strong external focus. Companies with a market culture focus on producing work and getting things finished. This emphasis on results, and success, helps to keep these organisations together. Because of this, employees tend to be competitive and goal focused.

Leaders of market cultures have high expectations and drive their teams hard. As such, stability and control, reputation, success and market leadership are high priorities.

What are the four types of company culture?

Source: GovTech

A well-known example of market culture is multinational computer technology Oracle, whose co-founder and executive chairman, Larry Ellison, famously said:

“I’m addicted to winning. The more you win, the more you want to win.”

Pros:

  • Employees are focussed and learn new skills in order to succeed
  • Pressure to meet goals often results in higher revenue – and profit
  • Companies are ahead of the curve and poised to react to change

Cons:

  • Employees can become overworked, resulting in low morale and staff retention
  • Competitive, results-based environments can become unpleasant to work in
  • Staying ahead of the curve comes with costs attached

What is clan culture?

Clan cultures are friendly working environments. Employees tend to have very similar interests and be heavily involved in the company. Because of this, they can feel similar to a family, hence the name.

Traditions, long-term career development, open communication and strong loyalty help to hold clan cultures together. As such, they often promote participation, teamwork and consensus. Clients’ and employees’ needs, perhaps unsurprisingly, are high priorities. Leaders also play an important role, often functioning as mentors rather than figures to fear.

A good example of clan culture is specialist HR software company Breathe. Winners of the National Technology Awards 2019 for Best Tech Company to Work for, the company is big on culture and practices what it preaches. The team showcases the benefits of true collaboration, autonomy, open communication, clear direction and reward, as well as flexibility and creativity.

Pros:

  • Clear, inclusive communication means everyone is on the same page
  • Feedback loops help to alleviate concerns and allow new ideas to surface
  • Employees enjoy working with each other and for the company
  • Happy employees are more productive and help the business to grow

Cons:

  • Shared interests can blur the lines between social and professional relationships
  • Leaders need to ensure the boundaries of authority remain in place
  • Too much collaboration can distract employees
  • ‘Pack’ mentality can discourage alternative thought

What is adhocracy culture?

Adhocracy cultures are creative and dynamic. Innovation, experiments and creative solutions help to hold them together. As such, they promote individual freedom and initiative. Growth as well as new products, services and resources are high priorities.

Employees tend to view leaders as innovators and risk takers, and take risks themselves. Leaders are often entrepreneurs or ‘visionaries’.

What types of company culture are there?

The Google café.

A famous example of adhocracy culture is Google. Few businesses can claim to be more innovative than the search giant, whose relentless search for better answers has formed the core of the company’s culture from the outset.

Pros:

  • Experiments and creative thinking result in innovative products and solutions
  • Adhocracy cultures are often industry leaders with their eyes on the future
  • Unexpected turns, even wrong ones, are opportunities to learn
  • Adhocracy cultures tend to react to change quickly

Cons:

  • Experiments come with risks attached
  • Adhocracy cultures are often unstable environments
  • Recruiting a suitable team is key as adhocracy isn’t for the faint hearted
  • Consensus and collaboration can be difficult with an individualist, creative team

A different approach to company culture types

The Harvard Business Review talks about company culture types in a slightly different way.

It talks about two primary dimensions of organisational culture:

  • How people respond to change
  • How people interact with each other

These dimensions are based on how people like to work – interdependently or independently – and, once more, on whether the business requires stability or flexibility.

The video below breaks down company culture further, into eight different types.

Which type of company culture is right for your SME?

Hopefully the examples above have helped to clarify which type of company culture best suits your business. It’s also worth remembering that the type of culture you want your business to have may not actually be the most appropriate.

You may, for example, want a mixture of clan and adhocracy cultures for your business. If logistics form an important part of your business, however, then stability and control will be greater priorities.

Equally, we often see open communication as a positive, but in some industries it may actually be best for a select few to know certain information. Too much structure and too many rules, on the other hand, will probably be restrictive in more creative environments.

Your culture is yours to set and establish as you choose. But think carefully about your decisions. They could be the difference between your business faltering or flourishing.

In association with Breathe, Real Business is running the SME Culture Leaders List 2019, the only league table of its kind catering to the UK’s thriving small and medium businesses that put company culture first. (Campaign closes 28th June 2019.)

If your business has an amazing atmosphere, stellar perks and more, tell us all about it for a chance to feature on Real Business as an SME Culture Leader. Nominate your business today!