What Organizational Culture Is & Why It Matters

You'll often hear someone, when speaking to a friend about work, say, "So, what's the company culture like?"

In response, you might hear something along the lines of, "Really friendly people. Ping pong tables. Free pizza on Friday's."

Culture is a critical component of any organization. As the HubSpot Culture Code states, "Culture is to recruiting as product is to marketing." To attract and retain talented people, you need to create a culture people will love.

But organizational culture is more than friendly people or a cool office space. Here, we're going to define organizational culture and describe different types, so you can get a sense for what it is -- and why it matters.

What is organizational culture?

Organizational culture is an inherent part of any workplace.

Essentially, organizational culture is the values, behaviors, and shared vision that contribute to the environment of an organization. 

Let's focus on one aspect of that for a moment -- "values". In this instance, we're using values as an umbrella term over the whole organization, but also as a label to define the daily interactions between individual employees.

For instance, your company might value autonomy. On a larger scale, you might implement autonomy by allowing leaders to manage their own teams with little interference. However, to truly infiltrate the culture, you'll want each employee, from intern to VP, to feel autonomous over their own schedules and workload.

For our purposes, it's important to distinguish the difference between "value" and "behavior". Your company might value kindness, but to truly create a compassionate culture, you'll need to ensure each employee follows certain behaviors. Kindness can mean anything from being inclusive during team outings, to remaining open to new ideas during meetings.

If your values don't play out in your employees' daily behavior, you'll never create the kind of culture you want.

Finally, it's critical your company have a shared vision. Without a shared vision, it's difficult for your employees to work together towards a common goal, make effective decisions, and move the company forward. Additionally, your vision is the motivating factor that can keep employees engaged when times get hard.

For instance, consider Life is Good, a company with an impressive 4.0 rating on Glassdoor. From an outsider's perspective, Life is Good sells t-shirts and other apparel. But their vision is bigger than that -- "To spread the power of optimism."

A vision helps a company grow, but it also enables individual employees to stay on track and make the right decisions for the brand. When faced with challenges, Life is Good's employees might ask themselves, "Well, does this spread optimism, or does it go against our mission?" Ideally, the vision acts as common ground and enables leaders to take a step back and allow for greater autonomy across the organization.

Types of organizational culture

University of Michigan business professors Robert E. Quinn and Kim S. Cameron developed the Organizational Culture Assessment Instrument, or OCAI. Using their research in the field, they came up with four different organizational cultures -- but, it's important to note, most organizations are a combination of these cultures. Here, we'll break them down.

1. Clan Culture

Clan Culture is a "family-like" culture. People are friendly and respectful towards one another, and leaders are seen as mentors. There's an emphasis on team-building and employee involvement. Clan Culture organizations prioritize their Human Resources department, and implement long-term HR approaches to encourage teamwork and inclusion. There's also a strong emphasis on loyalty and tradition.

Smaller companies are typically good examples of Clan Culture. For instance, Propellernet, a Brighton-based marketing agency consistently named a top UK Place to Work, has said they "prioritize the health and well-being of our team, work hard to challenge, engage and inspire them, and have a business plan that focuses on making their dreams come true."

2. Adhocracy Culture

This is an innovative, dynamic, and creative work environment. Above all else, a Adhocracy Culture promotes freedom and individual innovation. Employees are encouraged to experiment and offer new ideas, and leaders are seen as risk-takers. Ultimately, the organization aims to grow and create new products. Their metric of success is whether they are able to anticipate market needs and develop new solutions to meet that demand.

Apple is a good example of Adhocracy Culture -- Steve Jobs, Apple's founder, once said, "We hire people who want to make the best things in the world." Apple puts an emphasis on invention and creativity.

3. Market Culture

A Market Culture emphasizes getting things done. There's a competitive nature both among employees and even between leaders. Employees are motivated by rivalry and reaching goals, and there's a steadfast focus on winning. Leaders are both hard drivers and rivals. Ultimately, success is measured by market penetration and stock.

Oracle is a good example of Market Culture. Oracle's executive chairman and co-founder Larry Ellison has said, “I’m addicted to winning. The more you win, the more you want to win.”

4. The Hierarchy Culture

Strict institutional procedures are adhered to closely in a Hierarchy Culture. A leader's job is primarily to ensure employees follow procedures correctly. In a Hierarchy Culture, there's a strong emphasis on efficiency and uniformity. Ultimately, the organization's goals revolve around smooth execution, results, and low costs. A Hierarchy Culture relies on systematic problem-solving and process control to operate effectively.

Bureaucratic organizations like the Department of Motor Vehicles, or Burger King, are good examples of a Hierarchy Culture. These organizations follow corporate procedures to ensure consistency and results.