Article

November 6, 2024

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

Francis Ndimba

8 minute read

What is Corporate Culture? Definition

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. Corporate culture includes everything from an organization’s mission and values, to its work ethics and expectations, to its office design and team dynamics.

Corporate culture is often seen as a crucial factor for a company's success. It plays a significant role in shaping employee behavior, attitudes, and interactions with each other and the outside world. A strong corporate culture can improve employee satisfaction, retention rates, productivity, and overall business performance.

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.”

However, not all corporate cultures are created equal. Depending on various factors such as industry, size of the company, location, leadership style, and more - there can be different types of corporate cultures that coexist within different organizations.

Who is in charge of defining corporate culture ?

The short answer is: everyone in the organization. Corporate culture is not solely dictated by top leaders or Human Resources departments. It is a shared responsibility among all employees to uphold and cultivate the desired culture. Managers can transmit it and employees can act as advocates (social employee advocacy) towards others.

Leadership, however, plays a significant role in setting the tone for corporate culture. They are responsible for establishing the company's mission, values, and vision - which serve as the foundation of corporate culture. Leaders should also lead by example and ensure that their actions align with the desired cultural values.

— 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.

Internal Communications – Measurement to Mastery

Enhance your internal communication strategy and learn the impact of communication done right.

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, often referred to as a collaborative culture, primarily emphasizes the importance of teamwork and community within an organization. In this culture, strong relationships, active participation, and high company morale take center stage. Managers in a clan culture are viewed as advisors and mentors to their employees, fostering a supportive environment rather than adopting an authoritarian stance. This means they offer guidance, context, and assistance, rather than merely issuing commands and punishing mistakes without explanation.

One of the defining characteristics of clan culture is its commitment to minimizing barriers between the executive level and the rest of the workforce. This approach encourages open dialogue and collaboration across all levels of the organization, creating a sense of belonging and shared purpose. The flexibility inherent in clan culture allows organizations to thrive in the face of change, as teams are empowered to take initiative and adapt quickly to shifting circumstances.

Advantages of Clan Culture

Team members genuinely enjoy collaborating and building relationships, which enhances overall job satisfaction and loyalty.
Open and effective communication between team members fosters a sense of trust and transparency, leading to more innovative solutions and a stronger team dynamic.
Employees in this environment are likely to be highly engaged, as their contributions are valued and recognized, resulting in increased productivity and morale.
The collaborative nature of clan culture can lead to significant market growth, as diverse ideas and perspectives are encouraged, driving creativity and competitive advantage.

Disadvantages of Clan Culture

Maintaining such a collaborative environment can become challenging as a business expands and introduces more layers of complexity, potentially diluting the sense of community.
The horizontal leadership structure may result in unclear career paths, leaving employees uncertain about advancement opportunities and how to navigate their professional growth.
While collaboration is beneficial, excessive focus on consensus can hinder productivity, as decision-making processes may become prolonged or convoluted.
Furthermore, an emphasis on considering employees’ feelings can sometimes lead to difficulties in making tough decisions or enforcing accountability, which may impact the organization’s overall effectiveness.

In summary, while clan culture offers numerous benefits that promote a positive and collaborative work environment, it also presents challenges that organizations must navigate carefully to sustain their growth and effectiveness.

2. Adhocracy Culture

Adhocracy culture is primarily focused on innovation and risk-taking, fostering an environment where creativity and bold ideas thrive. Many successful startups are considered to embody this type of corporate culture, which is characterized by its emphasis on adaptability and forward-thinking.

This culture creates an entrepreneurial atmosphere in the workplace, where employees are actively encouraged to take risks and explore unconventional solutions. In an adhocracy culture, ideas that might be deemed too radical or unorthodox for a more conservative workplace are not only welcomed but are also nurtured and pursued with enthusiasm.

These companies are driven by aspirational goals and visionary objectives. They are constantly on the lookout for the “next big thing,” whether it's a groundbreaking product, a revolutionary service, or an innovative approach to solving existing problems. This proactive stance requires them to be well-prepared to take calculated risks, as they understand that significant rewards often come from stepping outside traditional boundaries.

Advantages of Adhocracy Culture

High risk, high reward: This culture offers greater potential for growth and breakthroughs, as the willingness to experiment can lead to significant advancements and market leadership.
Creativity Boost: Employees are highly motivated to unleash their creativity and develop new ideas, knowing that their contributions could lead to major innovations.
Supportive Environment: Team members feel supported when suggesting new ideas, as the culture values every voice and encourages collaboration.
Investment in Development: Companies with an adhocracy culture are more likely to invest in professional development opportunities, ensuring that employees have the skills and knowledge to bring their creative ideas to life.

Disadvantages of Adhocracy Culture

Instability Risks: There is potential for a lack of stability due to the high number of new initiatives being undertaken simultaneously, which can lead to confusion and resource strain.
Failure Rates: The risk that new ventures may not succeed can be significant, and failure can hurt not only the company’s financial health but also its reputation in the industry.
Intimidation for Juniors: Junior employees may feel intimidated by the high expectations to work aggressively and decisively, making it challenging for them to contribute effectively.
Competitive Pressure: This work culture may create an environment where employees feel competitive towards one another due to constant pressure to generate new, fresh ideas, which can sometimes lead to stress and burnout.

In summary, while adhocracy culture can lead to incredible growth and innovation, it also requires careful management to balance the risks and support the team effectively.

LumApps for Company Culture

Watch the Full Demo

3. Market Culture

In a market culture, the bottom line is the main priority, emphasizing financial outcomes above all else. Everything within the organization is gauged with the company’s profitability in mind, which means that decisions are often made based on how they will impact the financial performance. An organization that adopts this type of corporate culture is primarily focused on results and achieving measurable goals. This results-oriented mentality influences every aspect of the company’s operations, from strategic planning to daily workflows.

Often, the language used in a market culture revolves around meeting quotas, hitting targets, and achieving sales objectives. This type of environment attracts individuals who are competitive, driven, and eager to “win” in their respective roles. In a market culture, leaders are typically demanding, setting high expectations for their teams and fostering a high-pressure atmosphere that can lead to extraordinary performance—if managed correctly.

Advantages of Market Culture

Employees are generally enthusiastic about their work, fueled by the drive to excel and succeed in their roles.
The competitive atmosphere encourages all workers to put in their best efforts, fostering teamwork and collaboration while striving to reach company goals.
The organization’s intense focus on profitability creates a clear, objective target that employees can rally around, promoting a shared sense of purpose.
Companies with market cultures often experience higher success rates and profitability, as their clear goals and competitive nature drive performance and innovation.

Disadvantages of Market Culture

It can be challenging for employees to engage with their work on a deeper level, as each decision and action is tied to a quantifiable number, which may overshadow intrinsic motivation.
The constant competition inherent in this environment can create a toxic work culture, where collaboration takes a backseat to rivalry, leading to strained relationships among team members.
Employees can feel significant stress at work due to the relentless pressure to perform and deliver results consistently, which can impact their well-being and job satisfaction.
It’s not uncommon for employees to experience burnout in a market culture, as the expectation to continuously climb the corporate ladder and produce results often comes at the expense of personal health and work-life balance. This can lead to high turnover rates and difficulty in retaining talent within the organization.

4. Hierarchy Culture

A hierarchy culture is one that adheres to the traditional corporate structure, characterized by a clear and defined chain of command. In such organizations, multiple levels of management create a separation between executives and employees, ensuring that decisions flow through a structured path.

This type of company typically has established procedures for various operations, which may include traditional norms such as a dress code, rigid work hours, and a formal approach to communication. The overall focus of a hierarchy culture is on stability, reliability, and maintaining established protocols that have proven effective over time.

Advantages of Hierarchy Culture

Stability and Predictability: Since this corporate culture is conservative by nature, the company benefits from a stable environment where risks are minimized. This stability allows for more consistent performance and employee retention.
Clearly Defined Processes: The processes within the company are explicitly defined, enabling the organization to meet its objectives effectively. This clarity helps employees understand their roles within the larger framework of the organization, ensuring that everyone is aligned with the company's goals.
Clear Expectations: Employees know exactly what is expected of them when they arrive at work. This clarity helps reduce confusion and increases productivity, as workers can focus on their tasks without ambiguity regarding their responsibilities.
Sense of Security: Workers experience a strong sense of security knowing that expectations and working conditions are predictable. This security can lead to higher job satisfaction, as employees feel more comfortable in their roles with established routines.

Disadvantages of Hierarchy Culture

Inflexibility: The emphasis on procedures over people can create an inflexible work culture that stifles individual creativity and adaptability. Employees may feel constrained by rigid rules, limiting their ability to express themselves and contribute innovative ideas.
Discouragement of Innovation: This corporate culture can discourage innovation and creativity, as employees might be hesitant to suggest new ways to approach tasks or challenge the status quo. A lack of encouragement for fresh ideas can lead to stagnation within the organization.
Slow Response to Change: In a rapidly evolving market, it may be challenging for companies with a hierarchy culture to respond quickly to changes. The layers of approval required for decision-making can slow down the process, making it difficult to act swiftly when new opportunities or challenges arise.
Employee Engagement: With company goals taking priority over individual contributions, there may be little attention paid to employee engagement and morale. Employees might feel undervalued if their input is not considered, leading to lower motivation and potential turnover.

In summary, while a hierarchy culture provides stability and clear expectations, it is crucial for organizations to strike a balance between maintaining structure and promoting an environment that encourages innovation and employee engagement.

How to Choose and Build a Corporate Culture

The question can be : "Which kind of culture is the best for my company ?"

Choosing and building a corporate culture is not a one-size-fits-all approach; it requires careful consideration of various factors, including the company's industry, size, values, goals, and overall vision. Here are a few steps to help guide you in choosing and creating the right corporate culture for your organization.

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 surrounding company culture should not only relate to diversity, inclusion, and shared values but also be tailored to reflect the unique identity of the organization. The owner needs to take a step back and reflect on the initial motivations that led to the establishment of the company, as well as the long-term vision they hope to achieve.

This reflection can help in articulating what the company stands for and what it aspires to become. The resulting company culture should encapsulate these principles clearly and effectively, serving as a positive message that resonates with current employees and attracts potential talent. It should inspire and encourage a sense of belonging, thus fostering an environment where everyone feels valued and motivated.

3. Get Employees Involved in the Process

Understanding and nurturing company culture can be quite challenging, especially when it comes to measuring its effectiveness over time. To make meaningful improvements, employee involvement is crucial. Actively collecting feedback through various means, such as employee engagement surveys, can provide invaluable insights.

It's essential to ensure that these surveys are anonymous, as this encourages honest and candid responses that reflect true sentiments. Alongside surveys, maintaining an open dialogue with employees through regular check-ins and discussions can further enhance understanding of their perspectives on corporate culture. Keeping a pulse on employee sentiments regarding the workplace atmosphere helps identify areas for improvement and cultivates a culture of trust and collaboration.

4. Encourage a Growth Mindset

A growth mindset is the belief that one's abilities and intelligence can be developed through effort, hard work, and persistence. In a corporate culture that promotes a growth mindset, employees are encouraged to learn and develop new skills, take calculated risks, and embrace challenges as opportunities for growth. This mindset enables individuals to have a positive attitude towards change and adaptability, making them more resilient in the face of unexpected challenges.

To foster a growth mindset within an organization, leaders should model this behavior themselves by being open to learning from others and embracing new ideas. Additionally, providing employees with opportunities for continuous learning and development can help them cultivate this mindset.

5. Continually Assess and Adapt

Company culture is not a one-time creation; it requires ongoing assessment and adaptation to align with changing circumstances and goals. Periodically reassessing the company's values, goals, and employee feedback can help identify any areas that need improvement or realignment. This process ensures that the corporate culture remains relevant, effective, and positively impacts all employees within the organization.

In conclusion, building a successful corporate culture involves understanding the unique identity of an organization, setting realistic goals that reflect its core values, engaging employees in the process, promoting a growth mindset, and continually assessing and adapting as needed. By following these steps, companies can cultivate strong cultures that fosters innovation, employee engagement, and overall success. So whether you are a start-up or an established company, it's never too late to evaluate and enhance your corporate culture for the better. So don't wait for change to happen; be proactive and create a culture that drives success in all aspects of your organization!

Remember, a positive workplace culture doesn't just happen; it is intentionally created.

Takeaways:

Choosing and building a corporate culture requires careful consideration of various factors such as industry, size, values, goals, and vision.
The company's core values should be also well-defined and put into action to become associated with the brand.
Goals surrounding company culture should be aligned with the unique identity and long-term vision of the organization.
Employee involvement and feedback are crucial for understanding and improving corporate culture over time.
A growth mindset promotes continuous learning, adaptability, and resilience within an organization.
Company culture requires ongoing assessment and adaptation to remain effective. So don't wait for change to happen; be proactive in creating a positive workplace culture! But remember, building a strong corporate culture is not a one-time event, it is an ongoing process that requires dedication, open communication, and a willingness to evolve. By following these steps and continuously evaluating your company's values, goals, and employee feedback, you can create a thriving corporate culture that drives success and fosters a sense of belonging for all employees. So, let's take action now and create a culture that reflects your organization's unique identity and promotes growth and innovation!
Ready to revamp your company culture? Start by assessing where you are currently, involve your employees in the process, set achievable goals, foster a growth mindset, and be open to continuous improvement. Together, we can build strong corporate cultures that empower organizations to thrive! Let's embrace the power of positive workplace culture today!

Internal Communications – Measurement to Mastery

Enhance your internal communication strategy and learn the impact of communication done right.

Discover our latest content on employee experience.

Get started with LumApps

We would love to know more about your goals. How can we help?

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

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

What is Corporate Culture? Definition

Who is in charge of defining corporate culture ?

— Why is it Important?

— The Role of Corporate Culture

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

2. A good corporate culture reduces turnover rates.

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

4 Types of Corporate Culture

1. Clan Culture

Advantages of Clan Culture

Disadvantages of Clan Culture

2. Adhocracy Culture

Advantages of Adhocracy Culture

Disadvantages of Adhocracy Culture

3. Market Culture

Advantages of Market Culture

Disadvantages of Market Culture

4. Hierarchy Culture

Advantages of Hierarchy Culture

Disadvantages of Hierarchy Culture

How to Choose and Build a Corporate Culture

1. Determine the Company’s Core Values

2. Establish Realistic Company Culture Goals

3. Get Employees Involved in the Process

4. Encourage a Growth Mindset

5. Continually Assess and Adapt

Company

Partners

Popular pages