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Last updated: 24.08.21

What is Organisational Culture?

Organisational culture is a term used to describe the values, objectives, mission and expectations of a company or business. This culture informs the way that a work environment is structured, how well employees perform, the sense of teamwork within a company and how engaged and productive people who work there are.

Whilst business goals and a mission statement do feed into organisational culture, they are separate from it. The culture of an organisation is more about behaviours and values in the workplace than the specific targets you’re trying to reach and the purpose you’re trying to serve. It will affect things like contract terms, benefits and working hours, but more importantly informs things like attitude, communication, and approaches to problem-solving.

Many people often refer to organisational culture as company culture, but the former term is more inclusive as it can refer to any group of people instead of a business specifically. This article explains how organisational culture is formed, the most common categories of culture that most organisations fall into and why the concept is so important.

How is Organisational Culture Formed?

The formation of the culture of an organisation does not happen all at once. It is often an organic process that evolves and adapts over time as a company faces different internal and external challenges and gets a better idea of the best way to organise itself.

Key factors that influence organisational culture are the values of the founder or those in charge, industry requirements and employee preferences.

The first of these is often the most influential. When an organisation is just starting out, the owner or leader will often have a clear idea in mind of what they want to achieve and what they want their organisation to look like. These values will influence initial company culture, from the kinds of people who are hired to the ethos behind the work done and how profits are spent.

The industry that an organisation belongs to is also a big influence on how a culture is formed. Certain sectors may prioritise order and stability in all aspects of work because of the nature of the industry they belong to, whereas others may be much more creativity-driven and have totally different values that affect the way everyone works.

Finally, employee preferences may affect the way that organisational culture in the workplace is formed over time. It’s easy to establish company culture when it hasn’t been put into practice, but the people who are hired, the work that is done and the processes that work best may affect this culture and change it from what it initially looked like.

When it comes to forming organisational culture, the key thing to remember is that this is not something that happens overnight. Ideally, you’ll have an organisation full of like-minded people that means key values and preferences are quickly identified and integrated into workplace culture, but external factors like industry changes, business growth and new employees can all impact organisational culture as a business develops.

What are the Types of Organisational Culture?

Whilst the majority of organisational cultures are unique in one way or another, organisational scientists Robert E. Quinn and Kim S. Cameron from the University of Michigan identified that there were four different types of organisational culture that most groups fell into. These are clan culture, adhocracy culture, hierarchy culture and market culture.

Your organisation might be a mix of some or all of these types of organisational culture theory, or they may be loosely based on one with a couple of unique features.

Clan Culture

The primary focus of clan culture is teamwork and harmony within a group. It’s a type of organisational culture that is most often found in small businesses, close-knit teams and family-owned companies, where everyone’s input is valued and positive relationships are a priority.

Collaboration is a key part of clan culture, where the contributions of everyone in a team are valued and encouraged. Whilst there may be someone at the top of the ‘hierarchy’ in these kinds of organisations, there is an emphasis on group decision making and all members having the power to instigate change.

Personal growth is nurtured in organisations with clan culture, with all members of the group supporting one another and sharing resources and knowledge to allow everyone to learn and develop. Praise and rewards are given freely to maintain a positive atmosphere, and criticism is encouraged and given constructively so that everyone learns from their mistakes.

The key advantage of a clan organisational culture is that everyone involved is more engaged, productive, motivated and feels a strong sense of belonging to their company. On the flip side however, if an organisation grows larger then it can be hard to maintain this kind of close-knit atmosphere, decision making as a group becomes harder when there are more people to disagree with each other, and leaders in these organisations can sometimes find it hard to maintain authority when they are close with their employees.

Adhocracy Culture

The key aim of adhocracy culture is to create a space where creativity thrives and innovation is allowed to flourish. This type of organisational culture is all about taking risks to drive progress and creates a high energy, fast-paced work environment.

Leaders of organisations with an adhocratic culture tend to be forward thinkers who are happy to disrupt the status quo and like to push the boundaries of what is expected from their business. They may introduce new ways of working to their company in order to cultivate innovation and give themselves a competitive advantage in the market.

Individuality is highly valued in this kind of company culture, and everyone is encouraged to bring all kinds of ideas to the table and take risks in order to pursue success. This has a lot of benefits, such as nurturing innovation and creativity, reaching high profit margins and being a workplace that allows for a lot of flexibility.

However, not everyone is cut out for such an intense working environment, and all of the risks taken do mean that this is a type of organisational culture that does have to deal with plenty of losses and failures. It can also lead to unhealthy competition and tension between employees, which affects the working environment.

Hierarchy Culture

A hierarchy culture is what most people think of when they imagine how the majority of businesses are run. It operates on principles of structure and control, with efficiency as the main aim of the organisation.

The culture of a hierarchical organisation is quite formal, with an established chain of command where a founder, manager or director sits at the top of the pile and decides on the direction of the group and what work needs to be done. This workplace culture is strict and organised, using a measured, practised approach and strategy to get things done.

Many people find it easiest to work in an environment that is very controlled, and businesses that use hierarchical culture are very predictable, reliable and secure which is very important in a lot of industries. However, there is not much room left for creativity or individualism, which does not work for a lot of people and can mean that organisations remain stagnant and get left behind by being stuck in their ways.

Market Culture

The key focus of an organisation with a market culture is analysis, monitoring and a drive to come out on top. It’s perhaps the most aggressive kind of organisational culture theory, where every aspect of a business is monitored closely to ensure that performance is at an optimal level at all times.

Organisations that operate with a market culture are focused on beating the competition and making a profit. They favour stable, repeatable systems and processes which have all been chosen because they consistently achieve success, and have a lot of methods in place to monitor goals, progress and employee performance.

An advantage of market culture is that it does deliver predictable results when done correctly, efficiency and productivity are emphasised so employees get pushed to succeed, and everyone tends to be united by a common goal. However, this type of organisational culture again does not leave a lot of room for individuality and creativity, employees can feel overly monitored and pressured, and working at a constant high level of efficiency can lead to burnout.

What is the Importance of Organisational Culture?

There are many different reasons why organisational culture is important, the most significant of these being that businesses with a stronger culture tend to be better places to work. Not only do clearer expectations and goals mean that success is more frequently achieved, but employees are also more motivated to do their best work and have a bigger sense of fulfilment in their roles.

From a recruitment perspective, organisational culture influences the hiring process and often means that new employees have values that align well with their new place of work. This leads to reduced employee turnover, increased retention of really talented team members and easier onboarding, as people tend to fit in better if they’ve chosen to work somewhere that they feel comfortable and surrounded by other like-minded people.

Having a defined organisational culture can also be important for many businesses as it means that the overall brand image is stronger. This is a benefit both if you are trying to sell a product or a service or you are trying to grow your businesses by attracting new employees who want to work somewhere with a workplace culture like yours.

Internally, organisational culture in a company is important as it gives employees a sense of togetherness and belonging, as well as meaning there are clearly defined ways of doing things and expectations of how everyone should perform at work. This means that people are more engaged at work, achievements are recognised and rewarded more frequently, and productivity is higher as people have the tools and support they need to flourish in their roles. 

FAQs

What is the relationship between organisational structure and culture?

The definition of organisational culture is anything that dictates or impacts the values, attitudes and behaviour of employees within an organisation. Organisation structure, on the other hand, refers to the policies, rules and overall order of a business that all help it to run smoothly and achieve overall goals.

How does organisational culture affect change?

Having a strong organisational culture in a workplace can affect change because it means there is more likely to be a person-centred approach to any new systems, processes or rules that are brought in. Many organisations base every other aspect of the business on their culture, so this can affect change because it means that decisions are more likely to be thought through to ensure they align with overall values.

How does organisational culture affect recruitment?

If organisational culture is a significant and influential aspect of a company, this is likely to affect recruitment as potential employees will be screened based on whether they ‘fit’ existing company culture. Hiring for culture fit has been a bit of an uneasy topic recently, but ensuring that new employees believe in organisation values and want to work in a place with like-minded people is often a key part of most recruitment processes.

Organisational culture can also affect recruitment as it may impact the kinds of potential candidates who apply for roles. There is an increasing trend of job-hunters only wanting to work with companies who have similar values as they do, and your organisational culture may affect the kinds of people who are drawn to your job adverts and apply for roles.

Summary

The culture of an organisation makes a huge difference in everything from how well employees get on with one another to how successful a company is. Whilst every workplace culture has its own unique quirks, most operate from one of the four main organisational culture theories which each have their own advantages and disadvantages. It’s worth taking a look at the way that your own organisation or the one you work for is run, to analyse whether another approach may be more beneficial for the work you do and the people in your team.

If you’d like to learn more about this topic, we offer an ‘Understanding Organisational Culture’ online course that covers topics like types of corporate culture, the impact of this culture and how it can be changed in more detail.

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