4 different types of company culture explained

If you’re wanting to drive your business forward, building a strong company culture is a necessity – and getting it wrong can be a very expensive mistake. And many businesses have come to realise this after being faced with serious issues with employee retention, productivity and engagement (to name a few).

So, focusing on your people might be a high priority on your list, but how can you even begin to think about developing your culture if you haven’t the faintest about where your business stands right now?

The Competing Values Framework, a cultural assessment tool coined in the 1980s established four types of company culture. In this blog post, we'll be exploring each of these and looking at key characteristics (along with the benefits and fall-backs that each of them carry).

Which one sounds most like your business?

What are 4 different types of company culture?

Clan culture

Otherwise known as "family culture’" a clan culture is friendly, upbeat and is made up of employees who have a lot in common with each other. The task of building and maintaining a strong company culture consistently stands as a top priority along with focusing on employee wellbeing.

Leaders of clan cultures are hugely respected and are often perceived as mentors or father figures. These leaders drive team building, employee involvement and empowerment. Business goals and company values are commonly shared by employees across the organisation, resulting in one streamlined universal vision and employees who are invested in the company’s mission.

By coming into a business that boldly demonstrates a clan culture, employees enjoy a harmonious and tranquil working environment and are given the trust and freedom they need to thrive in their roles. This type of culture is typically more common among start-ups as it helps to establish a collaborative mindset where all ideas are welcome.

But, adopting a clan culture has its risks. By encouraging a social and fun environment you’ll be running the risk of losing the work/fun balance and the office lacking authority. Additionally you could be handing your staff an open opportunity to slack and become disengaged in their roles if you provide them with too much freedom. Monitoring is key in order to fully reap the benefits of a clan culture.

Adhocracy culture

Derived from the latin word ad hoc, meaning “for this”, adhocracy culture revolves around innovation, success and flexibility. This type of culture is often found within modern industries such as aerospace and technology. Businesses with adhocracy cultures are constantly thinking ahead and developing new products as they live by the assumption that all of their products only have a limited shelf-life.

The office environment is very creative, energetic and fast-paced. Leaders of an adhocracy culture are true entrepreneurs; they consistently encourage risks to be taken and push employees to experiment with new ideas. Adapting quickly to changing conditions is the norm in an adhocracy culture so that latest trends are reacted to and concentrated on.

But, working in an intense and fast paced environment can take its toll. Employees may find the atmosphere in the office chaotic and disorganised and they may struggle to clearly understand their responsibilities. And, with innovation and risk-taking coming first, the health of the business can face a direct financial impact too if brave experimentations don’t quite go to plan.

For a good example of adhocracy culture in action, you only need to look as far as Facebook, where according to Mark Zuckerberg, you should “Move fast and break things”. He says that “unless you are breaking stuff, you are not moving fast enough”.

Market culture 

And then there’s market culture. First becoming popular in the 1960s, market culture is ruthless, strongly results driven and performance orientated. Employees are encouraged to set difficult goals for themselves and work hard to achieve them and leaders are tough and demanding. Market share and profit at the forefront of the business focus at all times.

Adopting a market culture is rarely accidental, in fact it is something that is often deliberately integrated within the company in order to ensure that business objectives are a number one priority. It’s all about the company’s bottom line and financial growth with less of a focus on teamwork and community.

Whilst building a market culture most certainly brings benefits for business health, including optimised return rates, overtaking competitors and high employee motivation and engagement, it has its downfalls. And they can be pretty big.

With employees being pushed on a daily basis to maximise their performance and hit difficult targets, the competitiveness can often be taken too far and lead to dishonesty and conflict in the office, which you as an employer will need to step in and deal with. This friction may even result in team members who are disconnected from their work, a slump in productivity levels, and in serious cases a financial hit to the business. 

Hierarchy culture

The most traditional type of culture, hierarchy culture revolves around structure, control and “doing things right”. The working environment will be extremely organised with well-polished policies and procedures. Keeping the business running smoothly is key.

Unlike in a clan culture, there are strict rules, and leaders are likely to be keeping a close eye on what employees are doing. There are several layers of management between leadership and employees, many more than that in other cultures, and leaders are highly respected by their teams.

This type of culture is the most historical and goes back as far as the mid 1900s. Imagine your typical large bureaucratic company, such as McDonalds – they're more than likely to be accurately demonstrating a hierarchy culture.

The benefits speak for themselves with hierarchy culture; there are little or no issues with authority and boundaries are clear. Responsibilities are allocated by job level and lines of communication are seamless. 

However, with a strict, “by the book” culture comes its drawbacks. With power sitting at the top level of the business, a business leader may find that they are too absorbed in everyday decision-making to invest any time in their people. Employee one-to-ones may not happen as frequently (or at all) and appraisals are dropped down on the priority scale.

The structure of a hierarchy in itself can cause issues, too. With the sole decision-makers further up the business ladder, communications become slow and time-consuming, which can prove problematic in fast-moving, dynamic working environments.

Your company culture matters

Whichever type of culture your small business falls under, it’s important you get it right. And, because every culture works differently, assessing and identifying your business' culture is a great place to start.

Our People First Culture Series edition 3 offers actionable tips on culture agility, collaboration & psychological safety. Find out how to recession-proof your SME's culture today.