Types of Organizational Culture: Adhocracy Culture, Market Culture, Clan Culture & Hierarchy Culture

A business is more than what it sells. In fact, it could be argued that how a business conducts its mission is just as or more important than what that mission is in terms of products and services. When we think about the underlying principles that guide a business, we are considering its Business Culture. A significant element of a business’s overall culture is the structure of its decision-making processes and how it selects priorities as an institution. We call that the business’s Organizational Culture.

Experts agree there are four main types of Organizational Cultures: Adhocracy culture, Market culture, Clan culture, and Hierarchy culture. Each strategy has its own strengths and weaknesses within the context of a business plan.

In this article, we discuss the types of Organizational Cultures and how they reflect and influence the overall culture of an organization. The ways they determine how business gets done, and even, fundamentally, what the business actually is.

What is Organizational Culture & Why Is It Important?

Companies Culture lies at the root of what makes a company successful, and yet it can be hard to grasp or define, much less actively cultivate. In many ways, it is like the air we breathe, crucial to our survival, at the same time invisible.

Our Organizational Culture is the collection of values, practices, and expectations we use to guide our actions and inform the decisions we and our team make. Through our Organizational Culture, we declare, silently and out loud, what we believe to be important.

Everyone seems to know that culture is foundational to innovation, citing principles like willingness to experiment, co-creation, tolerance for failure, non-hierarchical structures, and team spirit. Yet, if innovation culture is so important, why do many companies fail to achieve it?

One reason is that companies often think they need to change their entire organizational culture to one of innovation.                                               

The importance of Organizational Culture and Organizational Strategy lies in their ability to impact how we deliver value to our customers.

You can think of your Organizational Culture as having three distinct levels. On the outside-most level you’ll find the cultural Artifacts. These are the elements of your business that we can see reflecting your business’s culture, including logos, building design, advertising, etc. The next level is built from your business’s Values, the ideas and ideals you claim are important. Finally, the third level of Organizational Culture is built from your Assumptions, the embedded ideas and behaviors you might not consciously realize at work in your business’s daily routines.

Your culture will ultimately have to change, whether you choose to or not. Outside forces such as technological innovation will force any organization to adapt or die. It is obviously better to design your own future then to be shaped for good or bad by external circumstances or luck. Creating a strong culture of innovation will allow your team to successfully navigate the complex, globally competitive, dynamically networked market that defines our time.

To get you started, we have designed a particularly useful tool: the Organizational Culture Canvas.

The UNITE Organizational Culture Canvas: Identifying Organizational Culture Critical Elements

We believe that your Organizational Culture fundamentally contributes to your business’s success or failure, and therefore, investing in understanding and (if necessary) changing your Organizational Culture should be among your highest priorities. Organizational Structure dictates how efficiently you respond to shifts in needs, how you prepare for the future, and how you inspire innovation. Modern companies must aspire to do well in all these aspects of business. To make this daunting task more manageable, we developed the UNITE Organizational Culture Canvas.

We created the Organizational Culture Canvas in collaboration with more than 30 experts from academia and industry to identify and map the key aspects of an organization’s culture. When we set out to understand, describe, discuss, question, shape and renew our organizational culture, we need a tool that will render culture understandable, tangible, and actionable. The Culture Canvas is such a tool. It enables a group to immediately understand the most important factors and how they interact. Although we will focus on applying the Culture Canvas to the field of innovation, you can apply this canvas to any type of organization and any horizon.                                                    

Identifying the gaps between your current culture and the culture you aspire to helps you focus and strategize your transition from one state to another. Gaining a solid understanding of how your organizational culture currently operates will be critical in that process. Habits of thinking and acting can be difficult to change; understanding their roots is critical for finding ways to transform them.

When seeking to change the culture of your group, your first task is to work together with your peers to identify the aspects of your current culture. The setting and circumstances will be different in each team; in some, members come from similar cultures and therefore can quickly assess their shared organizational culture.

In other situations, members may be coming from different cultures, in which case, each person should work individually to identify their own mindset before creating a joint picture of the team’s culture. You can use the Culture Canvas during this process as a jumping-off point for thinking about leadership, decision-making, values, principles and rules, structures, and communication.

Types of Organizational Cultures: Advantages & Examples

Most experts agree there are four types of Organizational Culture: Adhocracy culture, Market culture, Clan culture, and Hierarchy culture. No type of organizational culture is better than the others, so you’ll need to decide which direction you’ll take.

We suggest taking an honest look at where your culture is now—so honestly an outside observer might be the only viable option—in relation to where you think it is and where you’d like it to be.

Remember, since there are no right or wrong cultures, the culture you want might not be the exact fit for your business model. If that’s the case, you need to reframe what you think is the best Organizational Culture for your company or overhaul your business model.

Digital Leadership can help you with either direction you need to take. You can reach out via the “Contact” link on this website.

In the meantime, let’s unpack the four types of Organizational Culture and take a closer look at each one.

• Adhocracy culture
• Market Culture
• Clan Culture
• Hierarchy Culture

(1) Adhocracy Culture

Adhocracy: the organization’s culture is based on its ability to quickly adapt to changing conditions.

Advantages of Adhocracy Culture

An Adhocracy Culture facilitates innovation and creativity, empowering employees to identify and solve problems as they arise. Because employees have so much freedom to create as they see it, companies with an Adhocracy Culture often have an easier time attracting top talent.

Examples of Adhocracy Culture

Google is known for valuing employees’ ability to respond to changes and to innovate based on new developments. Google is a good example of an Adhocracy.

This is the case with many tech companies and other modern organizations that are less tethered to legacy infrastructure.

(2) Market Culture

Market: the organization’s culture is based around competitiveness, in the marketplace as well as between employees.

Advantages of Market Culture

Market Culture companies can experience greater employee productivity and increased profits. Frequently, because of the emphasis on competition, teams and individuals exceed expectations.

Examples of Market Culture

Many car companies and car dealerships are good examples of a Market Corporate Culture because their success—and often employee compensation—is tied to how well they deliver high quality goods and services to their customers.

(3) Clan Culture

Clan: the organization’s culture is based on the feeling that the company is like a family.

In many cases, Clan Culture is partnered with a power-sharing organizational model that seeks to decentralize the decision-making process so more employees have a stronger say in the business’s activities.

Advantages of Clan Culture

The advantages of Clan Culture focus on the affective experience of the employees, who develop stronger ties to the company and greater loyalty to its mission. They feel like members of an elite organization and work with a palpable sense of pride.

Examples of Clan Culture

One of the best examples of Clan Culture exists at SAS Institute, a company that makes business analysis software. In 2009, in the midst of one of the biggest batches of layoffs its sector had ever seen, SAS leadership promised there would be no layoffs there. They expressed how much they viewed its employees as its best resource. This shared risk and reward structure is one of the reasons SAS consistently appears in Fortune’s “Best Companies to Work For” list.

(4) Hierarchy Culture

Hierarchy: the organization’s culture is based on top-down decision-making and corporate values and attitudes.

Advantages of Hierarchy Culture

In a Hierarchy Culture, there is a clear reporting structure that helps employees use their expertise. Another advantage of Hierarchy Culture is that it facilitates smooth decision-making. It also makes advancement paths clearer.

Examples of Hierarchy Culture

The military is an excellent example of Hierarchy Corporate Culture as it has a clearly defined chain of command, with some people obviously higher in rank and power than others.

Churches and governments are two more excellent examples of a Hierarchy Culture. Most organizations that stress job titles—where offices get bigger, with better views as the title become more impressive—can be considered Hierarchy Cultures.

How Do You Choose the Right Organizational Culture Type for Your Business?

Much of what helps decide Organization Strategy in terms of culture is determined by the personality of the people who lead or begin businesses.

Begin by defining your company values. How do you measure success? What is really important to you: as a business owner, as a manager, as a human being?

Decide which culture best reflects what you hope to accomplish, and begin working toward building it.

We are committed to helping you find the culture that works best for your organization so you can continue to deliver value to your customers and innovate in ways that secure your success for years to come. If you have any questions about the UNITE Organizational Culture Canvas or would like to speak with one of our Digital Leadership consultants, reach out through our Contact Page on this website.

Frequently Asked Questions

What are the Elements of an Organizational Culture?

You’ll see all the elements of Organizational Culture in the UNITE Organizational Culture Canvas.

These include Assumptions, Values, Roles, and Communication.

What are the Levels of Culture?

The Three Levels of Culture are Artifacts, Values, and Assumptions.

How do you develop Organizational Culture?

Organizational Culture development should be a distinct element of your Strategic Planning. Build it into your innovation efforts so you ensure that you’re in the best position you could possibly be in.

The UNITE Business Model Framework: A Framework for Innovation Success