As what can be considered your business’ “personality,” company culture is one of the things that makes your business unique. You may not be able to immediately pinpoint it, but chances are it fits into one (or more) of the four main types of company culture.
Understanding the different types of company culture — including advantages, disadvantages, examples, and how you can achieve them — will help you navigate the path toward improving the culture at your business.
4 main types of company culture
Out of the many types of organizational culture, four tend to dominate the workplace: Adhocracy culture, clan culture, hierarchy culture, and market culture. While they each have their own defining characteristics, many workplaces will blend together more than one type of culture.
Adhocracy culture
It’s obvious why adhocracy culture is also referred to as “creative culture.” In this type of corporate culture employees are encouraged to think creatively, brainstorm outside-the-box, and become innovators.
The “ad hoc” in adhocracy comes from the Latin words meaning “for this” and in English it refers to something that is done for a specific reason. In the business context, it pertains to a solution or process for a specific purpose. In an adhocracy, the focus is on keeping the business moving and meeting needs in new and innovative ways.
While growth is a goal for all companies, businesses with an adhocracy culture aim for quick growth. This fast-paced mindset can result in risk-taking as companies move fast to become the first in the market to create new products and services.
Advantages of adhocracy culture
Adaptability: Without many rules and formal procedures in place, adhocracy cultures can more easily adjust to changes and discover new solutions.
Agility: Without the time, need, or expectation (as there is limited bureaucracy) for overthinking or planning, actions and decisions can be made quickly.
Flat hierarchy: Without multiple layers of management, most employees have equal power and responsibilities in an adhocracy.
Flexibility: From remote work to alternative hours, adhocracies value flexibility.
Growth: Agility and risk-taking allow adhocracies to achieve large-scale growth.
Innovation: Adhocracies focus on fostering innovation, creativity, and vision.
Supportiveness: A tendency toward risk-taking and shared goals create supportive and trusting teams.
Disadvantages of adhocracy culture
Added stress: The consistent expectation for creativity can be overwhelming.
Competition: Team members may feel competitive toward one another.
Costs: Risk-taking, innovation, and cutting-edge technology can be expensive.
Lack of clarity: Lack of distinct leadership and processes can result in uncertainty.
Lack of stability: Quick changes and flexibility can feel instable.
Regular mistakes: This fast-paced environment has a tendency to see more errors and failures.
Strain on recruitment and retention: It can be challenging to find, attract, and retain employees who fit the culture.
Too much, too soon: Fast growth can be problematic if businesses are not prepared.
How to achieve an adhocracy culture
If an adhocracy sounds appealing, there are several things you can do to promote this type of environment.
Encourage vision: Create an environment where creativity and vision thrive. Find out how your team members best release their creativity and make those opportunities available to them.
Hire the right people: Find workers who fit the adhocracy mindset and who would flourish in your organization’s culture.
Start at the top: Company leaders should exhibit the desired characteristics, such as flexibility and creativity.
Reward adhocracy behaviors: Show your appreciation for the behaviors you want to encourage, even if the end result isn’t successful.
Examples of adhocracy culture
You’ll find many examples of adhocracy culture in startups and the technology industry (think Silicon Valley).
Google: Google workers are expected to make decisions and changes swiftly to meet the constantly evolving demands of the tech industry. Finding solutions to consumer problems before others in the marketplace requires the agility, innovation, and creativity inherent in the Google workplace.
Amazon: Known for its ingenuity and risk-taking to become pioneers in the e-commerce market, Amazon is consistently ranked on Forbes’ World’s Best Employers List. A defining characteristic of Amazon’s adhocracy culture is its decentralized structure with small, agile teams. They call it a “two-pizza team” structure – meaning that teams are small enough for two pizzas to feed everyone. Amazon indicates that, in addition to being able to better serve customers, this structure also empowers innovation, reduces bureaucracy, and enables quick decision-making.
Clan culture
While businesses with an adhocracy culture focus on customer needs, those with a clan culture emphasize the employee experience and their well-being. This cohesive environment has the nickname “family culture” because workers feel more like a family. And as with a family, a clan culture isn’t successful unless individual members are satisfied — driving leaders to design employee appreciation programs, social events, and other workplace perks.
Everyone is valued equally in this horizontally structured, “we’re all in this together” environment where collaboration and teamwork are emphasized. Employee interactions and relationships are the backbone of clan culture, and leaders are regarded more as mentors than bosses.
Having shared values is also an important component of clan culture. Employees may bond over a commitment to environmental causes, social justice issues, or other uses of their platform to make a positive impact.
Advantages of clan culture
Happy employees: Adhocracy employees feel heard, appreciated, and respected.
High performance: When employees are satisfied, they are motivated to perform better (which is good for your bottom line).
Improved communication: Employees who enjoy working together have a deeper understanding of one another, which leads to better communication.
Informal: Clan cultures tend to be less formal and have more flexibility than other workplaces.
Loyalty: Not only may clan cultures retain employees longer, but they also attract loyal customers. Ergo the saying “Happy employees make for happy customers.”
Strong relationships: Workers develop meaningful relationships in this environment, which emphasizes employee interactions and fosters truthful feedback.
Strong sense of belonging: Clan culture employees feel as though they are part of something bigger than themselves.
Supportive work environment: Employees are more likely to accept help and constructive criticism, as well as feel comfortable brainstorming and sharing ideas.
Disadvantages of clan culture
Confusion: A lack of clarity and distinct leadership can feel confusing.
Decreased productivity: The informal and collaborative structure can cause too much chatting and less productivity.
Difficult to sustain: Maintaining close connections can be challenging as the company grows.
Exclusivity: Outsiders may experience difficulty working with or becoming part of a tight-knit group.
Lack of diversity: A closely aligned team can lack diverse thoughts, ideas, and characteristics.
Poor growth: Focusing on employee satisfaction and feelings can hold businesses back from developing.
Slow decision-making: When employees feel more like family members, decision-making can become stalled.
Stagnant creativity: A downside of feeling so comfortable is that creativity and innovation can become stagnant.
How to achieve a clan culture
With its friendly, collaborative atmosphere, a clan culture can be highly desirable. Here are some guidelines for creating one.
Allow for flexibility: It’s been well documented that today’s workforce prioritizes flexibility. Offer opportunities for flexibility through telecommuting, compressed work weeks, summer Fridays, floating holidays, and alternative work hours.
Build trust: Allow employees to feel safe when sharing ideas and providing feedback to leadership (think open-door policy and transparency).
Empower workers: Autonomy is important to today’s workforce. Empower your employees by taking a step back and allowing them control over their projects and tasks.
Encourage collaboration: Prioritize teamwork by establishing committees, creating an open floor plan, and setting up shared workspaces.
Enhance shared values: Create a strategy around your team’s shared causes. Unite your team through volunteering days, donation drives, and other initiatives that complement your mission.
Establish connections: Prioritize employee relationships by planning social events, celebrating holidays together, and creating special project teams (such as company culture or volunteering committees).
Show appreciation: Demonstrate how valuable your employees are by creating a rewards system to recognize individual and team achievements.
Examples of clan culture
The personal, friendly environment of a clan culture is commonly found within small businesses and family-run companies.
Tom’s of Maine: An all-natural personal care products company, Tom’s of Maine was started by two parents looking out for the health of their children. The company was founded in 1970 on family culture and still continues in this approach today, with Tom himself taking on the parental and mentor role. Tom’s of Maine is dedicated to creating products that are kind to the environment and they are also a Certified B Corporation. Their Stewardship Model guides the creative and production process for all products, ensuring they adhere to their standards for natural, safe, and effective products. And with a blog full of “tips and ideas for making a positive impact in the world,” Tom’s of Maine is publicly committed to their shared company values.
Whole Foods: This grocer is most notably spotlighted for its focus on teamwork, participation, and transparency at every level. “Promoting team member growth and happiness” is one of Whole Foods’ core values highlighted throughout their website. It goes on to say that the success at Whole Foods is “dependent upon the collective energy, intelligence, and contributions of all of our Team Members” — clearly aligning with the clan culture mentality.
Hierarchy culture
A hierarchy business culture is focused on a hierarchical structure – one with various layers of management with power trickling down from the top. Also known as control culture, responsibilities are distributed appropriately across the ranks. Clarity and uniformity are two of the main components in a hierarchy culture. Every employee has an explicit role, processes and procedures are explained clearly, and the company’s goals are unmistakable.
Whereas decision-making in a collaborative culture incorporates all employees, decisions in a hierarchy culture are made at the top. Furthermore, unlike in an adhocracy culture where decisions are made quickly and risks are taken to achieve fast solutions, decisions in a hierarchy are carefully weighed and risks are generally avoided.
Advantages of hierarchy culture
Clarity: With everything from goals to roles being clearly identified, employees rarely feel uncertain about their place in a hierarchy culture.
Efficiency: Guided by structure and process, not by emotions and collaboration, hierarchy cultures produce some of the most effective and efficient businesses.
Path to promotion: In a hierarchy structure, there’s only one path toward promotion — a straight line upward. Therefore, employees know what’s needed to advance in the company and are motivated to achieve the skills to make it happen.
Predictability: A hierarchy’s routine and traditional structure are predictable and can provide a sense of security for employees.
Strong sense of community: Although there is distance between employees and management, team members form strong bonds while working closely toward shared goals.
Disadvantages of hierarchy culture
Difficulty adapting to change: In a constantly evolving marketplace, businesses are often required to shift focus and adapt to change. This can be challenging for risk-averse businesses operating on traditionalism, routine, and predictability.
Hard to attract and retain talent: Many workers looking for flexibility and work-life balance are less attracted to the traditional structure and expectations of hierarchy culture. Recruitment and retention can be challenging for these businesses.
Lack of creativity: In such a predictable working environment, outside-the-box thinking can be difficult.
Slow decision making: Decisions take longer because more managers and supervisors are involved than in other types of workplace cultures.
Unengaged employees: With their lack of involvement in decision making, planning, and goal setting, employees may not be engaged in the business and its mission. This also creates a lack of empowerment, authority, and ownership over projects and responsibilities.
How to achieve hierarchy culture
Although hierarchy culture is becoming scarce due to an increasing desire for flexibility, autonomy, and empowerment, it does serve a purpose. Here are some ways traditional businesses and leaders can achieve a healthy hierarchy culture.
Build them the right way: Build a hierarchy based on expertise and skills. Hire and promote workers appropriately according to these factors. This will ensure your employees are accepting of the hierarchy structure and trusting of the leaders in the hierarchy.
Build a “flat” hierarchy: Flatten out the hierarchical structure (or design it to be more pyramid than ladder). This will allow for fewer layers of management, which increases employee involvement in the business and healthier employee-supervisor interactions.
Obvious signs of power: Taking away visible signs of power makes a hierarchy less conspicuous. This includes things like larger offices, dedicated parking spaces, and bonuses for management, among other perks not provided at the lower levels.
Encourage ownership: Give employees the opportunity to have control over their projects and tasks instead of being micromanaged.
Provide autonomy: Allow for flexibility and autonomy to help employees balance professional and personal demands.
Examples of hierarchy culture
Hierarchy culture is commonly present in high-risk industries and larger corporations. Here are some examples of hierarchy culture in today’s workplace.
Healthcare: While there are many different types of healthcare models, they all tend to have a hierarchy culture. In healthcare, power starts at the top with a board of directors and continues down to president, CEO, and other management levels.
Military: It doesn’t get more high-risk than the military, which is why it employs a distinct chain of command. Because effectiveness and safety are crucial in military work, it’s necessary for each individual to perform their specific roles and tasks appropriately and timely.
McDonald’s: With its many layers of management, the McDonald’s fast-food chain is a good example of a traditional, long-standing corporation with a hierarchical structure. At the top of the hierarchy is the chairman and COO, then president and COO for individual countries, followed by executive vice presidents, zone managers, regional managers, store managers, and shift managers.
Market culture
A market corporate culture is first and foremost results oriented. Also known as compete culture, leaders are more demanding in a market culture because their main focus is on market dominance. Employees are expected to achieve ambitious goals and are evaluated on their ability to do so.
The market culture environment is hard-working and high-pressured – so much so that it can lead to intense competition, even between teams and coworkers. Employees are usually rewarded for their accomplishments and punished for failures.
Advantages of market culture
Clarity: When performance and profits are the focus, there is little uncertainty about employee goals and expectations.
Healthy competition: If done right, market corporate culture can be motivating when it inspires healthy competition among teams and with other companies.
High employee engagement: Employees are likely to be proactive, and therefore engaged, in their quest to accomplish goals.
Higher profits: When meeting goals and achieving market success is at the center of a business’ operations, it’s much more likely the business will achieve maximum profits.
Industry leader: Staying on top of market research, consumer needs, and the state of your industry can be a challenging feat. However, businesses that do so are likely to be regarded as industry leaders.
Disadvantages of market culture
Burnout: Going after ambitious goals, adjusting to market changes, and burning the candle at both ends can be overwhelming and lead employees to experience burnout.
Increased costs: Keeping up with market research, as well as hiring and training for vacated positions, can result in increased expenses.
Toxicity: Instead of being motivational, a toxic work environment might develop depending on the severity of the market culture.
Trouble with teamwork: Because of the competitive nature, it can be challenging to effectively establish and enforce teamwork in a market culture.
How to achieve market culture
While adhering to a market corporate culture can be draining for some, others find it exhilarating, motivational, and challenging. When profits are your main focus, a market culture can be the right tactic. Here are some guidelines for establishing an effective and maintainable market culture.
Encourage work-life balance: Stress can overflow to employees’ personal lives when dedicating so much time and effort to work. Allow for easier work-life balance by offering flexible schedules and working arrangements.
Establish connections: Competition may be unavoidable in this type of corporate environment, but you can lessen the burden by emphasizing employee interactions and relationships. Encourage employees to connect by planning social events and opportunities for teamwork.
Prioritize mental health: As referenced, burnout and competitiveness can be problems in a market culture. Combat these challenges by offering mental health services, lessening workloads, and increasing paid time off.
Set clear and ambitious goals: Goals should be lofty to achieve the market status desired but should also be clear in order to avoid uncertainty.
Examples of market culture
Market culture is mostly prevalent in large corporations and businesses that have been around a long time. Here are some examples of companies with a market culture.
Tesla: It’s well known that working for this electric car maker is a demanding endeavor, due mostly to CEO Elon Musk’s lofty company vision. Former Tesla workers reported expectations of 70-hour workweeks and “unrealistic stretch targets.” But demanding working conditions are also a large factor in the company’s success and an effective approach for workers who flourish in a market culture.
General Electric: A multinational conglomerate with notable market presence in several industries, GE employees have commented on the company’s heavy workload, high goals, and demanding hours. Adhering to this culture type allows GE to remain competitive by demonstrating agility in meeting frequent changes in market and industry trends.
Other types of company culture
We would be remiss to not point out that while adhocracy, clan, hierarchy, and market are four of the main types of company culture, many others are also found in today’s workplace. Here are just a few.
Customer-centric culture prioritizes customer satisfaction and takes advantage of things like 24/7 support, customer satisfaction surveys, and customer rewards programs to accomplish this goal.
Businesses with an order culture emphasize rules, structure, and detailed processes to maximize effectiveness and performance.
Purpose culture focuses on the greater good. Employees are driven by the desire to pursue a higher cause instead of personal success.
In a strong leadership culture, business leaders prioritize employee growth. Management is eager to offer training, coaching, and mentorship opportunities to benefit their employees’ professional development.
How to identify the type of company culture at your business
So, you’ve made it this far – what type of culture does your business have?
Because of its impact on recruitment, retention, performance, and profits (discussed in greater detail in article four of this series), identifying the type of culture at your business is important. If you don’t know, or even if you think you do, the following suggestions can help you discover your own workplace culture.
Ask your employees: Talk with them one-on-one, in a large group setting, and/or via anonymous surveys to find out how they interpret the culture and if changes are needed.
Be a secret shopper: Try to see things from a prospective customer’s perspective by calling your business, perusing the website, and becoming a customer. Consider the first impression that’s made and how outsiders view your business.
Consider new hires: Walk through your interviewing, hiring, and onboarding processes. Envision how individuals feel in these situations and what impact that has on their employee experience.
Reflect: Think about your traditions, social events, rules, and processes. Are they well received and followed by employees, or is there pushback?
If you’ve completed these tasks but still have trouble identifying your culture type, don’t worry. While it might be clear-cut for some, many companies will experience gray area in terms of culture. You might have an entirely different focus than the ones listed in this article—or, more than likely, yours is a combination of multiple types of workplace culture.
The key is being aware of your culture, the impression it makes, and the impact it has on your business – and then making adjustments where needed.
As a business owner, the study of different types of company culture can be incredibly valuable when it comes to discovering and perfecting the culture at your own business.
While it may be true that most workers prefer a strong culture that’s friendly, flexible, collaborative, and creative, it’s important to note that not all successful companies have such an accommodating workplace culture. Many people thrive when faced with and enjoy the challenge of aggressive targets, challenging goals, and a fast-paced environment.
If a vigorous, results-oriented work culture is what you’re aiming for, be sure you’re still enforcing ethical practices and decision-making. It can be possible to reach ambitious goals, demonstrate agility, take risks, and prioritize innovation while still being concerned about the interactions, health, work-life balance, and satisfaction of your employees.
If you’re just in the starting phases of running your own company, the to-do list is never ending. Let Gusto help with startup tasks like payroll and benefits while you take care of the things only you can do, such as creating the type of company culture you’ve always envisioned.
