What is the culture of an organization? It is the set of values, beliefs, norms, and behaviors that shape how people work together and achieve their goals. It is the "personality" of the organization, the "way we do things around here". It influences everything from employee engagement, performance, retention, innovation, customer satisfaction, and profitability.
Why is company culture important? Because it can make or break your business. According to a Gallup study, companies with strong cultures have 40% lower turnover, 21% higher productivity, and 22% higher profitability than those with weak cultures. On the other hand, a toxic culture can lead to low morale, high turnover, poor performance, legal issues, and reputational damage.
In this blog post, we will explore the different types of organizational culture, how they affect the workplace, and how you can create a positive, inclusive, and innovative culture for your employees. We will also share some best practices and examples from leading companies that have successfully built thriving cultures.
The Four Types of Organizational Culture
One of the most popular frameworks for understanding organizational culture is the Competing Values Framework (CVF), developed by Robert Quinn and Kim Cameron. It identifies four types of cultures based on two dimensions: flexibility vs. stability and internal vs. external orientation. These are:
Clan culture: This type of culture is characterized by a high degree of flexibility and an internal focus. It values collaboration, trust, loyalty, and empowerment. Employees are treated like family members, and leaders are seen as mentors or coaches. Clan culture fosters a strong sense of belonging and commitment among employees.
Adhocracy culture: This type of culture is characterized by a high degree of flexibility and an external focus. It values innovation, creativity, risk-taking, and entrepreneurship. Employees are encouraged to experiment, learn, and adapt to changing environments. Leaders are seen as visionaries or catalysts. Adhocracy culture fosters a culture of growth, change, and innovation.
Market culture: This type of culture is characterized by a high degree of stability and an external focus. It values results, achievement, competition, and customer satisfaction. Employees are driven by goals, targets, and rewards. Leaders are seen as hard-driving and demanding. Market culture fosters a culture of performance, efficiency, and profitability.
Hierarchy culture: This type of culture is characterized by a high degree of stability and an internal focus. It values order, structure, rules, and procedures. Employees are expected to follow instructions, adhere to standards, and respect authority. Leaders are seen as coordinators or organizers. Hierarchy culture fosters a culture of control, consistency, and quality.
Each type of culture has its own strengths and weaknesses, and no one type is inherently better or worse than another. However, some types may be more suitable for certain situations, industries, or goals than others. For example, a clan culture may be more effective for a small, family-owned business that values long-term relationships, while a market culture may be more effective for a large, publicly traded corporation that faces intense competition.
How Organizational Culture Affects the Workplace
Organizational culture has a significant impact on various aspects of the workplace, such as:
Employee performance: A positive and supportive culture can motivate employees to perform better, while a negative and stressful culture can demoralize employees and lower their productivity. According to a Harvard Business Review study, a positive culture can increase performance by up to 30%, while a negative culture can decrease performance by up to 40%.
Employee engagement: A positive and inclusive culture can foster employee engagement, while a negative and exclusive culture can foster employee disengagement. According to a Gallup study, engaged employees are 17% more productive, 21% more profitable, and 10% more customer-focused than disengaged employees. On the other hand, disengaged employees are 37% more absent, 49% more likely to quit, and 60% more likely to make errors than engaged employees.
Employee retention: A positive and rewarding culture can retain employees, while a negative and punishing culture can drive employees away. According to a Glassdoor study, 77% of employees would consider leaving their current job if they found a new one with a better culture. On the other hand, a Deloitte study found that 94% of executives and 88% of employees believe that a strong culture is essential for business success.
Innovation: A positive and open culture can stimulate innovation, while a negative and closed culture can stifle innovation. According to a PwC study, 80% of CEOs believe that innovation is the key to growth and competitiveness. However, only 54% of employees feel that their company has a culture that supports innovation. A culture that encourages experimentation, learning, and collaboration can foster innovation, while a culture that discourages risk-taking, feedback, and diversity can hinder innovation.
Organizational culture is a powerful force that can shape the outcomes and success of your business. Therefore, it is important to understand your current culture, assess its alignment with your vision and goals, and take steps to improve it if necessary.
How to Create a Positive, Inclusive, and Innovative Culture
Creating a positive, inclusive, and innovative culture is not a one-time event but a continuous process that requires commitment, communication, and action from all levels of the organization. Here are some best practices and tips to help you create a thriving culture for your employees:
Define and communicate your core values:
Your core values are the guiding principles that define what your organization stands for, what it believes in, and how it operates. They are the foundation of your culture and should be clearly articulated, communicated, and reinforced throughout the organization.
For example, XYZ’s core values are: "Judgment, Communication, Impact, Curiosity, Innovation, Courage, Passion, Honesty, and Selflessness".
Align your culture with your strategy:
Your culture should support and enable your strategy, not hinder or contradict it. Your culture should reflect your vision, mission, and goals, and help you achieve them.
For example, ABC’s culture is aligned with its strategy of being "Earth's most customer-centric company" by fostering a culture of customer obsession, ownership, frugality, and innovation.
Involve and empower your employees:
Your employees are the key stakeholders and contributors to your culture, and they should be involved and empowered in shaping and sustaining it. You should solicit their feedback, ideas, and suggestions and act on them. You should also give them autonomy, responsibility, recognition, and support their growth and development.
For example, ABC’s culture involves and empowers its employees by giving them 20% time to work on their own projects, offering them various learning and development opportunities, and rewarding them with perks and benefits.
Promote diversity and inclusion:
Diversity and inclusion are essential for creating a positive and innovative culture, as they bring different perspectives, experiences, and skills to the table. You should embrace and celebrate diversity and inclusion in your organization and ensure that everyone feels valued, respected, and heard. You should also foster a culture of belonging, where employees can be themselves and connect with others.
For example, a culture that promotes diversity and inclusion by having various employee resource groups, hosting equality events, and providing equal pay and opportunities for all.
Encourage collaboration and innovation:
Collaboration and innovation are vital for creating a dynamic and competitive culture, as they enable you to solve problems, create value, and stay ahead of the curve. You should encourage collaboration and innovation in your organization and provide the tools, resources, and environment to facilitate them. You should also foster a culture of experimentation, learning, and failure, where employees can try new things, learn from mistakes, and improve.
For example, a culture encourages collaboration and innovation by having agile teams, cross-functional squads, and hack weeks.
How to Assess and Measure Your Organizational Culture
Assessing and measuring your organizational culture is an important step to understanding your current situation, identifying your strengths and weaknesses, and planning your improvement actions. Here are some tips and best practices on how to do it:
1. Use surveys and feedback tools
One of the most common and effective ways to assess and measure your organizational culture is to use surveys and feedback tools, such as employee engagement surveys, culture audits, or 360-degree feedback. These tools can help you collect data and insights from your employees, customers, and stakeholders and measure various aspects of your culture, such as values, behaviors, satisfaction, alignment, and performance. You can use online platforms to design and administer your surveys and feedback tools.
2. Conduct interviews and focus groups
Another way to assess and measure your organizational culture is to conduct interviews and focus groups with your employees, customers, and stakeholders and ask them open-ended questions about their perceptions, experiences, and opinions of your culture. This can help you gain a deeper and richer understanding of your culture and uncover the underlying issues, challenges, or opportunities that may not be captured by surveys and feedback tools. You can use online tools to conduct your interviews and focus groups.
3. Observe and analyze behaviors and outcomes
A third way to assess and measure your organizational culture is to observe and analyze the behaviors and outcomes of your employees, customers, and stakeholders and see how they reflect your culture. This can help you validate or challenge your assumptions and identify the gaps or inconsistencies between your espoused values and your actual practices. You can use online tools to track and analyze your behaviors and outcomes.
These are just some possible ways to assess and measure your organizational culture, but you can use any other methods that you think are appropriate and reliable for your situation. The key is to use a combination of quantitative and qualitative data and triangulate your findings from multiple sources and perspectives. This will help you get a comprehensive and accurate picture of your culture, and inform your improvement actions.
How to Change and Improve Your Organizational Culture
Changing and improving your organizational culture is not an easy or quick task, but it is a necessary and rewarding one. It requires a clear vision, a strong commitment, and consistent action from all levels of the organization. Here are some tips and best practices on how to do it:
Start with the top:
The top leaders of the organization are the key drivers and role models of culture change and improvement. They should communicate the vision, values, and goals of the desired culture and demonstrate them through their behaviors and decisions. They should also align the policies, processes, and systems of the organization with the desired culture and provide the resources and support for the change and improvement efforts.
Engage and involve the middle:
The middle managers and supervisors of the organization are the key enablers and influencers of the culture change and improvement. They should understand and embrace the vision, values, and goals of the desired culture and communicate and reinforce them to their teams and peers. They should also empower and coach their teams and peers to adopt and practice the desired culture and provide them with feedback and recognition for their progress and achievements.
Empower and support the bottom:
The front-line employees of the organization are the key implementers and beneficiaries of the culture change and improvement. They should be aware and informed of the vision, values, and goals of the desired culture and be motivated and inspired to follow and contribute to them. They should also be given the autonomy, responsibility, and recognition to act and perform in accordance with the desired culture and be supported and encouraged by their leaders and colleagues.
Final Thoughts
Organizational culture is a critical factor that influences the success and sustainability of your business. It affects how your employees work, how your customers perceive you, and how your competitors compete with you. Therefore, it is important to create a positive, inclusive, and innovative culture that aligns with your strategy, engages your employees, and drives your performance.
If you want to learn more about how to build a thriving organizational culture, join us at The People Summit: At the Intersection of Culture, Business, and Technology. This is a virtual event where you will hear from experts, leaders, and practitioners who will share their insights, best practices, and case studies on how to create a culture that works for you and your people. Register now and get ready to transform your culture and your business.
