What is Organizational Culture and Why Does it Matter?

Written by Brian Montes

On June 9, 2021
Organizational Culture

What is Organizational Culture and Why Does it Matter?

We’re nearly halfway through 2021. Congratulations! As a business leader, you likely have earned a moment or two to pause and reflect on the last 15-18 months. If you are like most, it has likely been a tough period.

Worldwide, we have been through a lot. We are still in the midst of a global pandemic. Here in the US, we’re encountering a social reckoning that has changed lives and spread awareness to issues previously undiscussed. Simultaneously, businesses have collapsed, full industries have changed economic position, and individuals have suffered the consequences.

How has your organization endured? It is likely a loaded question. Economically? Culturally? Philosophically? Would you receive a different answer if you asked your frontline employees than if you asked your board of directors? If so, why?

While COVID’s economic impact targeted some industries more severely than others, its cultural impact was industry agnostic. People across the world have lived through tremendous change in this past year and a half, which consequently means so have their organizations. Truly assessing how your organization has fared may be an indicator of your organizational culture and organizational health.

 

What is Organizational Culture?

Simply put, organizational culture is what your employees live, breath and feel when they come to work each day. In this article, we’ll be focusing on a well-known theoretical model known as the Competing Values Framework, developed by Drs. Kim Cameron and Robert Quinn. According to Cameron and Quinn:

“An organization’s culture is reflected by what is valued, the dominant managerial and leadership styles, the language and symbols, the procedures and routines, and the definitions of success that make an organization unique”

Organizational culture is important because it provides your employees their connection to the organization, and their sense of meaning and understanding for how to relate to others within the organization. It is especially important in times of change. Organizations with a strong and stable organization can be more resilient, more quickly returning to the status quo.

 

Types of Culture

In the Competing Values Framework, Cameron and Quinn developed and researched four dominant culture types, which we’ll describe below. According to Cameron and Quinn, most organizations have one dominant culture type. The framework also includes an assessment tool, the Organizational Culture Assessment Instrument (OCAI), which can provide you with an indicator of your organization’s dominant culture type.

You’ll note that the framework, pictured below, has four quadrants, each separated across two competing values. On the horizontal axis, the competing values are “Internal Focus and Integration” and “External Focus and Differentiation”. On the vertical axis, the competing values are “Flexibility and Discretion” and “Stability and Control”.

 

Competing Values of Leadership

 

Clan Culture

In the upper-left quadrant, the Clan Culture values Internal Focus and Integration and Flexibility and Discretion. With these core focuses, the Clan Culture is similar to a family, with shared values and goals. Rewards are given based on collective, rather than individual accomplishment.

  • Effective leaders: mentors, parent figures
  • Example organization: Tom’s of Maine

 

Adhocracy Culture

 In the upper-right quadrant, the Adhocracy Culture values External Focus and Differentiation and Flexibility and Discretion. With these core focuses, the Adhocracy Culture places focus on innovation and agile work in an organization. Employees provide support on whatever the most pressing item is at that moment, with an expectation that it will frequently change.

  • Effective leaders: visionaries, innovators
  • Example organization: NASA Manned Space Flight Center

 

Market Culture

 In the lower-right quadrant, the Market Culture values External Focus and Differentiation and Stability and Control. With these core focuses, the Market Culture places focus on the bottom-line, with an emphasis on competition and production. Market refers to a type of organization that functions as a market itself, oriented toward external consumers rather than internal affairs.

  • Effective leaders: drivers, competitors
  • Example organizations: General Electric, Philips Electronics

 

Hierarchy Culture

In the lower-left quadrant, the Hierarchy Culture values Internal Focus and Integration and Stability and Control. With these core focuses, the Hierarchy Culture values standardized rules and procedures with clear lines of authority. This culture is based on the earliest and most traditional approach to organizing.

  • Effective leaders: coordinators, organizers
  • Example organizations: McDonald’s, Ford Motor Company

 

 

Assessing Organizational Health

 

Organizational culture cannot be grown overnight, and there is not a magic formula to determine the correct fit for your company. Most importantly, a healthy culture requires room to grow; leaders should encourage the behaviors associated with a healthy organizational culture and allow employees to get involved in building a strong culture.

 An effective first step is assessing current culture. Take a look at the organization to determine strengths, and look for signs of an unhealthy culture.

 Since culture doesn’t only exist at one level of a workplace, start by talking to your employees at each level. What does organizational culture mean to them? What do they love about coming to work? What do they not love? How much variance is there between the answers you receive? These answers should be a great starting point for assessing what your organization’s culture is, and where you should look to make changes.

 Next, review your organization’s metrics for some quick signs of healthy vs. toxic culture.

 

Healthy Culture Metrics

Toxic Culture Metrics

Low turnover High turnover
Low absenteeism/tardiness High absenteeism/tardiness
High participation in employee exit interviews Low participation in employee exit interviews
High completion of employee reviews Low participation in or lack of team building activities
High employee engagement Low employee engagement
Regular team building activities Low participation in or lack of team building activities
Regular employee development activities Low participation in or lack of employee development activities

 

Finally, there are a few more deeply-rooted red flags that may be signals of a toxic culture. 

  • Lack of cross-functional communication: If you notice your teams are operating in silos, it may be a signal that while your individual teams have figured out a way to work effectively, your organization as a whole lacks a cohesive culture. 
  • Hypercompetitive atmosphere: Healthy competition is a great way to keep employees engaged, but if competition becomes cutthroat and prevents employees from sharing information or supporting others, there is likely a gap in the organization’s culture that requires attention. 
  • Lack of willingness to change: If you’re likely to hear the response: “that’s the way we’ve always done it” in response to a great suggestion, you not only may have a culture gap, but you also are likely to lose your top performers, and quickly. A respect for tradition and what works is great in some scenarios, but leaders in a healthy culture will feel comfortable embracing new ideas that may improve the organization. 
  • Lack of company values or vision: A key red flag is a lack of company values, or a lack of engagement in the company values. If your organization came up with values to put on a poster, but you’d be hard-pressed to find an employee who knows what they are, you likely still have a culture gap in this area.

 

What’s Next?

 

Consider our introductory questions – they weren’t meant to be rhetorical. How has your organization fared through recent turbulence? If you asked your employees, how would they respond? Better yet – ask them. Did they feel supported and connected to your organization? If the answer is no, it isn’t too late. Build an organizational culture that your employees can connect to. Not only will it help you in future times of change, but it will help you retain your employees in times of stability, and recruit employees in times of growth.

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