What Is Corporate Culture?

Corporate culture is a set of values and behaviors that guide interactions in the workplace. It is often implied, rather than formally enforced, and can influence outcomes in a variety of settings, such as hierarchical structures, communication styles, innovation practices, and more. 

Harvard Business Review’s Leaders Guide to Corporate Culture has found that it is, broadly, shared by groups, pervasive across organizational areas, enduring in the long run, and recognized implicitly by employees.

Why is corporate culture important?

The main reason corporate culture is vital to the success of an organization is that it influences employees’ wellbeing, productivity, and whether they stay or go. Happy employees are 13% more productive than their counterparts, so it’s worth investing in a culture that prioritizes workers’ needs.

For example, people are more likely to stay long-term in a company where ideas can be expressed freely and career progression support is granted, than in one where only senior management gets listened to and promotion pathways aren’t transparent. When employees stay with your business for longer, your recruitment and onboarding costs decrease and external talent will compete to work for your business.

Furthermore, implementing an employee-centered culture is conducive to innovation. This not only leads to better products and higher profits, but can also improve customers’ experience with your brand, as frontline staff use creative ways to solve problems.

Conversely, a less-than-healthy corporate culture can negatively impact your business. You might think your corporate culture is thriving, but if it encourages bullying, overworking, and underappreciation, it may be producing a high rate of resignations, low morale, and lack of innovation. This is often referred to as a toxic corporate culture.

What are the components of corporate culture?

There’s no single way to develop your corporate culture and the best fit for your business may depend on factors such as company size, industry, and C-level leaders’ personalities. A non-profit, for instance, may have a more relaxed working environment than a for-profit financial services firm.

That said, there are several components that corporate culture is shaped by across industries. These are:

• Hierarchy: establishing a chain of command and role responsibilities
• Career advancement: defining learning opportunities, mentoring, and promotion pathways
• Work-life balance: setting policies for flexible working arrangements, parental leave, and working hours
• Positive work environment: creating ethical standards, collaboration practices, and support networks
• Results and productivity: setting expectations and achievable goals for staff
• Personal mindset: emphasizing growth, innovation, competitiveness, and/or other traits

What are the four types of corporate culture?

While there are many ways to classify corporate culture, one of the most popular models was devised by Robert Quinn and Kim Cameron of the University of Michigan at Ann Arbor. It makes a distinction between hierarchy, adhocracy, clan, and market cultures, with many companies opting for a hybrid approach that integrates features across the four types.

Hierarchy culture

Hierarchy culture is defined by a clear chain of command and is heavily reliant on documented processes, guidelines, and job descriptions. There’s also a transparent career progression process in place, with a predetermined path from one role to the next.

While such a culture can result in higher operational efficiency and minimal uncertainty as to “how things are done”, there is a risk of decreased creativity and innovation if flexible systems aren’t introduced to foster new ideas and improve redundant processes.

Adhocracy culture

Adhocracy culture proposes an ad-hoc alternative to bureaucracy, with flexibility and continuous improvement as its main aims. This model is especially popular with start-ups, where ideas are tested and reiterated at a fast pace, and one person may do several jobs at once. However, some adhocracy principles are also applied by corporates seeking to boost employee satisfaction and innovation.

Whilst empowering employees to find innovative solutions without the barrier of bureaucracy, the downside to an ad-hoc work culture is increased uncertainty, especially around individual responsibilities.

Clan culture

Clan culture is often found in small teams where workers are either related—such as in a family-run business—or have close interpersonal bonds. It is defined by a strong support network, proactive team spirit, and a collaborative effort to serve customers to a high standard. While this may be hard to scale in large enterprises, you can integrate some of its principles, for example by encouraging team lunches and after-work social events to strengthen interpersonal relationships.

There is usually a flat hierarchy, which encourages communication and collaboration across all experience levels. This is often referred to as an open-door policy to reflect that you can always knock on a senior manager’s door for advice.

Market culture

A market culture is driven primarily by industry demand, whether that’s customers, shareholders, or competitive pressure, making it a results-oriented model. However, it can negatively impact the organization’s internal environment by increasing the pressure to deliver consistently high results and achieve outstanding customer satisfaction. 

Some companies that are driven by market culture become well-known brands in their industries, but demanding ever-increasing results from employees without adding elements of a clan or adhocracy culture can quickly lead to burnout and increase resignation rates.

How can you influence corporate culture?

Culture is a living part of your organization, shared and changed by coworkers on a daily basis. To influence it, both formal and informal approaches must be used consistently and with a long-term view. Here are some best-practice strategies you can apply to help your business assimilate a new corporate culture.

Define your culture

Before bringing change to your organization, you must perform research into how the culture currently operates and decide where you’d like to see improvements. Use elements from hierarchy, adhocracy, clan, and market cultures, according to the benefits you aim to bring to your employees and customers.

You should set both qualitative and quantitative goals across specific culture characteristics, such as ethics, collaboration, mindset, and others. For example, you may want teams to have lunch together at least one day a week; it may not happen immediately, but you can work towards it.

Involve employees

Understanding and reshaping your corporate culture doesn’t only happen in the boardroom. It must involve employees at all levels, since culture spreads through relationships and behaviors.

Formal policies can help create lasting change, like when you create disciplinary measures against workplace harassment. But policies should be complemented by facilitating informal conversations between employees, since people are more responsive to change when they’re driving it themselves.

For instance, the recruitment and onboarding process is an opportunity to engage new employees with culture elements like collaboration and attitudes toward hierarchy. For established employees, running working groups on topics like innovation can help shape your ideal culture.

Spotlight positive examples

You can’t be what you can’t see. So, in any attempt to revitalize corporate culture, at least one positive example should be made visible in the workplace and through internal communications. Think of Steve Jobs leading Apple with a can-do mentality and an obsession for quality and simplicity.

While the culture evangelist may be a C-level executive or a department head, they don’t have to be. Sometimes, energetic new recruits with a flair for influencing others and more time on their hands can spread cultural values very quickly, particularly when using social media.

Track progress

Many organizations understand the need for a healthy culture and may promote it in job descriptions and on their official websites. However, to maintain or improve your current culture, you must track your key culture components in meaningful ways.

For example, if you’re transitioning from an in-person to a flexible-working culture, you should track how easily people are adapting to the change and whether extra support is needed to maintain morale and productivity. You can do this by sending and analyzing regular employee surveys and investing time in one-to-one check-ins.

Be aware of limitations 

Your ideal corporate culture may not fit with your organization’s size, geographical location, or with the current mindset of your workforce. For instance, a flat-hierarchy system with little bureaucracy can come with decreasing productivity in scaling companies, if key procedures aren’t laid out.

Aim for flexibility and gradual improvements instead of trying to shape your company after a specific type of culture. Also, you may have to tailor your overall corporate culture to the subgroups in your organization, including geographically diverse branches and different religious denominations.

Conclusion

Corporate culture is a shared set of traits and attitudes that drive people in an organization, from how they innovate to how they collaborate. The hierarchy, adhocracy, clan, and market cultures are the four main types found across businesses. However, companies are often a mix of all of them, to some degree, depending on what they’re trying to achieve.

To influence your corporate culture, aim to think long-term and include informal interactions when promoting key values. You should also spotlight employees that put the culture into action and track your progress in a measurable way.