Organizational culture is one of the fundamental elements of every organization’s operation, determining its identity, way of functioning, and internal and external relationships. It is a system of shared values, beliefs, and assumptions that influences the behaviors of the organization’s members and its effectiveness. Research indicates that 90% of managers agree that the importance of organizational culture is growing in today’s business world, with 46% acknowledging that improving it impacts employee productivity, engagement, and retention. This article analyzes the most important models of organizational culture that help understand and shape this key aspect of organizational life.
Edgar Schein’s Model – Three Levels of Organizational Culture
One of the most influential and comprehensive models of organizational culture is that by American social psychologist Edgar Schein. This model distinguishes the components of organizational culture based on two criteria: visibility to external observers and the level of awareness among the organization’s members. Schein divides the manifestations of organizational culture into three levels: artifacts, values, and hidden assumptions.
Artifacts are the most superficial and visible level of organizational culture. They are the external manifestations of the organization’s functioning that can be observed at first glance. These can appear in three main forms: physical (appearance of the organization’s members, how the organization’s premises are arranged, logos), behavioral (communication patterns, traditions, customs, rituals), and verbal (organizational language, professional jargon, myths, and stories). Artifacts are the easiest to observe but also the hardest to interpret without understanding deeper levels of culture.
Values and norms form the second level in Schein’s model. They include conscious beliefs, rules, standards, and goals that influence the behaviors of the organization’s members. Values define what is important for the organization and its members, while norms indicate what behaviors are acceptable and which are not. Values can be expressed formally (e.g., in the organization’s mission, vision, and strategy) or informally (e.g., in daily interactions and practices).
The third and deepest level of organizational culture according to Schein is hidden assumptions. These are unconscious, taken-for-granted beliefs that are the source of values and actions. Schein identifies key areas where these assumptions manifest, such as: the nature of time (ways of measuring time and its significance in culture), the relationship to the environment (how culture situates itself in space), the nature of human beings (whether people are naturally good or bad), the nature of human activity (how people should act with each other – competition or collaboration), and the nature of human relationships (the relationship between homogeneity and diversity).
It is important to note that, according to Schein, the way cultures respond to these issues affects their functioning both in relations with the environment and within the organization. Schein’s model treats culture as a structure created within a group, forming an inseparable element of its operation. This three-level model allows one to observe the process of the emergence and permeation of cultural assumptions and values from the subconscious level of the organization’s members to the level of external cultural artifacts.
Competing Values Framework (CVF)
The Competing Values Framework (CVF) was created in 1983 by Robert Quinn and Kim Cameron as a tool for leaders to assess and transform organizational culture. This model is based on two dimensions: flexibility and autonomy versus stability and control, and internal focus and integration versus external focus and differentiation. Based on these two dimensions, four types of organizational cultures emerge: clan, adhocracy, market, and hierarchy.
The clan culture (collaboration) is characterized by high flexibility and internal orientation. In organizations with a clan culture, there is an emphasis on teamwork, employee engagement, loyalty, and tradition. Research shows that in cultures where personal responsibility is less important, there is much greater control. An example of a clan culture might be a startup, where a family-like atmosphere dominates, and relationships between employees are informal and based on trust.
The adhocracy culture (creation) combines flexibility with an external orientation. In organizations with this culture, there is a focus on dynamism, creativity, risk-taking, and flexibility. The adhocracy culture emphasizes innovation and risk-taking – leaders encourage employees to think boldly, experiment, and push boundaries without fear of failure. An example might be Amazon, where the organizational culture places strong emphasis on performance and innovation.
The market culture (competition) is characterized by stability and external orientation. Organizations with a market culture are goal-oriented and focused on competition. In such companies, results matter most, and the key success metric is market position and competitive advantage.
The hierarchical culture (control) combines internal orientation with stability and control. Organizations with this culture value efficiency, reliability, predictability, and stabilization. In such organizations, there is a clear hierarchy of authority, and processes are formalized and standardized. Examples might include traditional financial institutions or government administration.
The Competing Values Framework is one of the most popular tools for measuring organizational culture. Research has shown that cultures can be divided based on two dimensions (internal-external; stability-flexibility), which lead to four types of cultures: clan, adhocracy, market, and hierarchy.
Hofstede’s Model in the Context of Organizational Culture
Geert Hofstede, a well-known researcher of national cultures, adapted his methodology to study organizational cultures as well. In the organizational context, Hofstede’s Multi-Focus Model (MFM) focuses on several dimensions that help describe and understand organizational culture.
One key dimension of Hofstede’s model is organizational effectiveness, which speaks to how an organization seeks to ensure the effectiveness of its actions – whether through a focus on goals or the way of acting. In the current situation, as research indicates, a goal-oriented approach seems more desirable. The pandemic has forced many processes to be done “the new way,” and a large number of procedures and detailed guidelines could have become a “stone around the neck” for organizations.
Another important dimension is customer orientation, which distinguishes organizations that draw their impetus from within (where attachment to established ways of working is nurtured) from companies that focus on their external environment (close to customers and ready to react to their needs).
The fifth dimension of Hofstede’s model – communication – can be defined as open or closed. In open systems, everyone feels well-informed, which fosters trust and effective collaboration. Research shows that fewer than one in four employees believes they understand the values driving organizational culture, indicating significant challenges in internal communication.
Hybrid Models and Contemporary Approaches to Organizational Culture
Contemporary approaches to organizational culture often combine elements from different models, creating hybrid models tailored to the specific needs of organizations. As researchers point out, in management research reflections, the belief is growing that human resources management (HRM) practices can influence certain employee attitudes and behaviors, thus shaping the culture of the organization.
Thomas Peters suggested as early as 1978 that HRM systems could be treated as a mechanism for transmitting the values and beliefs of the organization, thus shaping its character. In this context, three issues are important: what the organization expects from employees, which employee behaviors are rewarded, and what are the do’s and don’ts of proper social coexistence within the organization.
Wendy Ulrich claims that policies and procedures implemented by managers in HR departments should become ritualistic within the organization, as they help establish boundaries and norms of behavior regarding people management, through which organizational culture is shaped. Research conducted in Hong Kong on a sample of 332 companies showed that HRM practices that emphasize training, rewards for performance, and teamwork development contribute to the creation of an organizational culture that promotes change and innovation.
Organizational Culture as a Competitive Advantage
The literature predominantly views organizational culture as unique to each organization and subject to change as the company evolves and new external conditions emerge. Proper management of organizational culture can influence employee engagement, company efficiency, and its ability to adapt to changes.
The primary factor conditioning organizational performance is the shaping of a culture that promotes collaboration and a participatory management style. This situation arises from greater empowerment of employees and their growing involvement in the decision-making process. Research confirms that organizational culture is an important element of business activities and has a significant impact on an organization’s competitiveness and success. It turns out that 75% of employees are eager for business success if they perceive the organizational culture as “good.”
A strong organizational culture builds a sense of belonging and strengthens identification with the company. Research also indicates that organizational culture serves as a mediator between the HR system and company performance, meaning that HRM practices implemented by companies affect organizational culture, which in turn influences the organization’s efficiency.
Practical Applications of Organizational Culture Models
Models of organizational culture have broad applications in management practice. Here are a few examples of their practical use:
Example 1: The start-up Echometer uses holacracy as an organizational form, which is a manifestation of an adhocracy culture according to the Competing Values Framework. In holacracy, responsibility is decentralized, allowing for faster decision-making. This type of cooperation suggests that the organizational culture in Echometer is based on the value of ownership. Employees can flexibly organize their working hours, which is another indicator of the value of personal responsibility.
Example 2: Bain & Company, which topped the list of large employers in the USA on the prestigious Best Places to Work 2024 list, builds its organizational culture based on four key principles that enable the creation of a cohesive organizational culture. This is an example of a clan culture, where relationships, collaboration, and shared values are important.
Example 3: Amazon represents an organizational culture that emphasizes performance and competition, which corresponds to the market culture in the Competing Values Framework. This company combines elements of adhocracy culture (innovation, experimentation) with market culture (focus on results).
Practical application of organizational culture models can also be observed in the process of cultural change. According to a Gartner report, 97% of CHROs (Chief Human Resources Officers) would like to change some aspect of their organization’s culture. To effectively implement cultural change, leaders should help employees understand the values underlying organizational culture, explain what these values mean and how they affect the team, ensure that employees know what to do to build the desired culture, and optimize the processes governing employees’ work to support the culture they strive for.
Challenges in Managing Organizational Culture
Despite the growing awareness of the importance of organizational culture, managers still face numerous challenges in managing it effectively. It seems that managers do not devote enough attention to organizational culture, viewing it as an immeasurable structure whose effectiveness cannot be presented in terms of hard metrics, which is crucial in many organizations.
Gartner’s research indicates that 57% of leaders agree with the statement that managers do not enforce the desired culture vision in their teams, and 53% of HR leaders claim that team managers do not feel responsible for “leading by example.” While more and more companies have a vision of their organizational culture, implementing it in practice proves to be much more difficult.
According to Flamholtz, culture is “an area of organizational development that is of critical importance, a fundamental strategic element for successful companies.” Copeland suggests that defining a company’s culture is a key step in developing intellectual capital. Therefore, the challenge for modern organizations is not only understanding their organizational culture but also skillfully managing it in a way that supports the achievement of strategic goals.
Conclusion
Models of organizational culture are invaluable tools in understanding, diagnosing, and shaping organizational cultures. Edgar Schein’s model, with its three levels of culture (artifacts, values, and hidden assumptions), helps understand the depth and complexity of organizational culture. The Competing Values Framework (CVF) offers practical frameworks for diagnosing and changing culture by identifying four types of cultures: clan, adhocracy, market, and hierarchy. Hofstede’s model, in turn, provides tools for analyzing organizational culture in the context of various dimensions, such as organizational effectiveness and customer orientation.
Research clearly shows that a strong, positive organizational culture is a key factor for organizational success, influencing employee engagement, their effectiveness, and overall business results. However, managing organizational culture remains a challenge in the face of continuous changes in the business environment and growing employee expectations.
In the era of digital transformation and changing expectations of different generations of employees, the ability to diagnose and shape organizational culture becomes a crucial competency for leaders. As Gartner’s research shows, leaders should equip managers at all levels of the organization with tools to embed culture in values, behaviors, and processes so that everyone feels responsible for it.
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