Organizational Culture Explained [2023]

In the summer of 1995, Jeff Bezos was running  the then tiny Amazon on his parents’ life savings. He’d just hired employee number five  and had to buy an extra desk. So he went to Home Depot across the street and saw that the desks  were much more expensive than the doors.

So, he decided to buy a door and put some legs  under it. This door desk symbolized frugality, which became one of the company’s  core values: when you have a problem, find the easiest and least  expensive way to solve it. This is a great example of how company culture  takes shape.

Imagine you’re one of the early employees at Amazon and you know that story.  You will think twice before making an expensive purchase for the company That shows the power  of organizational culture; it helps to build behaviors we want to see from our employees, and  if we do it well it helps us engage and retain a productive workforce. In this HR deep dive, you  will learn what organizational culture is, how culture can explain why people at Amazon do not  use PowerPoint, and you will learn about the four different types of organizational culture and  how you can recognize them, so let’s get started!

Organizational culture explains why people in  an organization act and think in a similar way. At Amazon organizational culture explains  why people are more frugal and efficient, while other companies have different  values. Culture is about what is celebrated, what is tolerated, and what you  cannot do inside an organization.

If you work at a corporate law firm, you may  find a competitive culture where you either get promoted, or you leave. This is called up  or out. Or you may work for a local government, which is a much more political organization, aimed at building consensus and involving everyone. 

Depending on your personality and preference, you will be attracted to different types of  organizations. That is how culture works. But apart from manually screwing legs on  doors, how do you build culture?

For that, we first need to understand how  organizational cultures are formed. Think of culture as an iceberg. Why an iceberg? 

It’s because a big part of organizational culture is not directly visible – but it plays a huge  role in what is expected and how work is done! The iceberg is divided into three parts:  On the top, sticking out above the water are the artifacts and behaviors that  any newcomer to the organization would easily notice. These are your desk doors. 

In the middle layer, just under the surface, you have norms and values. All the way at the  bottom, you have the underlying assumptions and beliefs that inform a company’s culture. To really  understand how organizational culture is shaped, let’s take a deep dive to explore  the different layers of the iceberg.

The artifacts and behaviors at the top  of the iceberg include symbols, beliefs, rituals, and myths & stories. These are easy  to recognize. Symbols include the dress code, the way the office space is laid out,  as well as ceremonies and events.

Another symbol is Amazon’s door desk. When you  work at Amazon and ask a colleague why you have these weird desks, you will immediately  get an answer. The door desk anecdote is a story or myth.

The desk does not matter,  what matters, is what it stands for. It symbolizes Amazon’s culture of frugality  which has served the organization well. A ritual at Amazon is that they do not use  PowerPoint.

Instead, the host of the meeting prepares a 6-pager, which is a 6-page document in  which the idea of the meeting is written down. The first 20 minutes of the meeting are then spent  in silence, with everyone reading that document before it is discussed and challenged. The  6-pager is then updated with all the new input, making it very easy to share it with other  teams as well.

This 6-pager is culturally significant because it ensures that everyone is  - literally - on the same page. The focus is on the substance and not the delivery. The cultural  value that Amazon communicates with this ritual is a focus on results.

Of course, you may not always  agree with how an organization gets there – but Amazon is a great example of a culture that  has helped the organization be successful. Below the water’s surface, you have adopted norms  and values. These are also called espoused values.

They are the underlying justification of the  stories, beliefs, and artifacts. To observe these norms and values, you have to look a little  deeper into how people behave. For example: are senior leaders sitting next to employees,  and can you just walk up to them and share your honest opinion, or are leaders sitting in their  own room on the top floor and not mingling at all?

These behaviors are important indicators of  how hierarchical your organizational culture is. Amazon has four clearly stated values.  First, customer obsession.

Bezos did not want to be customer-centric, he wanted  employees to be customer obsessed. 2. Long-term thinking.

Bezos believed that  having a long time horizon is critical if you want to build something big and  enduring. Amazon invested, for example, over a decade in Amazon Prime before it started  to generate profit and boost e-commerce sales; 3. Eagerness to invent, characterized by an  open culture in which people are not afraid to take risks, experiment, and innovate; And  finally, pride in operational excellence.

This is where the door desk example comes in. Cost  need to be low, and service fast. These values are communicated to employees and are used as  guidelines for hiring and performance management.

Finally, all the way down at the bottom of the  iceberg are the underlying assumptions. These are values that are unconscious and difficult  to observe. These beliefs are taken for granted because they’re not tangible or talked  about but they are the true motivators for people’s behavior.

For example, a  company might choose inclusion as value, but if the underlying assumption is  that it’s each person for themselves, you won’t see the organization living up to that. A famous example is Enron, a U. S.

-based energy  company that went bankrupt in 2001 after an accounting scandal. Enron had a good reputation  amongst the public and investors. However, the underlying assumptions at the company  fueled greed and corruption.

This led to a toxic culture in which short-term profits  took priority and inflating the company’s stock value was seen as acceptable. This is  a perfect example of a company that may have quoted all the right values to the outside  world which is the top of the iceberg, but the unwritten rules allowed for a  culture that ended up ruining the company. So let’s talk about the four different cultures  that we generally find in organizations.

The four organizational cultures are mapped on the  competing values framework which has two axes, that shows opposing forces in an organizaletion.  An organization can either be flexible or stable and internally or externally  oriented. Based on these, we see the clan, adhocracy,  hierarchy, and market culture.

At the end of the video you will learn  what kind of organization Amazon is, but let’s first make these four cultures a  bit more practical. Let me introduce you to the four heroes of this story: Mr Clan, Mr.  Adhocracy, Mr Hierarchy, and Mr.

Market. Mr Clan finds it very important that  people are involved, collaborate, and work together. In his company, he starts the  week with a standup where they first check-in on how every team member is doing, before getting  down to business.

Mr Clan values cooperation, and would rather do things together than alone  even if it means that things go slower as a result. Mr Clan values trust and loyalty just  as much as the ability to get things done and his team feels supported, cared for, and safe, which  helps them to collaborate effectively. Because of his collaborative spirit, Mr Clan’s organization  is able to adapt to changes.

You could find Mr Clan in small or family-owned businesses, local  governments, or customer service organizations. Mr. Adhocracy is very different.

Her organization  is also very flexible but instead of focusing on her employees, she is all about ideas, trying new  things and experimentation to find ways to meet the needs of the customer. Mr. Adhocracy has a  team of creative innovators who like change, are entrepreneurial, and are looking to continuously  grow the organization and themselves.

Sometimes an employee may be left behind because they are  unable to change as quickly, or get frustrated due to the lack of structure and “shoot from the hip”  decision making. Where Mr Clan would wait and make sure that this employee was able to catch up,  Mr. Adhocracy has already moved on because her focus is on serving the customer – and she thinks  the customer is king.

You will find Mr. Adhocracy in early-stage tech startups, in advertisement,  design firms, and in research and development. Next up we have Mr Hierarchy.

Mr  Hierarchy likes order, procedures, structure, quality, and predictability. In his  organization, there are set rules, processes, and policies to get things done. No-one  takes shortcuts and the mentality is "if it ain’t broke, don’t fix it".

Unlike Mr.  Adhocracy, who thinks outside of the box, Mr Hierarchy believes that there are tried  and tested methods that will lead to success. Mr Hierarchy believes that employees should have  clear roles and responsibilities, and that rules and regulations are vital for success.

You will  find Mr Hierarchy in the military, in hospitals, in church, or in any other organization  where there’s a clear chain of command. You may also find him running manufacturing  businesses, like in the pharmaceutical industry, where you have strict rules and regulations,  and where following the book is important. Finally, you have Mr.

Market. She is  results-driven, so the first thing she does is like the video, and subscribe to this channel,  because that will get the numbers up Where Mr Hierarchy wants to stick by the book and follow  the chain of command, Mr. Market is competitive, will break rules to win, wants to be seen as  the leader in the market, and shoot the lights out in terms of results.

You will find Mr.  Market in a sales-oriented organization, in investment-driven organizations, and professional  services organizations like law firms, where everyone has clear targets and deadlines,  gets bonuses when they perform well, and is let go when they don’t. Just like Mr.

Adhocracy,  Mr. Market tries to best serve the external customer. But where Mr.

Adhocracy allows for  idle time, innovation, and creative discussion, Mr. Market wants to see results, and she wants  to see them fast - no matter what it takes. Just like people with different  personalities behave differently, organizations also behave in different ways  depending on their culture.

Which of these four cultures characterizes your organization  best? See if you can identify it. Of course, nothing is black and white.

You will find  Mr Clan, Mr. Adhocracy, Mr Hierarchy, and Mr. Market in all organizations.

But every  organization has more of one, than the other. For example, if Mr. Market is the boss, driving sales  and results, but Mr.

Adhocracy occasionally pops in to come up with new ideas and innovations,  she will be able to launch new products that Mr. Market can sell. So together, they make  a more successful organization than alone.

When different parts of the organization have  different cultures, we call these subcultures. That means that Mr Clan may run the show in your  customer service or product department, where cooperation is important to get a good result,  Mr. Adhocracy runs the innovation department, while Mr.

Market is in charge of sales. This  is an example of an organization that is able to ‘manage competing values’. This is easier  said than done and requires great leadership, but research shows that organizations  that are successfully able to manage the tension that these competing values  bring, are the most successful ones.

So, where in our model would you place Amazon?  Amazon is a great example of a company that is externally oriented, and working to create  the best online shopping experience for its customers. If we plot Amazon on the competing  values framework, you will find that its culture focuses on achievement and results and has a  strong performance-based culture.

You will also see that the organization is flat, experimentation  is encouraged, and Amazon is known for its innovation. That makes Mr. Adhocracy and Mr. 

Market the two dominant cultures at the company. That’s it for this deep dive in which you’ve  learned about organizational culture You’ve learned how cultures are formed and shaped  over time, you’ve learned about the four different types of culture, and you’ve learned  about subcultures and how one organization may have multiple different cultures. If  you learned something from this video, give it a thumbs up And if you haven’t  already, make sure to subscribe.