Unit 6: 204 Assignment (2)

The Four Major Culture Types

We now explain and illustrate each of the four culture types.

The Hierarchy (Control) Culture

The earliest approach to organizing in the modern era was based on the work of a German sociologist, Max Weber, who studied government organizations in Europe during the early 1900s The major challenge that organizations faced at the turn of the twentieth century was to produce goods and services efficiently for an increasingly complex society. To accomplish this, Weber (1947) proposed seven characteristics that have become known as the classical attributes of bureaucracy: rules, specialization, meritocracy, hierarchy, separate ownership, impersonality, and accountability. These characteristics were highly effective in accomplishing their purpose and were adopted widely in organizations whose major challenge was to generate efficient, reliable, smoothly flowing, predictable output. In fact, until the 1960s, much of the emphasis in management and in the management literature was on creating hierarchical or organizations or bureaucracies because this led to stable, efficient, highly consistent products and services. Because the environment was relatively stable, tasks and functions could be integrated and coordinated, uniformity in products and services was maintained, and workers and jobs were under control. Clear lines of decision-making authority, standardized rules and procedures, and control and accountability mechanisms were valued as the keys to success.

The organizational culture compatible with this form (and as assessed in the OCAI) is characterized by a formalized and structured place to work. Procedures govern what people do. Effective leaders are good coordinators and organizers. Maintaining a smoothly running organization is important. The long-term concerns of the organization are stability, predictability, and efficiency. Formal rules and policies hold the organization together.

Organizations ranging from a typical U.S. fast food restaurant (such as McDonald's) to major corporations (like Ford Motor Company) and government agencies (such as the U.S. Justice Department) provide prototypical examples of a hierarchy culture. Large organizations and government agencies are generally dominated by a hierarchy culture, as evidenced by large numbers of standardized procedures, multiple hierarchical levels (Ford has seventeen levels of management), and an emphasis on rule reinforcement.

Even in small organizations such as a McDonald's restaurant, a hierarchy culture can dominate. For example, many of the employees in the typical McDonald's restaurant are young people who have no previous training or work experience, and a hallmark of the business is the uniformity of products in all outlets. Key values center on maintaining efficient, reliable, fast, and smoothly flowing production. New employees begin by doing only one specific job (such as cooking fries). Almost no discretion is provided by the job, since uncooked fries are shipped from a central supplier in standardized packages, the temperature of the oil is predetermined, and a buzzer tells employees when to take the fries out. The rules specify that only a certain number of seconds can elapse from when the buzzer goes off to when the fries must be removed from the oil. And they may sit under the heat lamp for only a specified time as well. The rules manual, which every employee studies and is tested on, is over 350 pages long and covers most aspects of employee dress and on-the-job behavior. One requirement for promotion is knowledge of these rules and policies. Promotion within the restaurant follows a specific series of steps, and it is possible for an employee to be promoted several times within a restaurant before reaching a managerial level (for example, from fry cook to hamburger cook to counter person to crew chief to assistant manager). Hierarchy cultures are characterized by a controlling environment.

The Market (Compete) Culture

Another form of organizing became popular during the late 1960s as organizations faced new competitive challenges. This form relied on a fundamentally different set of assumptions than the hierarchy did and was based largely on the work of Oliver Williamson (1975),[ 3 ] Bill Ouchi (1981), and their colleagues. These organizational scholars identified an alternative set of activities that they argued served as the foundation of organizational effectiveness. The most important of these was transaction costs.

The new design was referred to as a market form of organization. The term market is not synonymous with the marketing function or with consumers in the marketplace. Rather, it refers to a type of organization that functions as a market itself. It is oriented toward the external environment instead of internal affairs. It is focused on transactions with (mainly) external constituencies such as suppliers, customers, contractors, licensees, unions, and regulators. And unlike a hierarchy, where internal control is maintained by rules, specialized jobs, and centralized decisions, the market operates primarily through economic market mechanisms, competitive dynamics, and monetary exchange. That is, the major focus of markets is to conduct transactions (exchanges, sales, contracts) with other constituencies to create competitive advantage. Profitability, bottom-line results, strength in market niches, stretch targets, and secure customer bases are primary objectives of the organization. Not surprisingly, the core values that dominate market-type organizations are competitiveness and productivity.

Competitiveness and productivity in market organizations are achieved through a strong emphasis on external positioning and control (the lower-right quadrant of  Figure 3.1 . At Philips Electronics, for example, the loss of market share in Europe and a first-ever year of red ink in the 1990s led to a corporation-wide initiative to improve the competitive position of the firm. Under the leadership of a new CEO, the worldwide organization instituted a process called Centurion in which a concerted effort was made to shift the company's culture from a relatively complacent, arrogant, hierarchy culture to a culture driven by customer focus, premium returns on assets, and improved corporate competitiveness—a market culture. Three yearly meetings were held to assess performance and establish new stretch targets. Assessments using the OCAI showed a substantial shift toward a market-driven culture as a result of these interventions.

A similar example is Xerox, which invented the technology for photocopying in the 1960s. Its famous Palo Alto Research Center developed the first personal computer, the first computer mouse, the first WIMP (Windows, Icons, Menu, and Pointer), the first Internet routing, the first cathode-ray-type screen, the first computer-connected alphanumeric keyboard, Ethernet networking, file servers, print servers, and e-mail. In 1979 Xerox invited industry representatives and the press to view its innovations, which led to the creation of the backbone of Microsoft's and Apple's computer and software businesses. Steven Jobs, CEO of Apple, said, "They just had no idea what they had." The trouble is, Xerox lacked a competitive culture, and by the 1990s it had lost significant amounts of market share to Asian competitors in photocopiers and competitor computer companies in electronics. The appointment of a new CEO, Anne Mulcahy, began the turnaround of Xerox in 2000. She embarked on a major cultural transformation including aggressive cash generation, acquisitions, and innovation. When Ursula Burns was appointed CEO in 2009 and immediately acquired ACS, Xerox had essentially completed its cultural transformation. An aggressive market-driven culture was in place.

The basic assumptions in a market culture are that the external environment is hostile rather than benign, consumers are choosy and interested in value, the organization is in the business of increasing its competitive position, and the major task of management is to drive the organization toward productivity, results, and profits. It is assumed that a clear purpose and an aggressive strategy lead to productivity and profitability. In the words of General George Patton (1944), market organizations "are not interested in holding on to [their] positions. Let the [enemy] do that. [They] are advancing all the time, defeating the opposition, marching constantly toward the goal."

A market culture, as assessed in the OCAI, is a results-oriented workplace. Leaders are hard-driving producers and competitors who are tough and demanding. The glue that holds the organization together is an emphasis on winning. The long-term concern is on competitive actions and achieving stretch goals and targets. Success is defined in terms of market share and penetration. Outpacing the competition and market leadership are important.

The Clan (Collaborate) Culture

A third ideal form of organization is represented by the upper-left quadrant in  Figure 3.1 . It is called a clan because of its similarity to a family-type organization. A number of the researchers who studied Japanese firms in the late 1960s and early 1970s observed fundamental differences between the market and hierarchy forms of design in the United States and clan forms of design in Japan (Ouchi, 1981; Pascale and Athos, 1981; Lincoln, 2003). Shared values and goals, cohesion, participativeness, individuality, and a sense of "we-ness" permeated clan-type firms. They seemed more like extended families than economic entities. Instead of the rules and procedures of hierarchies or the competitive profit centers of markets, typical characteristics of clan-type firms were teamwork, employee involvement programs, and corporate commitment to employees.

These characteristics were evidenced by semiautonomous work teams that received rewards on the basis of team (not individual) accomplishment and that hired and fired their own members, quality circles that encouraged workers to voice suggestions regarding how to improve their own work and the performance of the company, and an empowering environment for employees.

Some basic assumptions in a clan culture are that the environment can best be managed through teamwork and employee development, customers are best thought of as partners, the organization is in the business of developing a humane work environment, and the major task of management is to empower employees and facilitate their participation, commitment, and loyalty.

These characteristics are not new to American organizations, of course. They have been advocated for decades by many writers associated with the human relations movement (McGregor, 1960; Likert, 1970; Argyris, 1964). However, it took the highly visible success of Japanese firms, which had adopted these principles and applied them successfully after World War II, to help U.S. and Western European organizations catch the message in the late 1970s and 1980s that clan cultures can make good business sense. For example, when rapidly changing, turbulent environments make it difficult for managers to plan far in advance and when decision making is uncertain, an effective way to coordinate organizational activity is to make certain that all employees share the same values, beliefs, and goals. In the post–World War II environment, Japanese organizations caught the message long before Western organizations did.

An example of a quintessential clan-type culture is Pixar, the maker of highly successful animated movies. No other film company in history has come close to Pixar's record of successful movies—eleven out of eleven have been box office successes, and each has been nominated for an Academy award. This success, according to people we know at Pixar, is due to a clan culture.

Pixar doesn't just make films that perform better than the standard fare. It also makes its films differently. Most film companies gather together highly talented people, provide them resources and flexibility, let them do their creative work, and then turn them loose (a typical adhocracy culture). Pixar has instead developed a tightly knit culture, full of collaborators who stick together, learn from one another, and strive to improve with every production.

Michael Johnson, head of computer animation, told us that when he receives a fantastic idea or product from another person in the company—whether it is a custodian, an intern, or a senior animator, his reaction is, "Wow, this is a fantastic idea. I need to step up my game if I am going to add value and make it even better." Company title or position is irrelevant in the production of good ideas. Andrew Stanton, who directed Wall-E and was a key figure behind Finding Nemo, which won two Oscars and became the best-selling DVD of all time, didn't capitalize on his fame by offering himself to the highest bidder or demanding perks and special treatment. Instead, he went back to his job as a regular employee of the studio to begin work on his next major project. All contracts are long term and are with the company, not a particular project (Taylor and LaBarre, 2008).

Randy Nelson, dean of Pixar University, explained, "Contracts allow you to be irresponsible as a company. You don't need to worry about keeping people happy and fulfilled. What we have created here—an incredible workspace, opportunities to learn and grow, and, most of all, great co-workers—is better than any contract":

It's the heart of our model, giving people opportunities to fail together and to recover from mistakes together. You can try to outspend the competition. Or you can try to outculture them. Create a place that makes employees feel special. A place that makes them feel like they're part of a bigger whole. A place where they continually get to learn and evolve. A place where everyone actually likes each other. If you create a culture like that, who would want to leave? Plus, you'll get the best minds out there knocking on your door to get in.

This explains why the Pixar University crest bears the Latin inscription, Alienus Non Diutius—Alone no longer.

The clan culture, as assessed in the OCAI, is typified by a friendly place to work where people share a lot of themselves. It is like an extended family. Leaders are thought of as mentors and perhaps even as parent figures. The organization is held together by loyalty and tradition. Commitment is high. The organization emphasizes the long-term benefit of individual development, with high cohesion and morale being important. Success is defined in terms of internal climate and concern for people. The organization places a premium on teamwork, participation, and consensus.

The Adhocracy (Create) Culture

As the developed world shifted from the industrial age to the information age, a fourth ideal type of organizing emerged. It is an organizational form that is most responsive to the hyperturbulent, ever-accelerating conditions that increasingly typify the organizational world of the twenty-first century. With a rapidly decreasing half-life of product and service advantages, a set of assumptions was developed that differed from those of the other three forms of organization. These assumptions were that innovative and pioneering initiatives lead to success, organizations are mainly in the business of developing new products and services and preparing for the future, and the major task of management is to foster entrepreneurship, creativity, and activity on the cutting edge. It was assumed that adaptation and innovativeness lead to new resources and profitability, so emphasis was placed on creating a vision of the future, organized anarchy, and disciplined imagination.

The root of the word adhocracy is ad hoc—implying something temporary, specialized, and dynamic. Most people have served on an ad hoc task force or committee that disbands as soon as its task is completed. Adhocracies are similarly temporary. They have been characterized as "tents rather than palaces" in that they can reconfigure themselves rapidly when new circumstances arise. A major goal of an adhocracy is to foster adaptability, flexibility, and creativity if uncertainty, ambiguity, and information overload are typical.

The adhocracy organization may frequently be found in industries such as aerospace, software development, think-tank consulting, and filmmaking. An important challenge for these organizations is to produce innovative products and services and adapt quickly to new opportunities. Unlike markets or hierarchies, adhocracies do not have centralized power or authority relationships. Instead, power flows from individual to individual or from task team to task team, depending on what problem is being addressed at the time. Emphasis on individuality, risk taking, and anticipating the future is high, and frequently many members of an adhocracy become involved with production, clients, research and development, and other matters. For example, each different client demand in a consulting firm is treated as an independent project, and a temporary organizational design is set up to accomplish the task. When the project ends, the structure disintegrates.

Similarly, the story of the successful failure of the Apollo 13 space mission illustrates clearly how leadership changes regularly and often unpredictably, team membership is temporary, and no clear map can be drawn to identify the communication or control system. During the flight, astronauts in the space capsule as well as support personnel on the ground were not organized in a stable way for very long. Different problems demanded different types of task teams to address them, leadership shifted often, and even the piloting of the spacecraft switched from one astronaut to another. This was typical of the entire Manned Space Flight Center at NASA. Its formal structure changed seventeen times in the first eight years of its existence. No organizational chart was ever drawn because it would have been outdated before it could be printed. Jurisdictional lines, precedents, and policies were treated as temporary. Titles, job responsibilities, and even departmental alignments changed, sometimes weekly. The organization operated with an adhocratic design and reflected values typical of an adhocracy culture. Well-known examples of other companies with adhocracy cultures are Google, IDEO—a design firm in Palo Alto—Genentech, Menlo Innovation, and most start-ups and entrepreneurial ventures.

Sometimes adhocratic subunits exist in larger organizations that have a dominant culture of a different type. For example, an adhocracy subunit culture existing within a hierarchy was described in a study we conducted of the evolutionary changes that occurred in the Department of Mental Hygiene in the state government of New York (Quinn and Cameron, 1983). In its first five years of existence, the department was organized as an adhocracy. Among the characteristics we found in our analysis were the following: (1) no organizational chart—it was impossible to draw an organizational chart because it changed frequently and rapidly; (2) temporary physical space—the director did not have an office and set up temporary bases of operations wherever he thought he was needed; (3) temporary roles—staff members were assigned and reassigned different responsibilities, depending on changing client problems; and (4) creativity and innovation—employees were encouraged to formulate innovative solutions to problems and to generate new ways of providing services to clients. Because this adhocracy was so inconsistent with the larger state government design (a hierarchy) and with an environment that demanded efficiency and accountability, it was pressured to shift to another type of culture. Similar shifts are typical in many organizations, and we discuss them in the  next section .

In sum, the adhocracy culture, as assessed in the OCAI, is characterized by a dynamic, entrepreneurial, and creative workplace. People stick their necks out and take risks. Effective leadership is visionary, innovative, and risk oriented. The glue that holds the organization together is commitment to experimentation and innovation. The emphasis is on being at the leading edge of new knowledge, products, and services. Readiness for change and meeting new challenges are important. The organization's long-term emphasis is on rapid growth and acquiring new resources. Success means producing unique and original products and services.

[ 3 ]Oliver Williamson won a Nobel Prize in economics for this contribution.