This is an excerpt from the book “Diagnosing and Changing Organizational Culture” by

Kim Cameron and Robert Quinn (published by Prentice Hall, 1999 and available on
Amazon.com for $37 or in the faculty lounge reading corner.)

The Four Major Culture Types are explained below. For a summary of the
types at a glance click on SUMMARY

The Hierarchy 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 1800s. The major challenge
faced by organizations at the beginning of the industrial revolution the time Weber wrote-was to produce
efficiently goods and services for an increasingly complex society. To accomplish this end, Weber
proposed seven characteristics that have become known as the classical attributes of bureaucracy (rules,
specialization, meritocracy, hierarchy, separate ownership, impersonality, accountability; see Weber,
1947). These characteristics were highly effective in accomplishing their purpose. They were adopted
widely in organizations whose major challenge was to generate efficient, reliable, smooth-flowing,
predictable output. In fact, until the 1960s, almost every book on management and organizational studies
made the assumption that Weber's hierarchy or bureaucracy was the ideal form of organization, because it
led to stable, efficient, highly consistent products and services.

Inasmuch as 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 smooth-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 (e.g., McDonalds) to major conglomerates
(e.g., Ford Motor Company) and government agencies (e.g., the 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 (e.g., Ford has seventeen levels of management), and an emphasis on rule-reinforcement. Even in
small organizations such as a McDonalds restaurant, however, a hierarchy culture can dominate. For
example, many of the employees in the typical McDonaIds 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, smooth-flowing production. New
employees begin by doing only one specific job (such as cooking french 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 only sit under the heat lamp for a certain 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
ail employee to be promoted several times within a restaurant before reaching a managerial level (for
example, from fry cook, to fry-hamburger-filet cook, to counter person, to crew chief, to assistant
manager).
The Market Culture

Another form of organizing became popular during the late 1960s as organizations were faced with new
competitive challenges. This form relied on a fundamentally different set of assumptions than the hier-
archy and was based largely on the work of Oliver Williamson, Bill Ouchi, and their colleagues
(Williamson, 1975; Ouchi, 1981). 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 nor 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 including suppliers,
customers, contractors, licensees, unions, regulators, and so forth. And, unlike a hierarchy where internal
control is maintained by rules, specialized jobs, and centralized decisions, the market operates primarily
through economic market mechanisms, mainly 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 Fig. 3.1). At Philips Electronics, for
example, the loss of market share in Europe and a first-time-ever year of red ink in 1991 led to a
corporatewide 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 are held to assess performance and to establish new stretch targets.
Assessments using the OCAr show a substantial shift toward a market-driven culture from the early 1990s
to the mid-1990s.

A similar example of a market culture is a Philips competitor, General Electric. General Electric's CEO,
Jack Welch, made it clear in the late 1980s that if GE businesses were not number one or number two in
their markets, they would be sold. Welch has bought and sold over three hundred businesses during his
tenure as CEO. The GE culture under Welch is known as a highly competitive, results-or-else, take-no-
prisoners type of culture. It reflects a stereotypical market culture.

The basic assumptions in a market culture are that the external environment is not benign but hostile,
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, 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. They 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 Culture

A third ideal form of organization is represented by the upper left quadrant in Fig. 3.1. It is called a clan
because of its similarity to a family-type organization. After studying Japanese firms in the late 1960s and
early 1970s, a number of researchers observed fundamental differences between the market and hierarchy
forms of design in America and clan forms of design in Japan (Ouchi, 1981; Pascale & Athos, 1981;
Lincoln, 1990). 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;
Agyris, 1962). However, it took the highly visible success of Japanese firms, which had adopted these
principles and applie!i 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, it was found that 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 clan-type organization in the United States was People Express Airlines in its first five
years of operation-until its founder, Don Burr, encountered financial difficulties that led him to sell the
company to avoid bankruptcy. After leaving Texas Air in 1980, Burr dreamed of creating not only a
profitable airline but a model of how ideal organizations ought to function. Burr brought with him
several other officials from Texas Air and within two years had defied all experts' predictions by turning
a profit-the most dramatic success story in the history of the airline industry.

The hallmark characteristics of People Express were (1) minimal management levels-only three levels of
management existed between Burr and flight deck personnel; (2) informality and self-management-Burr's
office doubled as the conference room, and when it was being used, he went someplace else; (3)
employee ownership-all employees owned company stock and had lifetime job security; (4) work teams-
the entire workforce was organized into teams of three or four people, mostly self-selected; (5)
participation- at least four separate management councils helped make company decisions; and (6) job
rotation-employees regularly switched jobs so that pilots were, for example, also baggage handlers and
reservations hosts. Fierce loyalty to Burr and to the concept of People Express kept employees' salaries far
below rival airlines while morale initially remained high. As indicated by these characteristics, People
Express was clearly organized on the basis of the clan model. The incompatibility of this clan culture with
the kind of company that was created when the highly unionized and adversarial Frontier Airlines was
merged with People Express led to the airline's downfall.

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 longterm 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 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,
hyperaccelerating conditions that increasingly typify the organizational world of the twenty-first century.
With rapidly decreasing half-life of product and service advantages, a set of assumptions were developed
that differed from those of the previous three forms of organization. These assumptions were that
innovative and pioneering initiatives are what leads to success, that organizations are mainly in the
business of developing new products and services and preparing for the future, and that 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-referring to a temporary, specialized, dynamic unit. Most people
have served on an ad hoc task force or committee, which 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 where uncertainty, ambiguity and/or 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 of these organizations is to
produce innovative products and services and to 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. A high emphasis on individuality, risk taking, and anticipating the future exists as
almost everyone in an adhocracy becomes involved with production, clients, research and development,
and so forth. 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 flying 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 sometimes changed from week to week. Each of these
organizations operated with an adhocratic design and reflected values typical of an adhocracy culture.

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 by
Quinn and Cameron (1983) of the evolutionary changes that occurred in the department of mental hygiene
in the state government of New York. In its first five years of existence, the agency 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 for the agency 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 forced to shift to another type of culture. Similar shifts are typical in many organizations, and we dis-
cuss 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/or 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 pro-
ducing unique and original products and services.

Summary of culture types at a glance

The Clan Culture The Adhocracy Culture

A very friendly place to work where people share a A dynamic, entrepreneurial, and creative place to
lot of themselves. It is like an extended family. The work. People stick their necks out and take risks.
leaders, or the heads of the organization, are The leaders are considered innovators and risk
considered to be mentors and perhaps even parent takers. The glue that holds the organization together
figures. The organization is held together by loyalty is commitment to experimentation and innovation.
or tradition. Commitment is high. The organization The emphasis is on being on the leading edge. The
emphasizes the long-term benefit of human re- organization's long-term emphasis is
sources development and attaches great importance on growth and acquiring new resources. Success
to cohesion and morale. Success is defined in terms means gaining unique and new products or services.
of sensitivity to customers and concern for people. Being a product or service leader is important. The
The organization places a premium on teamwork, organization encourages individual initiative and
participation, and consensus. freedom.

The Hierarchy Culture The Market Culture

A very formalized and structured place to work. A results-oriented organization whose major
Procedures govern what people do. The leaders concern is with getting the job done. People are
pride themselves on being good coordinators and competitive and goal-oriented. The leaders are hard
organizers who are efficiency-minded. Maintaining drivers, producers, and competitors. They are tough
a smooth-running organization is most critical. and demanding. The glue that holds the
Formal rules and policies hold the organization organization together is an emphasis on winning.
together. The long-term concern is on stability and Reputation and success are common concerns. The
performance with efficient, smooth operations. long-term focus is on competitive actions and
Success is defined in terms of dependable delivery, achievement of measurable goals and targets. Suc-
smooth scheduling, and low cost. The management cess is defined in terms of market share and
of employees is concerned with secure employment penetration. Competitive pricing and market
and predictability. leadership are important. The organizational style is
hard-driving competitiveness.