When Barry McCarthy became CEO of Peloton in February 2022, he had his work cut out for him. Having just suffered deep financial losses and a 2,800 internal job cut, the major at-home boutique fitness company was—and still is—trying to recover from its pandemic “boom and bust.” Skeptical and fearful, his team needed renewed confidence, motivation, and vision. So as the new leader, McCarthy’s priority was to redefine expectations, inspire growth, and earn the trust of his followers.
Shortly after signing on, McCarthy, a former CFO of Netflix and Spotify, sent an email to all Peloton team members listing ten values that reflected his beliefs. They included sentiments like “think from first principles,” “fast is as slow as we go,” and “be stubborn on vision, flexible on details.” It may not seem like much, but by doing this, McCarthy set a new foundation to move the company up and forward. He was re-building the organizational culture.
It worked.
Despite changes in leadership and obvious company hardships, Peloton today still upholds one of its core values to “be the best place to work.” They have an A+ culture score, a top 5% leadership rating, and are maintaining their 2021 Comparably Best Culture Award. Of 907 employee reviews on Glassdoor, 68% still recommend Peloton as an employer.
Ups and downs are a part of operating a business—they’re inevitable. Old leaders leave, new ones come in, sales spike, and then plummet. Organizational change is the only constant. Strong organizational culture and the leadership behind it is the only way to weather the fluctuations and remain successful.
In this article, learn more about organizational culture and the different types. We’ll explore:
- What organizational culture is
- The impact that leadership has on culture
- Types of organizational culture
- How to build a culture that’s right for your business
What Is Organizational Culture?
Company culture is the backbone of any successful organization.
gary vaynerchuk
A company’s consistent and widely shared beliefs, attitudes, and practices form an organizational culture. Founders and executive leaders are responsible for establishing strong roots in vision, values, purpose, and ethics so the organization grows in a sustainable and healthy way. Successful companies have strongly held, structurally supported values within their organizational culture that circle back to their core “why” or the reason the business exists. When leaders create these conditions, organizational culture flourishes and develops, benefitting not only those within the company but the customers and clients the business serves.
Organizational culture has a huge impact on the makeup and success of a company. Due to employee turnover alone, businesses have lost about $223 billion in the past several years, according to SHRM. Many have left their jobs in pursuit of other passions or life changes, but 58% of these employees have quit because of their managers. A recent culture report discovered that one in five employees had left their job because of the culture.
If those statistics aren’t significant enough, also consider this: A survey revealed that 35% of job seekers wouldn’t accept a new job if the culture is poor. Today, the only way to remain competitive in the employer marketplace is by having an organizational culture that is clear and effective with supportive and conscientious leadership.
How Leaders Shape Organizational Culture
- They communicate and live the vision: Not knowing a company’s vision is like navigating a huge forest without a compass. The company’s vision needs to be communicated to align employee efforts. When building a team culture, leadership must communicate the company’s core values, vision, mission, and “why.” Additionally, they should also model behaviors that reflect these things. This trickles down to the rest of the company, shaping the business culture.
- They define the “why”: Many team members know what their company does, but not all know why. A business’s “why” is the reason it exists. To fully understand this, you need to know what your company stands for or what it is fighting for. Sometimes it’s easier to determine what you don’t stand for. Leaders who communicate this clearly attract better candidates and foster stronger buy-in.
- They hire the right people: It only takes one poor cultural match to spread negativity throughout a company. Successful leaders understand this and make hiring decisions with the most potential for positive impact and harmony. To do this, always hire new team members who practice the distinct ethical values and core values your team lives by.
- They prepare employees for success: The onboarding phase should engulf employees in the company’s mission, culture, and best practices for cross-culture communication. This is what prepares them for optimum success and to be able to integrate into the organizational culture seamlessly.
- They establish goals that align with core values: Setting goals that align with a company’s core values facilitates supportive decision-making. If goals don’t align with values, confusion will result, and decisions can bring the culture off course.
- They cultivate supportive cultures: When an organizational culture is one of safety, trust, and open communication, team members can build relationships. It’s the responsibility of leadership to ensure team members feel supported enough to build bonds and work well together.
- They empower and raise new leaders: When employees are empowered, they empower others. This creates a culture that no one will want to leave, and many will want to join. Leadership that recognizes individual strengths creates a culture that thrives.
Types of Organizational Cultures
Create the kind of workplace and company culture that will attract great talent. If you hire brilliant people, they will make work feel more like play.
richard branson
Not all organizational cultures are the same. Businesses can adopt or pull from several different kinds of cultures, each with its pros and cons. Understanding the different kinds and the benefits of each will enable you to make the best choices for building your own world-class, weatherproof organizational culture and structure.
Clan Culture
A culture that prioritizes deeply shared goals and values is referred to as a clan culture. These cultures are highly supportive and cohesive, offering mentorship and internal collaboration opportunities. Family-owned businesses, like Tom’s of Maine or those with very hands-on leadership models, tend to have clan cultures.
Pros: Overall cohesion, sense of belonging, loyalty, and strong working relationships.
Cons: Highly exclusive; difficulty integrating new team members; changes in culture or leadership may not be easily adapted to; difficulty collaborating with external teams.
How to get the best of this organizational style: Take special care to create a cohesive working culture without making it completely exclusive. Have internal team members work with those from different departments and companies; encourage external partnerships and collaboration; and practice open-mindedness to new ideas and innovations.
Hierarchal Culture
Common for most large businesses today, a hierarchical culture stems from a traditional pyramid-style structure of power. Companies with a hierarchical culture have a clearly defined chain of command, starting from a CEO at the top and working down to entry-level employees.
Pros: Defined levels of control and authority; a clear path for promotions and advancement; loyalty and relationship-building within specialized departments.
Cons: Having more leadership (managers or supervisors) can be costly; poor communication may result between departments; too rigid of a structure for highly innovative, creative thinkers.
How to get the best of this organizational style: Balance the natural authoritarian leadership style that results from this kind of culture by practicing other, more flexible leadership styles. The democratic leadership style, for example, would complement a hierarchical culture well.
Market Culture
Market cultures bring internal teams and departments together to work towards one big, common company goal. The goal can be closing a new partnership, an acquisition, or a company merger. It can mean significant financial incentives for employees and company stakeholders if the goal is achieved, motivating everyone to work their hardest. Market cultures like the ones at General Electric, Apple, and Amazon are highly competitive and results-driven. It’s about meeting and exceeding sales, quotas, and profits, together as a company, nonstop.
Pros: Maximized profit; the high likelihood of reaching stated financial goals; employees who are self-driven and motivated.
Cons: Staying on top of ever-evolving market trends can be costly; a fast-paced environment can easily cause work burnout; and high levels of competition, even internally, can lower team morale and collaboration.
How to get the best of this organizational style: In a market culture, the focus tends to stay on processes, data, and thresholds. Remember your people. Keep your employees top of mind, set attainable goals, and offer support when needed. This will ensure they feel valued and invested in the business.
Adhocracy Culture
Companies that are entrepreneurial in spirit, creative, innovative, and daring tend to have adhocracy cultures. These cultures are adrenaline-based; they run fast, take risks, and relish disrupting cultural norms or expectations. Think of startups or technology companies like SpaceX. Those who work in adhocracy cultures are adaptive, fluid, and learn from mistakes quickly.
Pros: Adhoc cultures usually consist of experts within their fields, leading to greater output and quality performance; modern schedule expectations allow employees to pursue activities outside of work, and encouraged innovation prevents stagnation.
Cons: Employees who are not proficient in their role may not adapt well or hold back progress; the absence of a secure schedule or hierarchy can cause overwhelm or disorganization; individualism and internal clashes in ideas are likely among teams of all experts; poor work-life balance.
How to get the best of this organizational style: Be willing to take risks, but be sure they’re educated and well-thought-out. Failure is discouraging, and so is doing the same things. Get the most from an adhoc style by trying new pathways while remaining realistic about what’s possible.
Building an Organizational Culture That Works
Being a great place to work is the difference between being a good company and a great company.
brian kristofek
There’s no right or wrong way to build or rebuild an organizational culture. It’s all about picking the qualities of the four styles that fit your business, your goals, and your people the best. It may take trial and error to get the organizational culture right, and that’s okay. Notice what works and doesn’t work and make improvements as necessary. Simply caring and thinking about the health of your company culture is the first step to building a successful one.
Continue learning how to optimize your work culture with “Building Remote Work Culture in 2022” and “Here’s How to Build a Great Corporate Culture.”