Various business management theorists have introduced models of the types of corporate culture because there is no one common theory of the different models of organizational culture. It is mainly because businesses are very different in the ways that they operate.
Charles Handy proposed a theoretical model of corporate culture based on the assumption that different kinds of cultures are needed for different business activities, e.g. farmlands, car factories, universities. The four different types of corporate culture as proposed by Handy provide a framework for managers to understand the cultural dynamics of their organization.
Dimensions of corporate culture by Charles Handy
Every business organization has its own mix of the following dimensions of corporate culture including:
- Power distribution. This determines who holds the decision-making power. This offers valuable insights into how decisions are made, communication flows, and motivation within different cultures.
- Task orientation vs. relationship orientation. This refers to the focus on getting results from the work done or the benefit of the individuals involved. It determines whether the firm is task-oriented or relationship-oriented.
Types of corporate culture by Charles Handy
Based on different mix of dimensions, the following types of organizational culture can emerge:
- Power cultures. They exist in businesses when there is one single dominant source making important decisions quickly as there is little bureaucracy. All decision-making power is concentrated among only few people such as an individual or a small group. This centralized form of strong management directing all major operations is associated with autocratic leadership. The organizational structure is flat with a wide span of control and without formal job titles or positions. Motivation is likely to focus on financial rewards and managers are judged based on results. Power cultures are common in small businesses.
- Role cultures. They exist in highly structured businesses with rigid job roles, rules and procedures as stated in formal job descriptions. Power and authority derive from the formal position or role that the individual holds in the organization with each employees having a clearly defined job title. The organizational structure is tall and hierarchical with narrow span of control and clear delegated authority and accountability. Any unnecessary decision-making and risk taking by lower-level employees are not encouraged. Role cultures are common in bureaucratic organizations like government, schools and colleges.
- Task cultures. They exist in businesses where the focus of employees is on getting results from the work done. There is no single source of decision-making power with the organizational structure following a matrix structure. But it is individuals and teams who are empowered and have discretion to make decisions in relation to their responsibilities. Problem solving-groups are formed with flexible and dynamic teams, often made up of representatives from different departments based on their expertise. The contribution that individuals make to completing tasks as well as cooperation and team work are more important than formal job titles. Task cultures are common in creative sectors and problem-solving environments.
- Person cultures. They exist in businesses when employees in similar positions with similar expertise create groups with similar expertise to share their knowledge, skills, good practice and expertise. While this corporate culture only exists for the benefit of the individuals involved as they are given the freedom to express themselves and make decisions, the business can indirectly benefit from that creativity. Employees are not asked to work in a structured environment and there is not emphasis on teamwork either. Person cultures are common in larger organizations with different branches such as retailing, or in certain professions such as accountants, surgeons and lawyers.
In addition, one more type of cultures that exists is an entrepreneurial culture. Entrepreneurial cultures encourage management and workers to take risks and encourage new ideas and business ventures. Success is rewarded but failure is not automatically criticized. Motivation can be high among people who like a challenge and risk taking.
It is important to note that these are just four types of corporate culture, and in reality, most companies will have a culture that is a mix of these types. The best type of corporate culture for a company will depend on a variety of factors, such as the company’s industry, size, and stage of development.
