Sep 12, 2017 Team Collaboration

Organizational Culture and Its Impact on Team Performance

Organizational Culture and Its Impact on Team Performance

What do you get when a rigidly structured enterprise hires a team of former digital nomads?

In rare cases, the company would get a beacon of creative light and an inspirational idea how to secure its place on the market. More often, however, the team of former digital nomads who are used to freedom when it comes to creativity and decision-making gets overwhelmed by strict hierarchy and excessive bureaucracy.

In that case, the team is left with two options: either they will adapt (which is time-consuming), or they will leave the organization with the excuse of not being able to adapt to new surroundings.

Simply put, they suffer because their creativity and their performance are under the influence of drastically different organizational culture than they are used to.

Download Free Materials

The Big Book of Team Culture

Get your hands on this free ebook and learn what makes a great team, how to improve teamwork, what it means to be a leader in a modern workplace, and how to create a positive team culture - all in one place.

*Enter your email address and subscribe to our newsletter to get your hands on this, as well as many other free project management guides.

Thank you for subscribing!
Download the Ebook

Newsletter subscribers can download all free materials

Types of organizational culture

To understand how culture impacts team performance, we must first take a look at different types of company cultures. Depending on “decision-making” and “reward structure” dimension, there are four types of company cultures:

Each company culture has its strengths and weaknesses which the creators of this theory Jeanne Urich and David Hofferberth describe as “the culture’s unbalanced form”.

1. Creative company culture

This culture is all about self-expression. This means that leaders allow their employees to utilize their creativity, and encourage “out-of-the-box” thinking. This fluid organizational structure is aligned around self-organizing teams and collaborative project groups.

As these companies focus on research and development and professional services, the main goal is to beat the competition by using innovations. Their business owners are not viewed as “traditional” CEOs, but as entrepreneurs and even visionaries.

The unbalanced form of “Creative culture” is the creation of the cult-like environment, which causes employees to feel loyalty to the “deity”, that is, the founder (or the CEO) of the company. The most obvious example is Apple and the personality cult built around Steve Jobs.

2. Collaborative company culture

This type of organizational culture relies heavily on teamwork, consensus and decision-making based on a shared view of desired results.

The main differences between “collaborative” and “creative” companies are that the former value trustworthiness and teamwork above creativity and aggressiveness. Here, the focus is on marketing and customer service as these companies often regard user satisfaction as a success metric.

The unbalanced form of “collaborative culture” can be boiled down to two things: insider clubs and analysis paralysis. Insider clubs create group think, while analysis paralysis, can prolong the decision-making process: not only will it take a lot of time to evaluate alternatives, but there is also a period needed for reaching consensus among some conservative groups.

3. Competitive company culture

For companies that nurture this type of culture, winning is everything. Based on sales and product development, it is the perfect environment for capable and cunning poachers - individual achievements are valued more than teamwork itself.

It is all about succeeding. So companies that cultivate “competitive culture” will rely on tiger teams which are expected to achieve specific goals efficiently. Their leaders are focused on beating the competition and are driven by personal and team achievements.

The unbalanced form of “competitive culture” can be found in companies that want to win at any cost. These companies will turn a blind eye to an occasional crossing of ethical boundaries and will tolerate blurred lines between competing and cheating - all for the sake of results.

As this environment is an excellent breeding ground for the development of sales superstars, it is quite common to find cliques forming around these successful individuals.

4. Controlled company culture

Controlled culture requires order and alignment based on clear data-driven goals and objectives. Often focused on finance or manufacturing, companies that opted for this kind of culture rely heavily on annual business plans and key performance measurements.

Additionally, they use quarterly improvement metrics and benchmarks to determine if the business is heading in the right direction. Finally, company leaders create top-down reporting structure based on the hierarchy.

The unbalanced form of “controlled culture” leads to the creation of the cast-system - a system in which individualism is not welcome so as to maintain order and status quo within the company.

When taken to the extreme, controlled culture transforms into a “Mafia mentality”. CEOs are regarded as top-level Godfathers, whose direction overrules all, including personal morals and convictions.

Effect On Team Performance

Organizational cultures have a different effect on different employees. In our last post, we talked about how business owners often allow recruits to decide if their company culture fits them or not. After all, not all of them can succeed in a fast-paced world of startups.

Similarly, controlled company culture is not for energized and creative people. Different cultures suit various types of teams, and each team can succeed or fail depending on the way things are done within the company.

Creative culture

Creative culture is perfect for smaller tech-industry businesses that rely heavily on agile frameworks. The point is to keep up with world of software (and hardware) development.

This “unconventional” culture tends to use self-managed and remote teams, which require a certain level of autonomy to function properly. Likewise, highly-structured teams have to struggle, as uncertainty and unpredictability will prevent them from reaching desired productivity.

Collaborative culture

A collaborative culture isn’t really for start-ups, but more for scale-ups which strive towards becoming an enterprise. Implementation of this culture implies a larger workforce, as well as the need to keep all employees involved in the process. Companies with collaborative cultures will most likely use matrix management and complex double and triple line reporting structures, so it is no surprise that they will rely on matrix teams.

Matrix teams are considered to be “middle ground” between flexible and rigid teams, as both “extremes” would struggle with the different aspect of collaborative culture. Creative, and flexible teams would be held back by consensus decision-making, while rigid teams would lack clear leadership and straightforward set of rules to rely on.

Competitive culture

Competitive culture is for companies that are focused on individual results first, so encouraging “the team” to handle things may not be the best option. This is one of those cases when using a group instead of a team might be a good idea: There will be a lot of “superstars” competing, so expecting them to collaborate on a common goal would seem unnatural, to say the least.

As team success takes a back seat to individual accomplishments, gelled teams would fail to achieve what leaders of competitive culture companies consider to be a positive result.

Controlled culture

Controlled culture is meant for established enterprises that value highly structured and organized teams, which tend to follow the rules to the letter. Most of the time, they will utilize functional and operational teams as these have proven to provide the most stability to the already rigid culture.

Controlled culture is characterized by excessive bureaucracy and complex management mechanism which prevents creative and independent teams from reaching their full potential. What’s more, this approach will demoralize the creatives, as they will feel trapped without freedom to make decisions.

To conclude

If the company chooses a particular culture and implements it throughout all departments, “natural selection” will soon take its course: employees who feel that organizational culture suits them will stay within the organization. Others will leave on their own accord.

However, if the company allows different cultures to operate in separate departments, it may impact employee performance severely. For example, the HR department has “written communication only” culture. On the other hand, in a marketing department, you can often overhear a loud conversation, discussion, and even laughter.

This “inequality” and “uneven treatment” will most likely cause rivalries among areas, and culminate in outright rebellion if not handled correctly. So, giving each department freedom to choose their own culture is usually NOT a good idea. All employees are equal in the eyes of the company and should be treated as such.

Make Real Work Happen!

Start your trial today, free for 14 days! Onboard your team, plan, collaborate, organize your work, and get paid.

By signing up you are agreeing to the ActiveCollab Terms of Service & Privacy Policy.