How Adhocracy Culture Works in a Business Environment

An adhocracy is a type of organization that lacks the formal structure of hierarchical bureaucracies. Rather than focus on organizational hierarchy, adhocracies tend to divide employees into project teams—where people group together by job specialization—or matrix organization—where team members work on multiple overlapping projects. Adhocracies provide a more organic structure than hierarchies that value status over core competencies.

The word adhocracy is a portmanteau of “ad hoc,” which means "for the purpose" in Latin, and the suffix “-cracy,” which means "to govern" in ancient Greek. The term is credited to American organizational consultant Warren Bennis, who used it in his 1968 book The Temporary Society. It gained greater cultural currency via inclusion in 1970's Future Shock by Alvin Toffler. Famous organizations like the Xerox Palo Alto Research Center and the National Aeronautics and Space Administration (NASA) have spent part of their history organized as adhocracies.

An adhocracy culture has notable characteristics that distinguish it from other business models. They include:

• Decentralized authority: Adhocracies bestow power onto project teams and give them the power to change course without needing to navigate layers of bureaucratic approval.
• Focus on skills rather than formal training: Workers in an adhocracy may not undergo the same formal training required in other organizational structures. This lack of formalization does not indicate a lack of competent skill. Rather, adhocracy workers tend to be valued for their abilities more than their certifications.
• Minimal standardization: Adhocracies rarely have standard procedures that apply to all sectors of the company. Each project team or matrix organization enjoys a great deal of autonomy.
• Adaptive flexibility: By keeping bureaucratic administration to a minimum, adhocracies empower project teams to quickly pivot to new initiatives and exercise their own judgment when solving problems.

The best examples of adhocracy can engender the following benefits:

1. 1. Nimble corporate culture: Adhocracies can quickly adjust to new market conditions and change strategy in relatively short time.
2. 2. Employee empowerment: The best adhocracies promote meritocracy, where team members are rewarded for their skill and effort rather than for their seniority or job title. For this reason, adhocratic culture can foster professional development in ways that a traditional corporate structure cannot.
3. 3. Cross-specialization: Adhocracy employees tend to lack formal job descriptions. This enables them to jump to different project teams and contribute in ways that are unique to their own personal skill set.

Despite certain advantages of adhocracy culture, businesses rarely operate as adhocracies. Here are some reasons why:

1. 1. Difficult to establish a unified culture: With different project teams acting semi-autonomously, it can be hard to unite all company stakeholders toward a common mission statement, core values, and code of conduct. Over time, this lack of a unified company culture can produce a high risk to a human resources department.
2. 2. Insufficient supervision: In a top-down hierarchy, team leaders have to report up the corporate ladder, apprising senior leadership of all activities and progress. In an adhocracy, there are few corporate reporting mechanisms, and project teams may find themselves out of sync on shared objectives.
3. 3. High cost of communication: Adhocracies do not foster natural communication channels. The lack of a hierarchical structure can leave employees in the dark about what is happening in other sectors of the company. To combat this, some companies use a bureaucracy-adhocracy hybrid that is sometimes called a bureau-adhocracy. This business model combines the organizational standards of a bureaucracy with the adaptability and empowering nature of an adhocracy.

In order to learn how to improve your company’s current culture, it’s useful to understand the four types of organizational cultures, as laid out by business professors Robert E. Quinn and Kim S. Cameron of the University of Michigan:

1. 1. Hierarchy culture: The most traditional organizational culture of the four types, hierarchy cultures value organizational structure and control with an emphasis on efficiency, uniformity, and the practice of strict procedures. They also boast a clear chain of command that separates employees from leadership. While there is less room for creativity, a hierarchy culture enjoys clear direction with well-defined objectives.
2. 2. Clan culture: Organizations that have a clan culture prioritize collaboration. Clan cultures focus on creating a close-knit, “one big family”-style work environment where teamwork is valued and flexibility and discretion are key. Clan culture is often found in small companies and startups. While it can be difficult to maintain this type of culture as an organization grows, companies that encourage a clan culture often enjoy strong employee engagement and an adaptable environment.
3. 3. Market culture: The market culture is goal-oriented with a primary focus on profitability. Its leaders are demanding of their employees, and they prize the success of the company over internal satisfaction. Due to every aspect of a market culture being driven by numbers and tied to the bottom line, employees may find it difficult to engage meaningfully with their work. However, this type of culture may come with stability and can lead to success and profitability.
4. 4. Adhocracy: The adhocracy culture encourages risk-taking and experimentation. This type of culture is valued by cutting-edge companies that hope to develop the next big innovation. It emphasizes the importance of individual freedom among employees and differentiation in the market. The tech industry typically values adhocracy culture, as tech companies often focus on innovation. While this culture can foster competition among employees, it may also encourage creativity and increase motivation.

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