Organizational Culture: Schein and Levels of Culture

Culture as a Competitive Advantage

The phrase “Culture eats strategy for breakfast” is attributed to Peter Drucker. Whether or not this is true, the idea remains accurate: even the most brilliant strategy will not be implemented if the organizational culture contradicts it. McKinsey investigated the failures of transformational initiatives: in most cases, they failed not because of strategy errors, but due to cultural resistance.

Edgar Schein (1928–2023) — one of the founders of the field of organizational culture — developed a model that remains the most useful for practical application.

Schein’s Three-Level Model

Schein proposed three levels of organizational culture, differing in their visibility and accessibility to conscious analysis.

Level 1: Artifacts — what is seen, heard, and felt upon entering an organization. Physical space (open office or separate offices?), dress code, language (how do people address each other?), rituals (how are meetings conducted?), stories, symbols. This is the most visible level, but the hardest to interpret: one can see an artifact without understanding its meaning. An open office may mean “we value collaboration” — or it may mean “we don’t have the money for private offices”.

Level 2: Espoused Values — explicitly formulated values, norms, rules, mission. This is what the organization “officially” says about itself: “We put the client first,” “We are innovative,” “We respect diversity.” Espoused values may or may not correspond to real behavior. If the gap is significant — this becomes a source of cynicism and distrust.

Level 3: Basic Underlying Assumptions — unconscious, self-evident beliefs that determine behavior. This is the deepest and most influential level. Basic assumptions — about human nature (are people intrinsically motivated or not?), about power and hierarchy, about risk and mistakes, about time, about the nature of truth. They are rarely explicitly formulated — because they are “taken for granted”.

How Basic Assumptions Work

An example of a basic assumption in action. In Company A: the basic assumption is “mistakes are a sign of incompetence”. This assumption is never discussed — it is simply “obvious”. The result: employees conceal mistakes, do not report problems promptly, do not experiment. The espoused value (“we are innovative”) conflicts with the basic assumption — and the basic assumption wins.

In Company B: the basic assumption is “mistakes are an inevitable part of learning”. The result: open discussion of mistakes, fast remediation, experimentation. The same espousal of innovation — but a completely different reality.

To change culture means to change basic assumptions. This is possible, but very difficult — and that is precisely why most cultural transformations fail.

Diagnosing Organizational Culture

How to “read” an organization’s culture? Schein proposed the method of “clinical ethnography”: structured interviews, group discussions, observation of behavior. Key questions:

— How are decisions made? Who really has a voice? — How do people respond to mistakes? What gets punished and rewarded? — What is valued in the people who get promoted? — What is “forbidden” to discuss publicly? — What stories are told about the company?

Another method: observation during a “crisis”. How does the organization behave in a difficult situation? Crisis exposes the basic assumptions — those that “in peaceful times” are hidden behind artifacts and espoused values.

Culture Typologies

Cameron and Quinn developed the Competing Values Framework with four types of cultures: Clan (family atmosphere, mentoring, collaboration), Adhocracy (innovation, entrepreneurship, risk), Hierarchical (structure, processes, stability), Market (results, competition, achievement). Most organizations are mixtures of these types, with one or two dominating.

No type is “right” by itself — the choice depends on strategy and the market. A startup needs adhocracy; a nuclear power plant needs hierarchy. The problem arises when the cultural type does not correspond to the strategic demand.

Question for reflection: What is your organization’s cultural type according to Cameron-Quinn? Does it correspond to your strategic direction? Where do you see the greatest mismatch between artifacts, espoused values, and basic assumptions?