Clinical directorate service structures (CDs) have been widely implemented in acute settings in the belief that they will enhance efficiency and patient care by bringing teams together and involving clinicians in management. We argue that the achievement of such goals depends not only on changing its formalized structural arrangements but also the culture of the organisation concerned. We conducted comparative observational studies and questionnaire surveys of two large Australian teaching hospitals similar in size, role and CD structure. Martin's conceptualization of culture in terms of integration, differentiation and fragmentation was applied in the analysis of the data. The ethnographic work revealed that compared to Metropolitan Hospital, Royal Hospital was better supported and more favourably viewed by its staff across six categories identified in both settings: leadership, structure, communication, change, finance and human resource management. Royal staff were more optimistic about their organisation's ability to meet future challenges. The surveys revealed that both staff groups preferred CD to traditional structures and shared some favourable and critical views of them. However Royal staff were significantly more positive, reporting many more benefits from CDs e.g. improved working relations, greater accountability and efficiency, better cost management, more devolvement of management to clinicians and a hospital more strategically placed and patient focused. Metropolitan staff were more likely to claim that CDs failed to solve problems and created a range of others including disunity and poor working relationships. There was greater consensus of views among Royal staff and more fragmentation at Metropolitan where both intensely held and uncertain attitudes were more common. The outcomes of implementing CDs in these two similar organisations differed considerably indicating the need to address cultural issues when introducing structural change. Martin's framework provides a useful antidote to researchers' tendency to focus at only one level of culture.