One of the stock questions VCs ask when they do a deal, and one that is often not answered well, is "how are you going to scale your culture?"
I have never met a founder who wasn't passionate about the culture they wanted to build at their startup. Some are even guilty of waxing lyrical about it before their product is to market. That's OK. I get it. I've felt the same excitement. Entrepreneurs by nature have boldly rejected the status quo and turgid dealings of the modern corporation. It's in our DNA to do something different, something crazy. Give everyone stock, invert that pyramid, free lunches for everyone, build a new kind of -ocracy. Awesome.
So, you want to establish a culture, you want to build it, scale it, embed it, and be studied by future generations of Ivy League MBAs. Cool. How do you do it?
A: You use the levers available to you. Which, by the way, are different for different size companies. When there are 3 of you, you can go out to pizza every night and get a pretty good fix on culture. When there's 3,000 of you in 15 countries ... well, you're going to want to do something else.
1. The Start-Up: 2 – 50 people
A small band of tightly aligned people, united by a passion and vision, desperate to succeed
- What Makes it Unique: Everyone knows each other, so everything is done as a team and there are few formal processes. You'll never hear "how do I request leave for May?", "check with HR, fill out this form, and have it signed by your department head." No! You walk across the office and ask the CEO. Also, because the product is still evolving, so are roles. There’s not enough scale to specialize or money to hire true vertical experts in every vertical, so people wear multiple hats. This is often called the scrappy band of generalists stage.
- Available Culture Levers: Because of this, the culture is driven by the nerve center of the operation, the founders and the leadership team (which are usually the same). They have the passion, they have the master plan, and they are the lifeblood of the company. Everyone is counting on the founders ability to set the strategy, raise the next round, and keep the company afloat, so everyone is motivated to align to their way of doing things (culture). The leadership team dynamics are the most important piece of the culture at this stage, and are usually held together by friendship. Next come the employees: when you're hiring with limited funds and brand you often take what you can. You screen for technical skills. It's also vital to screen for passion at this stage. Passion is what will keep your company vibrant and get it through. Never hire a very qualified person who is not also super passionate. Lastly, culture is best changed informally: so get he company out of the office, and do the right things while in the office that keep the passion alive. Note that fun does not always equal passion (a mistake I have often seen).
2. The Darling: 51 – 200 people
A growing band of people united by opportunity, often scaling rapidly
- What Makes it Unique: To get past 50 people the company has found a level of success and is now attracting more interest from the market, VCs and talent. It now has the money and the need to start to specialize roles. As the product is much more mature, roles and the strategy are also better defined. The emphasis between tinkering and scaling has tipped toward scaling. The company starts to embed processes in every area because they are useful, but it's still not the heartbeat of the company. Because of the early stage culture of relationships, and the fact that with under 200 people everyone still sorta-knows everyone else, things are done interpersonally. In other words, there is an employee handbook, but you still know the exact right person to go to with your specific question, and it's usually better to just ask. Because you are scaling so fast, the founders and leadership team can't spend the same 1-1 time with people that they used to.
- Available Culture Levers: Companies at this stage focus on hiring, onboarding, and smart right perks. Beef up your hiring process to weed out mercenaries, job hoppers, and startup wannabes (those who love the idea of a startup, but can't deal with the reality). Hiring should still be based on competence, but also cultural alignment now instead of passion. So it's important to articulate what your culture really is, which may be different from what you thought it was or what you wanted it to be. (Which may be a good thing. If it aint broke.) The culture is still set from the top, but there are now many more people shaping it. Concentrate on training the growing manager population to understand and champion the culture, this should be done informally. As a CEO, keep your door open to everyone, but concentrate your efforts on the new culture nodes: heads of new departments and high potentials. Layer committed but under-skilled early employees, and part ways with skilled but misaligned employees.
3. The Company: 201 – 1,000 people
A larger organization that despite its best efforts may be starting to trend toward other companies out there
- What Makes it Unique: Two hundred people is a major tipping point. Up to now inter-personal relationships have been the nerves that have tied the company together, supported by light process. After about 200 people the company is becoming so large that people don’t know each other any more, and it’s growing so fast they can’t keep up with all the new faces even if they wanted to. The light processes that were established previously start to pick up the strain, and may not all be fit for purpose. At this stage faceless policies and process must replace custom human judgment in a multitude of small day-to-day decisions. Culture is created by people and process. When there were 50 people, you could be very selective about your people and culture, but as you get larger, if you don't have a strong fix on your culture and methods, you'll get the same kind of people as everyone else, manage them the same way, and therefore start to trend towards the same culture as everyone else.
- Available Culture Levers: The larger you get the clearer you have to be about what your culture is, and you will have to focus in more and more tightly on the levers you pull. As a startup you could do informal activities, hire the best people, develop everyone, and have consistent mindsets and visions across the company. Now you have to chose (although the more executive engagement have, the more you can do). Will you focus on hiring very specific people in a very expensive, detailed way, or awesome perks that reinforce your vision (how long can you maintain free lunches?). Will you sacrifice growth for your stand on quality people? Where are you prepared to make your stand? At this stage you must ensure all your people processes pull together to reinforce the culture; it's no good hiring great people if they are not onboarded well or are sent to bad managers. The executive team must all be clear on the culture and live it, and the culture must become part of the daily conversation, or it will fade into meaningless posters on the wall. Nobody in a leadership position should be able to say one thing and do another: which is why you must be so clear on what you will tolerate, because your non-negotiables will cost people their jobs. Culture is felt bottom up, but is always driven top down.
4. The Corporation: 1,001+ people
A large company, now with clear divisions, regions and functions
- What Makes it Unique: As the company grows ever larger it must split into manageable chunks, and by 1,000 people you have enough for 5 two-hundred people units. Divisions start to appear and management multiplies. Strong managers of regions and functions become ever more specialized and can become increasingly disconnected from the whole, even becoming CEOs of their own sub-companies. This creates silos, multiplies politics, and establishes sub cultures. The rah-rah rhetoric used to inspire people so well in the early days, can now become divisive: people start to say stuff like "we're the London team, we're much better than the Paris team" or "congratulations on being in sales, the most important part of the company." This becomes even worse when divisions are given special dispensation based on their results or politics: where some rules, unofficially, no longer apply to them, and everyone knows it.
- Available Culture Levers: At this stage you must spend time to reinforce executive alignment through individual and team interventions. Where once you could handle this internally, you may consider finding expert outside advisors to support you. The nodes where the breaks occur are your leaders; they establish silos through self interest, misalignment and/or mismanagement. You should ensure to increase corporate level people initiatives and internal communications that have the highest level engagement (i.e. not run by the comms team in isolation). Ensure all process that touch people are building the culture you want, and continue to use HR as a strategic weapon to fight in areas specific to your strategy and vision, not merely an administrative shield.
What stage are you at? What have you seen work?