In the early stages, founders juggle a number of activities ranging from raising capital to proof of product-market fit. Coupled with the fact that few founders have experience defining and establishing a culture, it is understandable therefore, that oftentimes corporate culture forms passively.
Regardless, a venture’s culture is likely to be an extension of its founders’ personalities. However, in the absence of a clearly defined culture, a corporate culture may evolve that reflects the way founders address ‘problems’ in the venture’s early stages. This may lead to an unsustainable learned way of solving problems. For example, the inability of Twitter’s corporate culture to evolve with Twitter’s growth led to Dick Costolo stepping down as CEO. Employees and public markets alike questioned Costolo’s vision for Twitter.
A positive culture can result in a 12% increase in productivity and morale, decreased employee attrition (14% low culture vs. 48% high culture) while also enabling improved external relationships; ultimately providing a competitive advantage. Concurrently, the disadvantages of a negative culture are abundant.
3 simple steps to proactively create a corporate culture:
1. Define and Commit to Values
In collaboration with key stakeholders, including co-founders, an entrepreneur should articulate the aspirations of the company, the beliefs and operating philosophies. By definition, the corporate values can be expected to mirror the founders’ strengths and weaknesses.
To effectively weave these beliefs into the corporate DNA, the values need to be institutionalized. Following the articulation of a mission statement, the values and their relevance need to be communicated to all employees. In addition, leaders should be vocal and involved to ensure the values permeate employees’ actions. As the venture grows, values ‘champions’ should be recognized and be responsible for embodying the values. Most importantly however, senior management must ensure they act in accordance to the values at all time. Culture starts at the top and only succeeds if it is consulted at every cross road, of which there are many in a startup. Over time these assumptions and beliefs become learned responses to ‘problems’.
Once the beliefs and values have been defined, the founders need to ensure the appropriate artifacts exist to enable the culture.
Values, and in turn culture, are not necessarily static. Employees at TOMS, the socially responsible accessory manufacturer, used to refer to a “TOMS way of doing things”. However, as TOMS grew, only the original 100 of the 400 employees knew what that meant. Mycoskie, founder, recently invited employees to a committee to rewrite TOMS mission, vision and values.
2. Hire Prudently
The purposeful recruitment of employees should ensure the culture perpetuates. However, recruitment it is not that simple. According to Peter Drucker, 50% of all hiring decisions are mistakes. Moreover, the financial cost of such a mistake is estimated to be 15x the individual’s base salary, in addition to the numerous qualitative implications including missed opportunities and disruption.
Consequently, the likelihood of a candidate’s ability to effectively operate and appreciate the company culture needs to be determined during the recruitment process. SmartGH’s recruiting Scorecard can be particularly useful. The Competencies component of the scorecard explicitly assesses important cultural values and behaviors required for the job.
Furthermore, the implications of hiring mistakes at senior levels are worsened as managers are unlikely to recruit individuals in accordance to the company’s values and culture.
In its infancy, Hsieh (CEO) and Mossler used to interview every job applicant in an attempt to protect Zappos’ culture. Additionally, Jeff Bezos famously stated, “I’d rather interview 50 people and not hire anyone than hire the wrong person”. These actions are infrequently observed in many larger organizations and companies with weakly defined cultures.
3. Fire Categorically
Given the effort required define and implement a corporate culture and recruit effectively, it is imperative that the culture is protected. Toxic employees that degrade the culture should be terminated. The act of firing an individual, particularly one that has failed to grow with the company or that performs well, is not to be underestimated. It is however essential.
A proactive approach to establishing a corporate culture should improve the odds of sustained success. The founders and company should remain flexible to make adjustments to the values as the company evolves. After all, culture is learned!