TL;DR
Startup culture is what sets them apart from corporations and lets them build great products; it’s easy to maintain when the team is small but it does not scale organically
The aim is for everyone to embrace the values that define the company and how things are done, regardless if it was employee 50, 375 or 1000.
You get to choose whether you want to be intentional about how you want it to develop or just roll the dice and see what happens
Values, behaviours and high level of psychological safety are the building blocks of strong company culture
70% startups experience a ‘cultural chasm’ in years 3-4
21% startups fail due to team and culture related reasons
early warning signs to look out for: drop in engagement, motivation, staff attrition, emergence of silos, and things taking longer to ship
To be be intentional about company culture you can: reaffirm your purpose and values, understand the stages of team development, redefine conflict, build psychological safety and a feedback culture to help your team grow
Dividends include: addressing issues related to cultural chasm (above) as well as: attracting the best talent, increased revenue, inspire investor confidence.
Horizontal leadership structure, open communication, flexibility and free-flowing creativity are characteristics of startup culture. Customers and employees being the priority mean startups have being people-focused embedded into their DNA from day 1. That's what lets them build revolutionary products while everyone involved is highly engaged. There is one issue, it doesn't scale organically.
It's relatively easy to maintain strong company culture when you're a team of 20. The challenge is to keep it strong as you grow with new people coming on board and more management layers being added. The aim is for everyone coming through the door to embrace the principles that define you as a company and how things are done, regardless of whether it's employee number 50, 250 or 1000.
You can take the 'let’s roll the dice and see what happens’ approach or be intentional about it by building a strong cultural foundation that can reliably and effectively sustain your company ethos. At the end of the day, it's that culture and what you are about as a company that got you to where you are now. It's worth protecting so it continues to propel you forward.
Piece of brutal honesty / disclaimer
There will be elements of your culture that will not scale. However, it doesn't mean they need to be abandoned. On the contrary, being intentional about cultural transformation ahead of time allows you to evolve them to meet your future needs while maintaining the essence which inspired them in the first place.
What makes a strong culture
A few months ago, I posted the above on LinkedIn asking whether people agreed or disagreed - an insightful discussion ensued. It was a trick question because it isn't one or the other but a balance of the two (think of it as giving someone meaningful feedback that will help them grow, while sipping a free coffee... and sitting in a bean bag).
Culture = values x behaviours is my favourite way of explaining company culture. Values are individual to every organisation and usually are the reflection of the founding team. They inform how things are done, what you screen for in the hiring process and provide a compass that will guide you when things get tough. As for behaviours, it's not just about the easy-to-like ones: tolerance for failure or willingness to experiment but also the tough ones: having difficult conversations, giving and receiving constructive feedback.
A psychologically safe environment where people trust each other, communicate openly and honestly without the fear of being judged, and can transform conflict into collaboration are all building blocks of strong company culture.
Signs your culture might not be as strong as you'd like
70% of startups in years three to four hit a cultural rough patch known as the cultural chasm. It refers to the end of the 'honeymoon' period where long-term employees find the changes from how things were in the early days to how they are now as the company has scaled difficult to accept. It would possibly also explain why 21% of startups fail due to team and culture related reasons.
It's easier to address problems in their infancy, here are some early warning signs to look out for:
Increase in employee attrition
Emergence of silos
Getting things done takes longer
Quality drops / level of service slips
Drop in engagement and motivation
Ineffective meetings
Misalignment values/purpose/team/people
How to be intentional about your culture
Reaffirm your purpose and values
You've probably heard it a million times from investors or mentors at your startup incubator. There are good reasons for it. Not only do purpose and values help inform your decisions and guide you when things get rough, but they are also what people unite around. That's how you built your tribe in the first place. As you set out to scale to build your village, town, and then city, they are equally, if not more, important.
Reaffirming your purpose and values is a great reminder of why you do what you do and helps bring people together. Here is a DIY workshop you can try yourself or get in touch if you want help facilitating it.
Understand the stages of team development
Teams and team dynamics are not static. They change as the company grows, people leave and join, and priorities change. It's helpful to identify where your team(s) is at spot any emerging patterns. You can use Bruce Tuckman's forming, storming, norming, performing or Susan Wheelan's Integrated Model of Group Development (IMGD).
Roles will change, continue supporting people’s growth
Many of a startup's early hires are generalists who can perform many jobs. As the startup scales, more specialists are needed who are really knowledgeable in one or two specific areas.
Review your organisational chart and skills matrix to ensure the best role-person fit and have career path discussions to create coaching and development plans to support people's growth. The guiding principle needs to be having the individuals' best interest at heart. They helped you get where you are now so make them feel looked after.
Also, if your paths are growing apart, it's ok to talk about parting ways. You have been on an incredible journey together so again, make sure the person knows and feels it.
Make people feel safe to speak up, experiment and be creative
Psychological safety is essential to handling change and uncertainty. Understanding what a psychologically safe environment looks and feels like is important. When levels of psychological safety are high, people feel able to bring up ideas, raise concerns and make mistakes. When it's low, people live in fear, hide and do a 'second job'.
As a leader devote time to think about the current environment and your impact on it. Explore what contributes to the sense of safety and how you can strengthen it.
Build a feedback culture to help your team grow
Giving constructive feedback is rarely comfortable or easy for anyone involved, but recognising its role in helping people grow is vital. Culture of feedback is directly linked to the level of psychological safety. To create it, make sure people feel that the feedback is not a reflection of them as a person but an observation of them in a business context.
Reinforce the fact it's ok to disagree as everyone is entitled to their own opinion and that the true purpose of feedback is not to gain agreement but understanding. Gradually build up people's confidence and willingness to give and receive feedback by using structured activities e.g. I appreciate… or principles of giving effective feedback
Redefine conflict
Despite being a natural part of collaboration, conflict is often perceived as something we should avoid at all costs. It could not be further from the truth. Conflict is an accumulation of energy and if you learn how to handle it, turns into fuel that can accelerate your team to the next level.
Help your people understand conflict responses and dynamics, increase their self-awareness in conflict situations, and how to give and receive feedback.
Recognise and help meet people's needs
Everyone in your company has psychological and social needs. If not met, it tends to cause stress and disengagement resulting in the person's and team's performance declining.
Use a modal like FIRO to understand the underlying needs that may motivate a person's behaviours. The aim is to create an environment where team members feel able to meet these needs in their own way.
Dividends
Apart from the benefits already mentioned: reaffirming and staying true to your founding values and purpose, creating a psychologically safe environment where your employees are more engaged, productive and fulfilled, there are three others:
1. it helps attract the most talented people as strong company culture is one of the key requirements for highly skilled workers
2. it's good for the finances - a study of over 200 companies found that strong company culture translates to four times higher revenue
3. it inspires investor confidence as it's a good indicator of stability, consistency and growth potential
Over to you
If the conditions for effective teamwork are not created, people will expend energy on protecting themselves, dealing with avoidable internal politics and conflicts, rather than advancing your company's mission.
Whether you're pre-seed, seed or well into your Series funding, being intentional about your company culture will pay dividends. I know confirming product-market fit, getting customers through the door and investors on board are top of your mind.
The sooner and the more time you can devote to culture initiatives, the more dividends it will pay. Simply put, you want your customers happy, investors satisfied and employees fulfilled. Strong company culture will help you achieve it saving many headaches along the way.