Why Developing Company Culture is Critical to Your Success
You’ve probably read the post from the successful CEO that talks about their mistakes early in building their company.
Here’s a great one from Anand Sanwal, CEO of CBinsights, titled "54 mistakes of a Startup CEO."
In almost every one of these posts there is something about mistakes developing their company culture. For Anand it's his number 1 mistake.
At some point along the way, whether it was their 4th hire or their 400th, they recognize that the culture they had always imagined wasn’t going to happen without deliberate effort put forth by the leadership team. Your company’s culture is intentional.
Last week, during an episode of our podcast, Scaling with Data, I sat down with Ty Hagler, founder and CEO of Trig Innovation.
Like most of my conversations-turned-podcasts, I have a handful of questions I intend to ask but mostly I don’t have a theme until one starts to unfold naturally. In this conversation, the theme quickly shifted to developing a strong company culture.
I find this topic interesting because you’ll hear a lot about how you need to be deliberate about your culture but you don’t hear a lot about what that entails, what tools people use, what processes they have in place, how they screen for the right teammates, how they manage them once they’ve built the team, and how they keep everyone driving toward a common goal.
Since there’s a lot in there, I’ve split this into two posts: Why Developing Company Culture is Critical to Your Success and How to Improve Company Culture with the EOS Model
Very Big, Small Giants
Much of Ty’s inspiration for focusing on company culture in 2018 stems from rapidly growing his team over the last few months and his recent reading of Bo Burlingham’s book, Small Giants. Small Giants is a book, but more importantly, it’s a community of like-minded business owners who value culture and values first, growth second.
Small Giants love what they do because they solve a problem they experienced in their own lives, they focus on creating a phenomenal product or service over growing for the sake of growth, and they build a culture of commitment, which I will dive into in a moment.
Investing in Growth vs Investing in Value
Of Burlingham’s Small Giants, only 4 out of 14 he discusses have funding from outside investors, which in many ways insinuates external investment does not breed “Small Giants” since investors make money on growth, not necessarily profits. I am certainly biased since we work with private market investors and companies with outside funding, but this is where I disagree with Burlingham. I would argue that many of the companies who have created the best outcomes for investors are, in fact, “Small Giants” who maintained that principle-based culture throughout their hockey stick journey to the top. Often it means finding the right investors who recognize the value in the Small Giant philosophy, so it’s a rare combination, but history has proven these two things are not mutually exclusive. Zappos, Buffer, and in many ways, Google, are just a few examples.
While I was reading Small Giants, something that stuck out to me was that employees in these businesses do not feel like a cog in a machine - they feel purpose, they’re proud to do their work each day, they’re accountable for key tasks, and they’re empowered to take on leadership roles. Small Giants have soul.
The entire company is intrinsically motivated to do well at what it does, not just to make as much money as possible. The owners set it up to do something they care about. The people they hired also care about that.
So obviously building a Small Giant is a good thing, but how do you intentionally build this type of commitment culture? What is a commitment culture?
What is a Commitment Culture?
This is a culture where management focuses on building trust and attachment to the company. You don’t necessarily hire the most intelligent, highest achieving individuals, but the ones who fit the company vision and the existing team. Hire empathetic people who also believe in your purpose and mission.
In 1994, Stanford Business School professors James Baron and Michael Hannan studied nearly 200 Silicon Valley startups in an attempt to understand more about the relationship between company culture and profit. Of the 5 different cultures they identified, none of the companies they labeled commitment cultures went bankrupt, they were the fastest to IPO, and they maintained the highest profitability ratios of all others after going public.
Building a Commitment Culture
Leaders who want to build a commitment culture hire driven, high-quality specialists that share the company’s passion, values, and principles. A helpful by-product of this type of employee is that they typically take less managing, which means they require fewer middle-managers, which means you spend significantly less on building out those middle-management teams.
You’re probably back to asking how this is actually accomplished. The answer for both Ty and our team at Malartu is through the Entrepreneurs Operating System (EOS), a derivative system from another great book, Traction, by Gino Wickman.
Bridging Culture and Data
In the early days, after Ty had hired his first employee, they didn’t really have a “culture” in the sense I’ve been describing. He would meet with his employee, they would talk about issues face-to-face, come up with solutions and move on. By the third employee everyone is having these conversations but there’s no intentionality. No structure. Anand has the same story. I'd wager most CEO's have the same story.
A few months following the 4th hire Ty realized they needed to add some structure to their operation. He recognized he was creating a culture deficit, that if neglected, was going to create one ugly monster as they continued to grow.
The key message to the book traction and the premise of EOS is this:
But that’s not all. It’s also essential to have the right people in the right places, track data, streamline processes, and account for any potential issues in your business.
You have to create and implement a deliberate system to build a commitment culture, or any culture for that matter.