The Culture You Want or the Culture You Get?

Originally posted by Joaquin on Orrick's Total Access blog

If corporations were, in fact, people, culture would be the personality. Culture is what it’s like to interact with an organization. Whether you’re an employee, customer, investor, partner or press, you’re exposed to the organization’s culture in each of your interactions with the entity.

Cargo Cults

As a consultant that helps startups understand how to scale their culture as they experience high growth, one of the biggest problems I’ve come across is the concept of culture hacking. In my experience, culture hacking almost always creates cargo cults. After World War II, the indigenous people on some Pacific Islands that had been occupied by Japanese and then American forces started performing rituals depicting the behaviors of military airmen in the hope that they were magic incantations that would bring gifts from the sky. They would perform parade ground drills with wooden rifles, or man makeshift air traffic control towers while wearing headphones carved of wood. They had seen the military men do these things just before cargo fell from the sky; to them, it made sense that these were magic gesticulations, so they mimicked them, trusting they would please the gods and be given cargo.

When I see companies in search of “culture hacks” hoping they’ll find a magic incantation that will make their company the next Google, I immediately think of these Pacific Island cargo cults. What most companies don’t understand is that these practices follow thoughtful plans, and the collection of practices the best companies enact all reinforce one another. If your company adopts them piecemeal, without a plan, you’ll get the cultural equivalent of Dr. Frankenstein’s monster while hoping for Prince Charming to drop from the sky (#AwesomeMixedMetaphor).

A Cultural Blueprint

If you ask about culture at most startups you’ll be directed to a ping pong table, kegerator, or pictures of drunken karaoke. While these cultural artifacts give hints as to what the culture is, they are simply that: artifacts. Some, more sophisticated, companies may point to a set of values hanging on the wall. While values are important, they are simply a blueprint. Sticking with that metaphor, let’s think about what it might be like to build an actual building. Though I’m no architect, I’m pretty sure the first thing I’d do would be to get a team together made up of the most important stakeholders and decide what the structure is meant for. I’d ask them to talk about their vision for the building to unearth their hopes and to make explicit their assumptions about what would make for a successful build. This process would lead to the creation of a blueprint. At this point, however, if you were to hang the blueprint on the wall and call it a building, people would laugh at you; the same goes for hanging your values on the wall and calling them culture. Those values, informed by assumptions, are simply a framework, just like the blueprint. That blueprint should inform policies and procedures that make the values come alive. Artifacts, policy, process, values and the assumptions that underlay them mix together with leader personalities and the employees an organization hires to create culture.

So what are these cultural assumptions, and how do you figure them out? You can start by figuring out your answer to the question: “How do we win the market we’ve chosen to compete in?” These assumptions are similar to the ones that underlie your business’s vision — though most organizations are much more rigorous about unearthing the assumptions underlying their vision than the ones underlying culture. Just as vision leads to a strategic plan, cultural assumptions lead to a set of values. Like a strategic plan leads to tactics, values lead to policies and procedures that enact your values.

Assumptions, Values, and Behavior in Practice

Take SumAll, for example. SumAll is a connected data company. Their customers trust them with real-time access to their most sensitive business data. One assumption SumAll has made is that customers won’t trust them with this data unless they are seen as a trustworthy company. Based on that assumption, one of the values the team adopted encompasses trustworthiness. Thus, from the vision comes a plan. Following from this value, SumAll created policies and procedures intended to encourage the company to operate in a trustworthy fashion; this includes an open cap table, simulcasting board meetings to employees, and fully transparent salary structures. These policies and procedures are the tactics that enact a cultural strategic plan.

If you want to shape culture, start by unearthing assumptions, distilling values and creating norms through policy and process. Is a collaborative sales team the key to winning your market? Maybe you want to get rid of your individual commission structure and create a team incentive instead. Do you want your engineers to focus on customer needs? What if you did something crazy like pay engineers a commission on sales? Want to build a culture that learns from its mistakes? Try blame-free retrospectives like Etsy. Want to create a culture of serendipity? Try what Steve Jobs did at Pixar and move all the mailboxes, food and restrooms into one central place and create serendipity. Don’t just pick and choose from these techniques, however, or you run the risk of creating a cargo cult. Align everything you do with your values to create a strong culture.

What You Want or What You Get

Whether you reap the culture you want through hard work, sowing the seeds of success and tediously pulling weeds, or you end up with a potluck style culture that evolves naturally from your whims, one thing is clear: your company is going to have a culture. Your choice is whether or not to take an active role in shaping it. When making that choice, keep in mind that your strategies and products can and will be copied by a fast follower. Your culture will ultimately be what differentiates your company and decides your fate.

MODes: Model for Organization Design

What is organization design?
Organization design is the pattern of relationships and procedures that define how an organization functions. When thinking about organization design, there are two aspects to concentrate on: the architecture, which formally defines authority and the division of labor (often represented by an org chart); and operational processes, which define how shit gets done (often called Standard Operating Procedures or SOPs).

Formal vs. Informal Design
Formal architecture comes from a need for clarity around decision making, roles, responsibility, and authority; creating too much formality in the architecture can lead to less flexibility and a reliance on titles and positional power, as opposed to ideas and knowledge, in decision making. The need for clarity around problem solving, collaboration, and communication leads to formal operational processes which can reduce ambiguity and create more predictable results. Operational processes that are too formal, however, can erect barriers to creativity, create bureaucracy, and lead to less coordination across the organization.

A Model for Organization Design (MODes)
Crossing (standardized and ad hoc) process with (static and fluid) architecture creates a grid of four MODes of organizations I’ve named the Hive, the Forest, the Fractal, and the Sandbox. Curious where your organization fits in? Take this assessment.

Organization Design for Startups
Startups begin in the sandbox. As they grow and feel the need for more structure, they often formalize their architecture instead of clarifying their process; by creating titles and reporting structures in the hopes of clarifying how shit gets done, they move towards the forest. While their need is greater clarity with regards to decision making, role authority, and responsibilities, they create titles titles and reporting structures in the hope that architecture will clarify process. This is a mistake and leads to prematurely hierarchical organizations.

An alternative is to do what we did at SumAll. Instead of moving toward the forest, move toward the fractal: clarify processes while keeping the architecture lightweight. You can achieve this by clearly delineating individual authority, roles, and responsibilities without assigning titles or creating reporting relationships. In this way processes help structure how work gets done while the architecture remains fairly fluid. Fractal designs keep organizations relatively flat and free of artificial power structures. Creating a flatter organization empowers people throughout the organization to make decisions based on their expertise, experience, and the strength of their ideas, not their hierarchical position.

Organization Design at Scale
The question is, can an organization remain a fractal at scale? That really depends on the culture and management. If the organization cannot, the best way to manage a more complex system of relationships is to move to the hive, by creating clear lines of authority. Managing complexity through static architecture, however, means less flexibility. The trick is to layer on as little formal architecture as possible while supporting it with operational processes that make it easier to coordinate and collaborate. The danger with operational processes, of course, is the creation of bureaucratic procedures that inhibit coordination and collaboration. At each stage of growth you have to determine the minimal structural requirements necessary to manage your organization’s complexity.

That Isn't a Bug, It’s a Feature

I had a really interesting conversation about culture the other day with a successful CEO in the NY tech community. We were talking about the difficulty certain companies might have in recruiting because of their culture.

For instance, SumAll exposes your salary to everyone in the organization. This is all about creating a radically transparent culture. NBC News asked a bunch of NYers how they’d feel about this policy and many, if not the majority, said they wouldn’t want to work for a company that was structured that way.. Turns out, those people wouldn’t be a good cultural fit.

Imagine an organization that said teamwork was their highest value and were building a culture that supported teamwork. That organization might decide to have a large part of sales commission to be team based, and a smaller part based on individual contribution. That would make total sense for the culture. It would also mean you would miss out on hiring many talented salespeople. And that’s okay. Culture is more important than any one sales person. Hiring that superstar individual contributor might be the start of cultural decay.

That isn't a bug of culture, it’s a feature.

Why You Should Run People Operations Like a Business

Help People Understand the Value
One thing I’ve learned over the last few years working with startups is that those of us working in People Operations have to integrate with the core business functions better than we currently do. That means understanding the entire business, not just the people side, and learning how to communicate our value better. I’ve been chewing on this for quite some time and I’m starting to create a thesis. We need to use the same metrics our businesses do to track our success. I’ve mainly  been working with SaaS companies and SaaS metrics fit nicely onto People Ops work, so I’ve started to talk about tracking the work I do in the same way.

The organization’s employees are the customers of People Ops, which, in turn, is a service provider. People Ops should be concerned with the same things the business is concerned with: acquisition, retention, and engagement.

Measure Your Impact
The products People Ops sells are culture, structure, opportunity, and the benefits of working at an organization. The customer, in this case that’s the employees, pay for the product with their labor. Google employees (the customers of their People Ops function) have a yearly ARPU of $1,000,000, with an average COGS of $800,000 for a net profit of $200,000 per customer per year. To manage the bottom line, People Ops has to function like a finance department and track CAC, LTV, COGS, and ARPU. People Ops is a high touch service and revenue comes from high prices on a low volume of transactions. However, in organizations where employees are both the biggest asset and cost, People Ops is no luxury; we are a necessity to remain competitive and drive real business value.

Create Negative Churn and Expansion Revenue
Above all, People Ops should be obsessed with churn. Specifically, finding ways of creating negative churn. Your People Ops group should closely track why customers (the employees) churn (quit), which customers are about to churn, and upsell like crazy to create negative churn (by increasing employee and organizational capability, the People Ops version of expansion revenue). The upsell is where we excel. We create culture, structure, and systems that enable innovation, communication, and engagement, and we also promote and develop employees. These activities can vastly increase our current customers’ LTV (by enhancing the value of their labor), to create expansion revenue from existing customers and, thus, negative churn. Some churn is desirable though, because certain customers will have very low or even net-negative value. People Ops has to identify these customers and help them churn to avoid misallocating resources.

This type of thinking leads you to see employee engagement as a way to build community (similar to the way you’re desperately trying to create a community for your SaaS product) and People Ops has to function like marketing. Onboarding new employees becomes just as important as onboarding new customers and partners, so People Ops functions as business development. Organizational structure is like the UI and organization design is like coding the front end, while culture has clear parallels to UX; in this way, the People Ops function is also responsible for design, engineering, and product management.

Love the Problem, Not the Solution
The last thought I’ll leave you with today is that, just like any entrepreneur, you’ve got to be obsessed with the problem you’re solving, not the solution. Understanding the organization’s values is like knowing your business’s value proposition.  It’s your elevator pitch and your guiding star. You have to understand the problem you are solving so you can build solutions. The values define the problem you are solving because they define your culture, and in the end that is in large part the service you are providing your customers. Trying to make culture haphazardly without the focus of values is like building a product out of cool stuff you’ve heard about from other services. Drag-and-drop upload here, share button there, connection-to-a-shopping-cart API here – you end up with a franken-product driven by solutions to an unknown problem your customer probably doesn’t even have. Policies (20% time, free lunch, etc.) are the services People Ops provides to our customers in order to fulfill our value proposition. These are the solutions that have been created to enact and live the values, the problem we are solving. Be obsessed with the problem, not the solutions. Experiment and learn and pivot with respect to the solutions. Measure relentlessly. Use cohort analysis to figure out how you’re doing. Pursue the problem doggedly.

Simply put, run People Ops like a business.

If you're currently running People Ops at a startup and would like to join a Venwise pod, you're in luck: I'm putting together a group right now. If you'd like to apply for one of the open slots (there are only 10 right now), email me here and tell me a little about your company and your role.

Making the CEO role a little less lonely…

This week Alyson Shontell of Business Insider published a great article about the loneliness of being a sole founder. She interviewed a good friend, Venwise member, and founder of SinglePlatform, Wiley Cerilli.

Wiley referenced 4 pieces of advice to sole founders:

1. Find your purpose,
2. Find a support group (Thanks for the shout out!),
3. Celebrate your wins before moving on to the next milestone, and
4. Focus on company culture.

Alyson and Wiley did a nice job capturing some critical pieces to focus on - especially as you consider the notion that being a CEO, not to mention a sole-founder, can be a lonely job. Who can we bounce ideas around with? Who can we brainstorm with? How can we avoid the pitfalls others in our spot have faced? How can we discover what works best for building team culture? What does "culture" even mean?

As a sole founder in a startup it’s really easy to feel lonely, but we ultimately have control over how “lonely” we are....The startup community is filled with amazing entrepreneurs and resources. The thing is that we have to open up and expose ourselves to fill the empty spots.  There are a lot of people who can give that to you, but you need to find a mechanism to trust them with your secrets.  One way or another, there are others in the same boat who have already or are experiencing similar pains and challenges scaling businesses. Wiley was a master of seeking out those resources. He is a model for what it takes to escape the loneliness of being a sole founder by being clear on what he wanted to achieve, how he was going to do it, and finding the right people to learn from.

Learning from your peers can be a powerful experience. We structure Venwise to focus on just that. We believe that the most effective way to structure a "peer learning" experience is to:

• Build a network of peers that include folks with a variety of different experiences and skill sets,
• Identify and learn from best practices,
• Understand the type of organization you have and implement best practices accordingly,
• Get feedback from others on specific initiatives you are undertaking at your company.

Just some food for thought - you are never alone when building a startup tech company. It's an awesome world to be a part of and there is a lot of support for you. You just have to know where to look for it.