Culture change is what failing businesses need - right? Wrong! If you’re the leader of a successful start-up or scale-up you won’t sustain your growth unless you change your culture. Why? Read on to find out…
Before we begin, a quick recap..
If you’ve read this blog, you’ll know that at The Pioneers we think company culture is a set of standards (be they assumptions, beliefs, models, norms, values, behaviours or shared ways of working) that your company learns and adopts over time as you work out how to engage successfully with the outside world and how to work together as a team.
Company culture is therefore situational — it develops in response to a company’s unique history, its vision for the future and the particular challenges it encounters along the way.
As your situation changes, your culture needs to evolve.
Instinctively we all recognise this fact. We all appreciate that you can’t run a company of 1,000 people in the same way as a company of 10.
When you’re a small start-up, you can change the way you work at the drop of a hat. Everyone’s passionate about making the company a success, everyone’s keen to experiment and culturally, there’s no ‘sunk cost’ — no one’s wedded to a particular way of working, cultural trait or value. Nothing’s set in stone and everyone knows what’s going on in everyone else’s heads. As you try to find that elusive product/market fit everyone can (and has to) be nimble, flexible and responsive.
But if you tried to run a company of 1,000 people like this, it would grind to a halt. People would find it disorientating and chaotic and it would be impossible for people to get anything done. The reverse is also true, if you put the processes and structure you need to get 1,000 people working effectively into a start-up, it would kill it stone dead.
The culture of every company is (and should be) unique. But for every growing company there are transition points where the culture that got you to that point, won’t take you through the next phase of growth.
At these inflexion points, you have to re-engineer aspects of your culture if you want to continue to grow successfully and sustainably. These transition points don’t come clearly sign posted, but Reid Hoffman has identified five stages that, in his experience, provide a useful rule of thumb for identifying when growing companies need to undertake significant cultural change.
The rationale behind Hoffman’s model is that adding more people to your company makes it more difficult to manage. The transitions from family to tribe to village etc, reflect natural breaking points in the growth of an organisation where the increase in social complexity either prevents you from growing any further or forces you to fundamentally change your approach to leadership and management. It’s at these transition points that companies need to re-engineer their peopleOS.
Adding people to your company creates social complexity and you’ll find there are breaking points in your growth when the culture that got you there won’t take you any further.
It’s at these transition points that you have to re-engineer your people operating system if you want to grow further.
First and foremost – well done on creating an awesome culture. It’s not easy and it’s definitely something to be proud of.
Secondly, you don’t need to worry about fundamentally re-engineering your culture unless you plan to go through a ‘people stage’ (or you’re contemplating a strategic pivot, new business model or entering a new market). If you’re staying within a people stage and a commercial model you know works, then you might want to optimise components of your people operating system, but you don’t need to redesign it.
Well not quite. Real life obviously doesn’t play out in neat factors of 10, so the challenge for leaders of rapid growth companies is knowing when it’s time to think about re-engineering their people operating system.
The first thing to say is that you shouldn’t be trying to fundamentally change your culture every time you encounter a ‘people problem’. Most of the time the right thing to do is to make small iterative improvements or tweaks. Sometimes the right thing to do is to ignore it completely and just let the fires burn so you can prioritise other areas. Unfortunately for the culture conscious leader, trying to re-engineer your whole approach to people management when it’s not necessary, is as likely to damage your company as failing to change your culture when it is.
Hoffman’s model is a useful guide to these likely inflexion points, but it’s worth noting that the more complexity you add to your business — for example, if you operate across multiple locations or countries, or if you have more than one market, product line or business unit — the more likely it is that these transition points will arrive sooner. A company of 75 working across 3 countries will almost certainly need to change its peopleOS sooner than if it only operated in a single location.
Most of the advice for scale-up leaders is framed around “how to protect your culture as you grow”, but when you’re scaling your company, this is a dangerous mindset to fall into.
The risk with taking this perspective is that it implies your culture can only get worse with growth – that you’ve already passed your cultural peak. This isn’t true. Bringing new people into your organisation is an opportunity to make your culture richer and more vibrant and scaling your business creates opportunities to do things for your people that you couldn’t even contemplate when you were a start-up.
Bringing new people into your company is an opportunity to make your culture richer and more vibrant.
Scaling your business creates opportunities to do things for your people that you couldn’t even contemplate doing when you were a start-up.
Growing companies that fall prey to the “protect your culture” advice, end up treating their culture like it’s some sort of saintly relic. They look to enshrine their values and start to detach them from the grubby day-to-day concerns of business operations. Culture becomes something that gets talked about at away-days, where people are encouraged to talk endlessly and passionately about ‘how we can live our values’. Then they get back to the office the next day and carry on as before.
The antagonism that develops between the values on the wall and the behaviours actually needed to get work out the door is a sign of a failing company. When your best employees experience this dissonance they’ll disengage and leave. Your customers will notice and your business will soon start to suffer.
It’s true that at every transition point, there are elements of your culture you’ll want to protect. You want to stay true to your history and identity. You shouldn’t abandon your values, organisational personality or brand (at least not without a very good reason). You might think of these things as your cultural DNA — the way you express them may change as you grow, but the strand of DNA itself should remain largely in tact. After all, you’re looking to grow the company, not create a new one.
Furthermore, there are aspects of your culture that should act as a hedge against some of the risks of rapid growth. If you’re not promoting diversity and inclusion; if you don’t have strong values, clear decision making frameworks and robust feedback mechanisms then adding more people increases the likelihood that people will behave unethically, selfishly or go completely awry. Investing in these things might not drive an immediate commercial return, but it will prevent a catastrophic cultural failure.
But culture change in a growing company, is more offence than defence. When you scale a company, more changes in how you operate than stays the same. You should celebrate this. It’s a positive thing. It’s a chance for you to be creative and innovative. A chance to invest in your people. A chance to develop a culture that’s loved by your employees, your customers and your investors.