Will your first employee kill your startup culture?

As an entrepreneur you create. And your fellow entrepreneurs are creative and dynamic like yourself. You dare to take risks, to experiment, to fail, you adapt and grow and learn. To create is to change and to learn… and you’re so busy doing this in your garage that the last thing you realize is – that you have created a startup culture.

Startup culture? Whoa. Do start-ups with 2 or 3 entrepreneurs have an actual “corporate culture”? Yes, they do. Anywhere where 2 or more people collaborate, leadership and culture emerge… Culture is simply stated “the way we do things around here”.

Collective behaviors evolve, shaped by unconscious shared beliefs. It may become the norm to work late and order pizzas. You could start to share the habit of challenging everything to improve yourself and ask “What if…” all the time.

No-one ever takes anything for granted, resulting in fruitful but sometimes endless debates. Everyone respects their freedom; never asking the others why the market research is not done yet or why they solve problems in the bathroom.

What counts is that they do solve the problems: innovation, creation and an entrepreneurial spirit count. You unconsciously agree that one of you takes the lead in contacting prospective clients. There’s another who always fixes the bugs and you never interrupt him when he is in thinking mode. You’re not aware anymore that experiments are never disputed. You take for granted that the market can’t wait to buy your product… The culture develops, alongside your start-up, without you even realising it.

Competing Values: growing pains

After extensive research into the way values are shaped in companies, professors Kim Cameron and Robert Quinn from the University of Michigan developed the ‘Competing Values Framework’.

Phase I: The Adhocracy

They came up with four archetypes of culture that emerge when people work together. The one you’re in with your startup in the garage is the phase of Adhocracy culture. Nothing is fixed or standardized or planned for. Entrepreneurship is ad hoc: doing things, trying, improvising. Flexibility and an external focus are vital.

But as you grow as a company, you’ll start to encounter growing pains. It’s a good thing, because it means you’ve been lucky and successful, but it hurts nevertheless. You need to find bigger, decent office space. Your customers want higher volumes or better after sales service. Your venture capitalist wants to see the numbers. You need a call center to help clients or a sales force to sell. You have to collaborate with a lawyer to negotiate a contract with your supplier. And you need coworkers. It’s time to hire the first employee(s).

You don’t need another wizz kid inventing technical solutions or questioning the product basics. You need a nice receptionist, you want call center people who are pleasant on the phone, persuasive sales people, a few technical guys to scale up the production volumes.

You need to organize who does what; you need to focus on the internal organization. Your staff need to be flexible (you don’t have time to write job descriptions or pension plans) and they have to collaborate, participate, commit to your little start-up company.

Phase II: The Clan Culture

They need to be people-oriented and friendly. You don’t need stubborn, entrepreneurial, individualist inventors like yourself this time. And without you even realising it, your organization shifts to the people-oriented Clan Culture, whether you like it or not. Collaboration is the new game. And chances are, you don’t like it one bit. You don’t care about the nuisance of managing and coaching people: counting sick-days and days-off, dividing perks, having meetings etc. So here’s the challenge: will your start-up die when you hire the first employee?

Not if you adjust. You may have hired some managers for your staff – or you may have developed into a great leader yourself. If you role model the right behaviors and consciously shape culture by showing “the way we do things around here”, your start-up might survive and even grow. That’s a real challenge.

“Do I have to spell everything out?” (Actually: yes!)

Culture will probably be the last thing you want to think about. You’ve just left the garage. The product is out on the market. You’re relieved that you’ve hired a receptionist and a sales person. Let them do their jobs, so you can do yours. You don’t have time to think about core values, beliefs and key behaviors that will make a difference. Do you have to spell everything out? Yes. You do.

You have to show your employees which competing value counts most. Which one will you pick:

  • Profit over people?
  • People over procedures?
  • Product innovation over procedures?

And you have to walk your talk. If you want to stay customer-focused and innovative, stimulate your receptionist and sales person to be market-oriented and improvise. Don’t castigate them if they sacrificed an agreement to satisfy a customer. Don’t compliment them if they were penny-wise but pound-foolish. You have to consciously install the right behaviors in your team. If you’re conscious about culture, you shape culture before it shapes you. Culture eventually directs automatic behaviors and habits in a team and directs organizational performance.

If you start to build culture in your small team, it will attract like-minded people and you can successfully grow….That’s what Apple’s Steve Jobs did, and Richard Branson, but also Eckart Wintzen when he started out.

Phase III: Hierarchy Culture (it’s when you hire that Six Sigma guy)

Your organization grows even further and one fine day you count 100 staff. It’s impossible to organize flexibly anymore. You need procedures to keep track of things – even though you would like to keep it entrepreneurial and flexible. What happens next, depends on whether you consciously created your company’s culture or not. If you did, you can keep a lot of the early dynamics while focusing just a little more on efficiency and control.

If you didn’t pay attention to culture, the natural shift is toward the process-oriented Hierarchy culture. Which department is doing what? Who signed for approval? Why are supplies late? How come clients have to wait for shipping? You need reliability, timeliness, efficiency.

No one notices the forgotten supplies in the back of the warehouse if you don’t keep an inventory database. You’re too big to keep it under control all by yourself. You’re ready for checks and balances. The game shifts to control.

This can be a very painful transition – from flexibility with a bunch of people toward formalized stability. Growing pains again. We need a signature for approval – instead of a smile as in “I trust you, John”. Procedures prevail over persons. Suddenly, you’re happy to hire an accountant. You start to value your administration guys who check numbers in details. You like timely department reports and smooth quality procedures. You hire a Lean Six Sigma guy and he saves you money – just like you need to in this process-oriented phase of Hierarchy culture.

Phase IV: Market culture (time to be lean and mean again)

Great. Sitting in your office on the top floor, you hear the organization buzzing and busying itself beneath you. But looking at your dashboard, you see the profit margin go down after a while. You receive customer complaints. From your glass skybox, you see competitors gain terrain. Meetings become endless. People hide behind signatures – waiting for the other department – keeping a low profile themselves. But wait a minute.

Isn’t it time we shortened our time to market? What’s R&D doing anyway? The product needs to be updated or it will be outdated. You’ve been busy with the internal organization for too long – and it’s time to look outside again, to regain that external focus. What else is the view in your office for? See what customers want, nowadays… You turn to results-oriented Market culture. You’re too big to be agile – maybe – but you still know how to achieve results and service customers. Your people need to get things done! You have to quit some signature-strings and speed things up to get results. To compete is the name of the game. Just like in the old days: see the niche, see the market, work hard and never give up.

Fix culture before it fixes you

startup culture

Marcella Bremer is author of “Organizational culture change”. Click the image to go to Amazon.

This is your future – if you succeed. You move through four transformations and learn a lot. If your start-up survives and grows, you adapt to each phase and you may find yourself in your big office. If you don’t consciously create culture, you might suffer confusion during the transformations – or worse – get stuck and perish. If you do shape culture however, you might have an interesting journey and success! Because culture is the invisible magic that makes the difference – and customers discern it clearly from the outside.

They sense your culture – as they test whether your image is true – and check if you are authentic or not. Are you in for real? What do you value most? But above all: what do you do in your start-up team? Action shapes culture and speaks louder than words.

Check your culture for free:

Check out your current culture with the free culture survey at http://www.ocai-online.com (select OCAI One).

Photo: Flickr, dpstyles

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About the author

Marcella Bremer

Marcella Bremer works as a consultant guiding organizational change and personal development. Her motto is: "Develop the workers, the workplace and the world." Marcella is a Master of Science of Business Administration from Rotterdam School of Management and she helps organizations and consultants diagnose and change culture, so they can utilize culture to create a great place to work in a very pragmatic, hands-on and engaging way. She’s been using the Competing Values Framework and it’s Organizational Culture Assessment Instrument (OCAI) for years in a great variety of organizations and she is the co-founder of OCAI Online. Marcella recently published the book “Organizational Culture Change: Unleashing your Organization’s Potential in Circles of 10”. Download the book here. You can follow Marcella Bremer on Twitter.

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