If you ask most entrepreneurs what’s important to them as they build a company, the top three answers will include “creating a great culture.” This comes as no surprise. Culture deeply influences the people you attract and retain. At the same time it shapes how people work together in your company and what they ultimately achieve.
As with most ideas that today’s entrepreneurs believe are unique innovations, this one has been around for a while. Terrence Deal and Allan Kennedy pioneered the idea that companies had cultures and they mattered in 1982 when they published The Rights and Rituals of Corporate Life. Then Geoffrey James wrote The Business Wisdom of the Electronic Elite in 1996, which called out the profound differences in corporate culture between traditional industries and tech companies, influencing the new generation of internet entrepreneurs.
Usually, when you ask people to talk about a corporate culture, they describe very specific details (e.g. the sushi bar for lunch). But to get this right, you have to take a step back and dig deeper. This makes more sense if we start with a definition of corporate culture.
Deal and Kennedy defined corporate culture as: “… a strong system of informal rules that spells out how people are to behave most of the time.” I prefer a more simple definition that hews more closely to the Mirriam Webster definition:
Culture is a set of values manifest through behavior and ritual.
This definition leads to a simple five step process for building a great corporate culture.
1. Articulate clear values
Your culture project starts by clearly articulating the values you want to build upon. You won’t succeed at building a strong culture if you’re not clear on what you believe.
Having a great corporate culture doesn’t mean you give away nice fleece jackets…
You can take a variety of paths to get to that list of values. Start with what you and the other founders believe. When the company values align with the founders’ values everything works better, and almost all great companies have this alignment.
At the same time, it’s very helpful to draw from best practices and other companies. Don’t just pick a company that looks cool. Focus on the companies that are like yours and winning, and then dig into what they value. As you draw from other companies, pay attention to what is unique to you. Your culture can be a source of competitive differentiation.
When James looked at tech companies he identified six key values:
Reed Hastings posted a great deck on the Netflix culture that shows another example nine values.
At Brightcove we always liked to say three things were important: being smart, getting things done, and being nice. These values very much shaped who we hired and how people worked. (Notice these are very simple and succinct.)
At Onfolio (a much smaller company) we laid out four values:
- Achieving Excellence – We strive to masterfully craft what we create—holding our work to the highest standards of quality and excellence.
- Seeking Truth – With intense candor, integrity, and humility, we seek to understand reality and ground our work and decisions in that understanding.
- Developing Talent – We expect our colleagues to be passionate students and patient teachers—committed to continuous learning and personal growth.
- Working Sustainably – We work to actively balance our corporate, personal, societal, and environmental responsibilities in a way that is sustainable.
Noticeably missing from the list was a focus on customers, which was not so good, but you get the idea of one way to articulate value. The final value reflected our desire for Onfolio to be more lifestyle than high-growth, which is an example of shaping values to the reality of the company.
Surf the web and visit companies you respect and you’ll find many of them publish their values, so you can get some ideas.
It’s my preference to list out the values simply and directly, more than 5 gets unruly, and write them down. But not everyone goes this far. For some firms the values aren’t so clearly written, but if the culture is strong you can bet that the leadership is very clear on what they value.
2. Hire people who share the values
Knowing your values is the beginning. The culture becomes real when you hire people who share the values. Having a great corporate culture doesn’t mean you give away nice fleece jackets or always have micro-brew beers on tap, it means the people in your company have a shared set of values, and they manifest those in behavior.
Fundamentally a company builds its culture when it hires. If you hire people that demonstrate they share your company’s values through their actions, you’ll make the company’s engagement in those values stronger.
At Brightcove we always filtered new hires for smart, nice, and get things done, which turns out to be very hard to find, but when you do they are awesome people to work with. This means you have to hire both for job fit and for cultural fit. The two don’t always come together. Unfortunately, if you fail to hire for cultural fit, no amount of pizza lunches will create a “good culture.” Without people who share your values, the corporate culture you dreamed of creating will fade away; your company will be weaker; and you won’t like going to work.
The power of hiring to drive culture is especially important in the executive leadership. If you hire executives who don’t share the company’s values and demonstrate them in their actions, you can bet that those executives won’t hire people who fit the culture, and pretty soon the values won’t be a part of the company.
3. Create rituals that support the values
If you were to ask someone from Turkey about their culture, you’d expect to hear something about ritual: the cuisine, the language, how holidays are celebrated, how life milestones are marked, how you behave in social situations.
The same goes for corporate cultures. For example, if you value continuous learning, then there should be real rituals that reinforce that such as giving every employee a budget for books and training, having internal training programs, bringing in speakers for to talk during lunch, etc.
If you value people staying in the office long hours and working incredibly hard, then you may decide to provide free dinners. If you want to single out individual excellence, you could give managers the ability to give spot bonuses for people who go above and beyond.
Google and 3M, who both deeply value technical innovation, famously give every employee dedicated time to work on their own creations and products. Thanks to that value and ritual we get cool products like Gmail and Post-It Notes.
At Allaire, the employee rewards we gave out each quarter were based on the four company values and everyone in the company voted for who would get them.
The net of this is simple. Don’t get a ping pong table because you think that’s what start-ups do. Make investments in rituals that reinforce your values. If it’s having fun at work, then buy the games. If it’s collaboration than organize big group social events for the company and give awards to the most successful ad hoc teams. If it’s technical brilliance, than have ways for people to show off innovations.
Design your rituals to reinforce your culture.
4. Get the leadership team to model the values
Ideally you’ve chosen to focus on values that you believe in. Then you’ve hired other leaders who share your values. Next you need to pay attention to consistently modeling your values. For example, if you say you value excellence and then you force the product team to cut corners and ship a low quality product to hit a release date, you’ll seriously cast doubt on whether or not your values are real.
5. Pay attention to fundamentals of leadership and management
The number one reason people leave a job is because they don’t get along with their direct manager, not because they got frustrated with the lack of good snacks in the kitchen. Bad managers create bad cultures. I’m not going go through everything that goes into good management and leadership (there are a 1,000+ books on the topic), but simply put, all the other values won’t make a difference if the company is not being well led and managed.
How do you know if you have a strong culture?
Here are three tests of whether or not you have a strong culture:
- Can random employees articulate your values (not simply recite a list from a laminated card hung in their cube, but actually reflect and describe them when ask what the company values)?
- In companies with a strong culture, people who don’t fit leave. In a strong culture, when a people don’t share the values of the company, they feel uncomfortable, and they leave. Move out people who don’t demonstrate a cultural fit, even if they have other strengths. Some people call this the “no jerks” rule. (Of course, if being obnoxious and aggressive is something you value, then keep the jerks. If not, let them go.)
- Employees complain to each other that the company doesn’t live up to its values. I once heard employees describe the list of company values HR passed around as “the fastest way to get fired.” That’s a problem.
Why bother with culture?
Companies with strong corporate cultures outperform companies with weak cultures. There are a variety of reasons:
- People who share values work together better and achieve more
- When people love working at a company they work harder
- Companies with a great reputation attract great talent
Creating a great corporate culture starts on the day you found your company. It’s strengthened or weakened with every hire, the actions the leaders take, rituals the company follows, the behaviors that are rewarded, and the way everyone is managed. Lose sight of it at your own peril.