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How Top Startup CEOs Use Culture to Win the War for Talent
By Rob Kornblum | Startup
If you run any kind of company, from startup to larger business, you are probably struggling to find great people. Hiring is incredibly hard right now.
Developing a world-class culture is one of the most important jobs a CEO and founding team can take on. Your culture will define how you hire, promote, and make decisions; it defines how everyone works, and what you work on. It will impact the types of people who you attract to your company and whether you are able to retain them.
The right culture will enable your company to grow quickly; the wrong culture, and your company will break. If your startup’s product is the body of the company, team is the oxygen and culture is the blood vessels for the oxygen. No matter how good your product is, your team and the culture you build are THE critical elements in achieving hypergrowth.
In his best-selling book The Advantage, author and organizational consultant Patrick Lencioni makes the case that “organizational health… is the single greatest advantage that any company can achieve.”
Having an amazing product and a terrible culture will surely sub-optimize the growth and value of a startup. Customer service and productivity will lag, turnover will increase, B and C players will be hired, customer churn will increase, and ultimately the company will fail to achieve its promise.
“Culture is your company’s operating system”- Dave Gray
Your company’s culture is set from the top down, but it grows and takes life from the bottom up. Because of that, leaders need to be conscious of how they impact culture, and also how it grows on its own. Nurtured properly, your startup’s culture will become the embodiment of what you value, how you communicate, and how you operate.
Mark Godley, CEO of LeadGenius, said: “To me, culture is finding a diverse group of people, understanding what their individual needs, motivations and goals are, and finding the overlap between all of those people, and in then that overlap becomes kind of where you build culture around.”
Culture is not perks and benefits. The media likes to “play up” stories about startup perks and benefits. We have probably all read articles about Google’s amazing cafeterias and free food, Netflix’s unlimited vacation policy, or some other company’s kegs on tap, etc. None of those things are culture, those are all perks, which is one very small element of culture.
OK, so if culture is so important, how do we go about achieving a great startup culture?
It turns out that two of the actions people try most often—hiring for culture fit and trying to build culture through HR programs—usually fail to achieve their goals. Furthermore, they may even set the culture back. Let me explain why, and then what founders can do instead.
Many founders believe in the concept of “hiring for culture.” Having people who come from similar schools, backgrounds, and generally get along does produce harmony and can reduce the friction of new people working together. As a result, hiring for culture can work in the short term.
But, be careful about trying to find “culture fit” in the hiring process, or you will likely end up with an extremely homogenous group of employees.
Sean Byrnes, founder & CEO of Outlier.ai, said
“Honestly, I think that [culture] “fit” is code word for bias in almost any company I’ve ever seen. If you have a bunch of people with the same life experience, the same experience in their professional lives, you’re going to have a lot of group think. You’re not going to challenge a lot of assumptions. I believe a corporate culture arises out of the people you hire, it’s not something you create. I specifically like to seek out people who will challenge and think in new ways. All the research shows that diversity is an enormous advantage in building teams.”
We can see this play out time and again in startup hiring processes, where candidates are rejected because they don’t “fit.” A deeper look at that “fit” often reveals a homogenous company where people of different gender, race, educational background, and age are rejected. Many of the CEOs I have interviewed cautioned against looking for “culture fit” in interviews; they believe that it results in not hiring those who are “different” under the umbrella excuse of “not fitting in.”
In some companies, that lack of diversity might be OK. But startups are all about creativity, new ideas, new products, and new business models. That type of radical thinking needs people to challenge the status quo, and is led by more diverse teams.
Can you really “build” a culture?
Mark Godley, said
“I believe culture is something that you don’t “do.” It happens. Another way to say it is—culture is an output, not an input. I think when I [try too hard to impact] culture, I end up doing what I would consider shallow experiences. You can do the trust falls event or bring in an outside speaker that people feel really good about, but 30 to 90 days later, there’s no change.”
OK, so if you can’t develop and build culture through classic HR-driven activities, how do you impact it as a leader?
Rob Chesney, COO of Trunk Club, scaled the team in a huge way by focusing on culture adds—finding people who are motivating. “We were hiring people who may or may not be your best friend, but they push you. You want to be surrounded by a group of people who are motivating and inspiring and not toxic.”
In my previous book Never Too Late to Startup, I outlined a series of questions for founders who are just beginning to establish their culture. Similar to exercises I use in private workshops, they can be effective at boiling down “esoteric” concept of values to real-world experience:
What traits do you really value in colleagues?
Who have been the best people you’ve worked with in your career? Why? What made them so good in your eyes?
Who do you respect the most as a boss? Why? Who do you respect least? Why?
What kinds of things are you good at and want to do more of?
What energizes you professionally? What things de-energize you?
Taking the time to answer these questions will go a long way toward outlining the culture that you want to build. Once you know what you value most, and how you want people to act toward each other, you can begin building the processes and norms that will reinforce the culture.
Rather than thinking about “culture fit,” outline the values that you care about in employees and construct an interview panel that will screen for those values.
In addition to defining the values you want, in words, take the time to describe the behaviors that you expect will embody those values. The leaders of Slack, the high-growth enterprise messaging company, laid out their values of “Diligence, Curiosity, and Empathy” but then also described what those meant:
“Diligence: We know that the success of our product will likely not come from unpredictable lightning strikes but from grinding hard rocks against other hard rocks day after day. To build a product that works well and is magical comes out of effort that looks very non-magical. It is easy and sometimes tempting to say “good enough” but after this is where the best work happens and what makes Slack special. This is also where your best work happens.
Curiosity: We are building something that most people don’t know they need. Every day, we are venturing into unknown territory. Thriving at Slack means recognizing this forward position and that you may not know the best direction to head. This means you ask good questions at the right time to the right people. It means being curious about how things work and what our customers need. Curiosity is not being satisfied with the status quo and looking at every problem deeper and from a multitude of angles.
Empathy: Building things for others to use is an act of empathy. Every decision made about how a thing is built and how it should be used comes from the worldview of the maker. How well they can see things through the user’s eyes determines the value of their work. No one person can see the world through another’s eyes. It’s all approximation and guesswork. Thus, the only way for us to broaden our understanding of our users, to see things the way they do, is through hiring people with as many diverse experiences and backgrounds as we can.”
I believe that actions are the foundation of a company’s culture, and in the case of a startup, it is the actions of the founders.
Glenn Elliott and Debra Corey’s book Build It, The Rebel Playbook for World-Class Employee Engagement highlights culture as:
“How your company behaves, recruits, makes decisions, operates, makes choices, through the actions of your leaders and managers”.
I interviewed David Mandell, founder and CEO of PivotDesk, for my last book Never Too Late to Startup. He described their culture to me this way:
“I think the single most important attribute that not only I look for in employees… is respect. And respect for everyone in the organization. The second that people don’t show respect for others, or people don’t deserve respect from others, we have to make changes. A lot of people think culture is based on foosball tables and catered lunches and that’s all bullshit. What you need is an organization that enjoys working together, because that’s when they work best together.
And the first step in an organization that enjoys working together is mutual respect. I mean that at every level of the organization, so… being a senior person does not in any way give you the right to be disrespectful to a junior person. Everyone that is here is here because they are really good at what they do. Some may have a lot more experience than others, but they’re all really good people, and they are all critical to our success. And the second anyone in our organization shows lack of respect I virtually stop everything and we either fix it or we make a change.”
Another incredibly successful serial software entrepreneur, Lew Cirne, was very thoughtful about the culture he wanted with his second company. Cirne was in a different stage of his life when he started that company, New Relic, so he emphasized different values. (I believe the team and culture are a huge factor in New Relic’s success. It is now a multi-billion dollar public company).
“When I started the company, I [decided that] we’re going to look for a more experienced employee base, capable of doing more in a shorter period of time, and is less likely to burn out. We’re going to have a standard minimum three-week vacation policy. We’re going to encourage people to take all of it and not store it up… so that you can really recharge.
The other thing I thoughtfully put into the culture is I make a habit of leaving the office at 5:00 every night because one of the important things to me is dinner with the family, and I like to cook the dinner… it is just a routine I have. Certainly I want it not to be, ‘Oh, Lew the founder gets away with it,’ [so] it’s a pretty quiet office between 5:00 and 5:30 at New Relic, compared to most other high-growth companies.
I want New Relic employees to love their Mondays. I use that term all the time. I ask people, “Do you love your Mondays?” I happen to love my Mondays. I think it’s an important way to think about it. [There are] two fundamental reasons why I love my Mondays and [why] I want New Relic employees to love their Mondays: One is you love the work you do, you feel like it matters and it has impact and it gives you joy. And [two is] you love the people you work with. They bring out the best in you and they encourage you and they help you grow.”
Culture is not about uniformity of thought. In fact, healthy conflict is often the sign of a great culture. Intel Corporation, the legendary chip company, had a great model that they called “disagree and commit.” Even when people couldn’t come to agreement around a contentious issue, they were expected to speak up and get their opinions out there. Regardless of whether they agreed with the decision, they were expected to support the final decision.
Lencioni believes,
“Most people are generally reasonable and can rally around an idea that wasn’t their own as long as they know they’ve had a chance to weigh in. But when there is no conflict, when different opinions have not been aired and debated, it becomes virtually impossible for team members to commit to a decision, at least not actively.”
I believe that healthy conflict comes like this comes from a place of respect and one that values diversity of background, gender, age, race, and experience.
It is clear that hiring people with similar, shared values is a key input in creating a thriving culture. One of the most challenging tradeoffs for startup founders is how long it can take to find top-level people who also share those values.
Everyone basically agrees that you can’t hire or retain assholes or your productivity and culture will degrade. There is a reason Netflix and other high-growth companies have developed a “no brilliant jerks” policy. The problem with brilliant jerks is that they destroy the performance of the team, and they hamper the ability to hire other A players. Who wants to work with jerks?
The real challenge comes when you are really need to fill a role quickly. You need people to help you hit the critical milestones that you have laid out for your Board and investors. You find people who are talented, and they are not jerks, but it is also not clear that they quite hit the bar in terms of values.
It’s a brutal tradeoff, and one that I see startups faced with all the time. How long can you leave a key position open? Are there some values you can “give on” a little?
Don’t be afraid to do a little inventory of the qualities you’re looking for in hires. I don’t simply mean skills, but values, family, personality, and style. Think about, articulate, and write down those qualities you’re trying to build in your startup.
Art Papas, founder of the highly successful software company Bullhorn, Inc., implemented a system to screen for values during the interview process. He also applies this system to reinforce the values during the company’s annual reviews and bonus compensation process. (I used to work at Bullhorn and reported to him.)
Papas defines his company’s core values in five key phrases or behaviors:
Ownership
Energy
Agility and speed
Service
Being human
He and his team go further than just listing values. Along with his company’s HR head and executive team, he defines what those phrases mean in terms of behavior. They use everyday examples so that employees and prospective employees know what matters and whether or not they’re a good fit. For example, the team defines the value “Energy” in behavioral terms:
• Leave people positively charged.
• Build up your teammates.
• If you see a problem, present constructive feedback directly to the source.
• Act in the interest of the team.
• Accept critical feedback with an open mind.
• Make people want to work with you again.
Equally important, Papas’ core values include definitions of what not to do, which includes the value of Energy:
• Talk behind people’s backs.
• Stir the pot.
There are a number of things you can do as a startup to communicate your values out to prospective hires. First and foremost, after you articulate them, put them on your web site. Create a few graphics or videos that explain the type of people who will thrive at your company and why.
Second, create a hiring process that emphasizes your values all the way throughout. If you value self-starters and problem solvers, let candidates show you that side of themselves, as an example.
Lastly, make sure your current team, and your recruiters, understand your values and how you implement them at the company. This comes out in word-of mouth, through interactions with recruiters, and in referrals.
The management guru, Peter Drucker, once said, “Culture eats strategy for breakfast.”
Culture is one of the most important areas in which you compete for talent. If you have built a distinct culture, and you are living your values as a company, it will be evident to candidates. Candidates will be drawn to your company, you will close (and keep) more and more “A players.”
This post was an edited excerpt from my latest book Entrepreneur Rocket Fuel available on Amazon here. To read more about how best practices in startup hiring, and for in depth interviews with top CEOs, pick up your copy.