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2015-03-26 10:30:50
Anthony K. Tjan
March 23, 2015
Great founders start businesses not to create a company but to solve a problem,
to serve a calling, and to understand that they have a purpose that can
actually make a meaningful difference. But of course, they also want their
businesses to survive and thrive after they ve moved on.
Great performance can never come without great people and culture, and the
opposite is also true great people and culture are affiliated most with
high-performing organizations. We can argue over which drives the other. But
there is one undeniable truth: when a company is in its earliest days when
there is no performance or numbers to speak of the key differentiators are
the team, their purpose, and their culture. The team is the company s raw DNA,
the purpose their religion, and culture their unique way of operating based on
common principles, norms, and values. Like aiming a rocket ship into orbit, if
you get this wrong from the start, your trajectory will only get worse over
time.
After some two decades of launching, building, and operating some of my own
businesses to both meaningful failure and meaningful success, I ve observed
some important principles for building and scaling a culture that can live
beyond a set of founders to become a lasting institution. I m certain there are
other key things to do regarding culture and variations on the themes I set
forth below, but here are my top six immutable laws of building and scaling
great culture:
Start with purpose. I learned this from my partner Mats Lederhausen who has had
a string of great business and culture-building successes as the former
Chairman of Chipotle, Chairman of Roti, and co-founder of Redbox. The common
theme he sees is that you need to begin by understanding your why from the
inside out. This is about mission, not marketing. What calling does your
business serve? This should feel authentic, inspirational, and aspirational.
The companies with strong purpose are the ones we tend to love best because
they feel different Chipotle, Pret a Manger, Ikea, Container Store, or Apple
to name a few. Whether it s trying to just offer better food, or democratize
great design, the cause behind the brand is clear.
Define common language, values, and standards. A great mentor of mine, Tsun-yan
Hsieh, was one of the foremost leaders at McKinsey. Over 30 years, he shaped a
large part of its people development program, and taught me the framework of
common values and common standards. Great cultures need a common language that
allows people to actually understand each other: first, a common set of values,
which are the evergreen principles of the firm, and second, a common set of
standards by which a business will measure how they re upholding those
principles. For example, if you have mentorship as a stated value, then you
must consider how you define it and how to measure it. Will it mean that you
expect employees to follow a certain promotion path and career timeline? Does
it mean that you will hold internal 360s that determine mentorship scores, and
tie those scores to people s bonuses? Or will you create go further, and only
promote the people who develop others? Only when you have common language,
common values, and common standards can you have a cohesive culture.
Lead by example. Leaders must reflect the firm s values and standards. They
must be the strongest representations of the firm s culture and purpose, not
just writing or memorizing the mission statement, but rather internalizing and
exemplifying what the company stands for. Again, a few examples bring this to
life: do people feel that a Richard Branson lives the Virgin way of spirited
fun when he makes daredevil entrances or entertains on his island? Do people
have any doubt that John Mackey of Whole Foods approaches food with a greater
consciousness about its quality and provenance? These types of leaders have not
just an incredible passion and work ethic for what they do, but a cultural
ethic in that how they do what they do inspires others.
Embrace your frontline cultural ambassadors. Every organization I ve worked
with has people throughout the employee base who are unsung heroes of brand and
cultural ambassadorship. These are people who love the company and its core
purpose. They are your best cultural cheerleaders. They may be the folks on the
shop floor trying to solve a product issue, an assistant talking to countless
stakeholders, an analyst crunching the numbers, a customer service rep
empathetically talking with customers, or a mid-level manager developing other
people every day. When they tell friends and family about where they work, they
don t talk about a workplace but a work story, with a voice that comes from the
heart. You know them when you see them, but as a company grows, it can take
more effort to identify them. Do you know who these people are? Have you
rewarded them and thanked them? At a time when outsourcing functions such as
customer service or automating checkout procedures are becoming more common,
the role of frontline cultural ambassadors does not diminish, but rather
disproportionately increases and can become a real competitive advantage.
Seek, speak, and act with truth. Arguably self-awareness and truth-seeking are
a subset of one s values (point number 2), but I would argue that
self-awareness and truth-seeking are so important that they should be on every
company s list of values. Some call this integrity, but truth seeking and
self-awareness are slightly different. If integrity is best described by C.S.
Lewis as doing the right thing, even when nobody is watching, then
truth-seeking and self-awareness are about having the ability to be completely
honest about your own strengths, weaknesses, and biases. In an authentic and
strong culture this applies not only to the leadership team, but every single
employee. Such self-awareness and truth-seeking is easy to lose, and hard to
win back. When cultures are failing, there are usually root causes that can
rarely be fixed quickly. During these times, people want to flip a light switch
and ta da! see that the culture is fixed. Unfortunately, building, evolving
and transforming cultures takes both time and hard work.
Be greedy with your human capital then treat them right. The mantra at our
own firm is that in the end it s always about people and character. When
recruiting folks, spend more time screening for character than you do screening
for skill. While skills can be learned, it is much harder to cultivate attitude
and character. This practice, known as hire for attitude and train for skill,
was pioneered by Southwest about 40 years ago, helping to explain its track
record as an admired, purpose-driven company. There is no doubt that over time,
institutional character and culture is the simple by-product of individual
people. Whether you are hiring based on competency or character, remember that
A s will always attract other A s but B s will attract C s. Bottom-line: be
super greedy with the talent you bring in to make sure you get the A players.
Compromising on talent that is good enough but not necessarily the best you
think you can get, especially in pivotal job roles, is a sure formula to
short-circuit your own culture and long-term performance. Once you ve hired the
right people, treat them right. The best long-term retention strategy is to
mentor people toward meaningful roles. I ve found that what matters more than
any extrinsic rewards like compensation and title is pushing and developing
people towards their full potential.
In business, we often overweight the what of the business and underweight the
how and why. But it is the how and why that form both the soul and
character of business what employees feel when they come to work, and what
customers feel when they do business with you. If you re lucky enough to hit
upon the right culture, do everything you can to preserve and scale it. If you
can do that, then you can have a chance of not just growing a successful
business, but of building a business that will survive long after you re gone.
Anthony Tjan is CEO, Managing Partner and Founder of the venture capital firm
Cue Ball, vice chairman of the advisory firm Parthenon, and co-author of the
New York Times bestseller Heart, Smarts, Guts, and Luck (HBR Press, 2012).