The Current State of Business
In a previous article, Internal Culture is External Brand, I introduced the current state of business as a state of constant change also known as VUCA: volatility, uncertainty, complexity and ambiguity. I mention that startups are well-positioned to deal with volatility and uncertainty given their nimble nature. Yet, in order to scale with excellence, in our fast-paced environment, startups must be able to deal with all four dynamics of VUCA. Especially as VUCA continues to increase with the rise of dispersed teams, automation, global competition through rising markets and so on.
Rapidly scaling teams are often led by inexperienced, but energetic leaders. They have a habit of reacting to opportunity and change, resulting in haphazard processes and lack of repeatable outcomes. As a team goes through its first growth stage, roles are designed and structures are developed. Over time those structures effectively strip away some of the nimbleness and communication that exists in a small team. Somewhere between 50 and 100 employees is when relationships start to decay within an organization.
Relationships are the synapses of culture, accelerating and harmonizing collaboration.
When we aren’t in relationship, we see other departments as task machines and other people as job descriptions. Without relationships, we have no team morale, especially when there is no accountability, and agreements are left to the wind (typical for scaling teams).
Scaling teams are overly prioritizing the evolution of systems and under prioritizing the evolution of their people.
Scaling teams are punished for not addressing the ever present cultural issues that naturally arise in rapidly changing, high stake environments. Patrick Henry cites a Harvard Business School study on Startup Business Failure Rate by Industry by Shikhar Ghosh in his blog and breaks down the business failure reasons as follows.
- Lack of focus
- Lack of motivation, commitment and passion
- Too much pride, resulting in an unwillingness to see or listen
- Taking advice from the wrong people
- Lacking good mentorship
- Lack of general and domain-specific business knowledge: finance, operations, and marketing
- Raising too much money too soon
All of these reasons for failure are closely tied to the mindsets and behaviors of leadership and in turn, the culture. Yet across the board, most companies see leadership and culture development as a “nice to have” focusing on developing the process’ and systems rather than the people.
The Evolution of Systems and People
In a previous article, The Secret to Innovation: Intrapreneurs, I introduced Daniel Kahneman’s book, Thinking Fast and Slow, which explains the terms “System 1” and “System 2” to describe our reactive and intuitive limbic brain and our rational, neocortex brain. Similarly, organizations go through phases where System 1 and System 2 are supporting its growth.
When companies are first starting out, System 1 is in charge, reacting to opportunity with minimal systems in place, and all hands are on deck to steer the ship forward. Soon, System 2 (rational) kicks into gear and adds processes, like role clarity, to increase efficiency and repeatability around opportunity. While this is an important step for growth, the shadow outcome reduces the company’s natural ability to manage volatility through collaboration. In order to scale with excellence, it is important to maintain collaboration rather than create silos through overly prioritizing the evolution of systems.
Regardless of industry, all organizations go through similar growth stages while facing VUCA. At each stage they face similar operational, cultural, and leadership challenges. Each shift from stage to stage requires not just process change, but culture transformation.
Cultural Operating System
Put simply, culture is how we operate, how we do things. At its best, your company’s culture reflects a commitment to developing the mindsets and behaviors that reflect your mission, vision and values. Within this definition, we can think of culture as an operating system.
Growth organizations need a cultural operating system that is robust enough to deliver with excellence and flexible enough to evolve. This starts with creating values that are brief, well defined, unique and actionable. In our rapidly changing environments and markets, growth organizations also need individuals with the “soft skills” required to make clear agreements and to stay adaptable when a pivot is needed. Google’s research around successful teams shows that Psychological safety is the number one key dynamic that enables teams to take risks. Psychological safety fuels operational efficiency because when we feel safe to take risks and are willing to be wrong, clarity, commitment and creativity prosper. And last but certainly not least, grounding in a connection to purpose (purpose = meaning + impact) is sure to increase engagement and productivity by creating intrinsic motivation and team alignment. These are all aspects of our culture that we have control over, that we can define and motivate our teams around.
Scaling teams have two options when developing their corporate culture. Continue to adopt the founder’s culture or “bake in” a culture that is adaptive and customer focused. Jonathan Shokrian, the founder and CEO of MeUndies and an angel investor says that “startup founders should focus on scaling their companies in ways that deliver steady growth, intelligently paced market expansion and responsible workplace practices. They should prioritize developing a sustainable corporate culture and environment to create innovations, develop applications, provide services or bring products to market.”
Rather than growing the number of employees who fulfill a job description and lose their agency to create, companies can leverage the entrepreneurial momentum to create a team of intrapreneurs- driven leaders with a purpose and the ability to identify and act on opportunity. When people are connected to their why it creates an ownership culture. An ownership culture is a culture where people are aware of their mindsets, take responsibility of their behaviors and own their outcomes. People are empowered to take matters into their own hands and create rather than playing the victim to their situation ie. “that’s above my pay grade”, “we don’t have the systems in place to support me”, “we aren’t focused on the success of my team right now” etc.
Essentially, a culture of ownership addresses the complexity and ambiguity that scaling teams must face to survive.
So, if we choose the route of crafting our cultural operating system, who do we choose to be? How do we choose to motivate to enable the desired, customer-centric behavior? Are we measuring learning or just outcomes, growth or targets, innovation or efficiency?
Let’s consider Slack as an example of an organization that chooses to be a people-first, scaling organization. In a recent article by Lattice, they explain how Slack built a people-first company by building a community, not just a company through their hiring practices and employee development. Slack asks interview questions based on human elements like values, empathy and communication. They also made structural changes in their hiring process to ensure a diverse applicant pool. Lastly, they developed leadership programs and people process’ that represent their fundamental beliefs. Slack’s CEO, Stewart Butterfield, attributes their success to “establishing an organization’s distinctive culture and providing leaders the confidence and tools they need to thrive”. These efforts enable a continuously evolving team which creates continuously evolving products. It is no coincidence that Slack hit 10 million active users this year with a $23B valuation.
CALL TO ACTION
Evolving your people is just as, if not more important than evolving your systems. In order to scale with excellence, we need to adjust our perspective around culture being a “nice to have” and take a more proactive approach to defining how we do our work and who we are as teammates. So ask yourself, are you ready to prioritize the creation of your cultural operating system or are you going to let the inevitable world of VUCA have its way with your company too?