Scaling Culture Requires Conscious Leadership
Joe is the CEO of a software company that is growing by leaps and bounds. They are projecting $110 million in sales in 2016, doubled from 2013. Joe has several hundred employees working for him now.
Joe believes in culture. He knows that scaling culture means ROI, through attracting and keeping the right talent. He has put in place several good management and team practices. And, he has noticed lately, that his role is shifting: He used to be able to manage people by instinct. Communication was easy when everyone was in the same building, and every employee was a short walk away. The good old days when hierarchy mattered less than getting things done, have been replaced by several layers between his office and the front lines.
Now, there are "channels" of communication. Rumblings of morale issues are seeping through the walls for the first time: Burnout. Confusion about priorities. Dreaded "us vs. them" language used by employees about management. Attrition of good employees is starting to increase.
Joe has been through this in the corporate world. He vowed things would be different when he started his own company.
Joe is caught in a classic entrepreneurial dilemma: Growth means scaling systems, structure and strategy - which can dilute culture. In today's rapid-change economy, balancing this effectively takes conscious leadership.
Apply 5 Rules of Engagement that Joe (our client) used to ensure his culture kept pace with business growth. And, kept alive the excited, engaged family-like feeling of the early days.
1. Size Matters
Ever heard of Dunbar's number? It states the number of people that can maintain stable social relationships in any group is 150. First proposed in the 1990's by British anthropologist Robin Dunbar, the theory says numbers larger than 150-200 people will create restrictive rules, laws, and enforced norms to maintain a stable, cohesive group.
This is highly relevant in the Era of Social Capital. Mega-corporate structures are the epitome of restrictive and forced norms, which is the opposite of how innovation happens: Shared knowledge, collaboration, relationships.
Innovation and Size Don't Mix Well
Today, innovation is more predictive of business success (in most industries) than mechanization, technology or financial investments. Size matters. Competitive advantage today happens in employee groups with strong connectivity and pride in their company.
Dunbar’s theory tracks with my experience in working with hundreds of leaders undergoing constant change. Companies who have grown quickly in scale (eg, through mergers and acquisitions) are most vulnerable to the cultural dilution, as achieving promised ROI often trumps the former “family feeling.”
When one group seeks to impose their social structure on another established group, energy is wasted. Turf wars and disagreements derail efficiency, innovation and progress. When two (or more) merged companies are left to continue their original social (cultural) structures and norms, the point of the merger may be lost.
A company that “suddenly” becomes 2000 people should plan on a LONG timeline and robust communication effort to integrate values, social and work habits, connection to the vision. (Essential predictors of winning in the modern workplace.) Take a lesson from brand management: Remember New Coke? That disastrous misstep was the result of people’s perception of change.
The remedy to size and scale, is to invest in building buy-in with employees prior to the change: Why is this change good for the business and the people? What benefits will they experience? What changes will they need to make? How will leadership support those? Manage people’s perceptions and mindsets carefully if you really want to achieve ROI from a merger.
And, when scaling rapid growth, consider how you might foster natural groups under 200 people. Seek to balance the cost benefits of scale, with fostering unique tribal cultures.
2. Alignment is a Verb
As a company grows and changes, the CEO should see alignment (of energy, priorities, direction) as #1 responsibility, and understand it’s a never-ending activity. (As is going to the gym.) Joe should be spending at least 20% of his or her time conveying the messages about direction. He needs to convey an inspiring, compelling message every employee can relate to:
- Why we exist.
- Where we’re headed.
- What winning looks like.
It should differentiate the organization (why we’re better than _________ (our biggest competitor) or how we are tracking to catch up. Communication methods can be both informal and formal. They must create a competitive spirit towards the external world (instead of fostering internal competition.)
This starts with the team at the top.
Ensure the CEO and his/her direct reports, are sending common messages and signals to the entire organization about what’s important. Creating inspiration and excitement for the journey. Acknowledging that sometimes chaos accompanies change, and what you’re doing about it.
The more the team at the top is speaking the same language about the direction of the company, the more trust is built company-wide.
3) Keep the Lens on Performance
The common ground of any organization is how it defines Winning. What is the definition of success in your business?
Most leaders hone in on the numerical definitions: Revenue. Profit Margin. Return on Invested Capital.
Definition of success in today’s world should focus on two key elements:
- A broad, inspiring Mission. For example, be #1 or #2 in every market we play in (GE). Google’s mission “organize the world's information and make it universally accessible and useful” is incredibly inspiring. These are passion-driven definitions of success because they don’t focus on money that primarily goes into executive and investors' pockets. This kind of definition of success creates stronger connectivity and pride: The seedbed for loyalty, creativity, and extra effort.
- Clear performance metrics for the individual. This can be through a traditional goal-cascade process, top-down. Or, through ensuring that each functional area (Sales, Finance, Research, Development) has specific performance metrics for their job that define success - and a visible and frequently updated dashboard that tracks progress.
This is how you create connectivity, top-to-bottom. Gain more productivity from the people are working for you. And ensure that high engagement translates to high performance.
4) Leadership Presence
Hewlett Packard and Tom Peters popularized it. Historians say Abraham Lincoln did it.
MBWA (management by wandering around) is the random and unplanned presence of top leadership – being visible and helpful to people, especially those on the front lines.
In a world where social connectivity is everything, CEO’s and top leaders need to revive this practice.
Learning first-hand, what people love and don’t love about working for your company. What customers need and what frustrates them. And most importantly, what makes people and customers loyal.
Craig Smith, COO and President of Home Advisor, knows his show-up in the common area of the company is a trade-off. It takes a significant amount of time from his day-to-day responsibilities, yet pays off in big rewards. “Some of our best ideas are pitched to me by employees this way. It helps me keep tuned in to how we are building our brand.”
Joe should allow at least a few hours a week "walk around" in a way that feels natural. It should be more social than goal-driven and show genuine caring of people. It will reap huge benefits, especially if he is asking powerful questions that open a dialogue.
If you want people to buy-in to growth and change, get their fingerprints on it. Step 1: Ask your people what they think. Step 2: Implement their ideas.
People follow leaders who show up and are present.
5) Foster Ownership Not Cookie Cutter
In our increasingly global, complex society, you need different methods for employee populations in different markets. In New York City, office culture will be uniquely different from suburbs of Minneapolis, which will be different from the tele-commuter division of the company.
Local leaders need to understand what is common across the company (Mission and Core Values). And, then be empowered to translate this to a local culture that builds strong bonds among employees and fosters their connectivity to the company.
Joe’s antidote to a de-humanizing corporate culture? Building a unique, sticky culture. This doesn’t happen by default. Great cultures are consciously raised (as you do a child.)
- What kind of culture does Joe believe in?
- Will that kind of culture achieve his Vision?
- Describe it, talk about it, and hire and empower people who will build it.
Then, ensure you have leadership alignment and a culture team (with trained culture champions) who are role models for the Core Values. Like any business process, you need a way to continuously nurture the culture in ways that are both effective and meaningful. (The people working for you care about meaning more than money.)
Make them feel like Culture Creators not Paycheck Collectors.
To ensure a fast-growing company can scale its culture, requires constant work on these 5 essential ingredients of strong engagement.
Heed the basics of people psychology as you do your financial statements … and be amazed how both grow like wildfire.