Everything you need to know about Start-up Culture

This week’s guest post is the first in Dr Zivit Inbar’s series about culture, recruitment and ethics for start-ups and SMEs. This post focuses on the often overlooked but crucially important topic of culture in start-ups. Of course, everything that applies to building great culture in start-ups also applies across the board in all organisations, so what follows is relevant to all readers.  This post outlines 5 ‘types’ of culture that can materialise (either by choice or by circumstance) in a start-up, as well as the pitfalls related to each of them. Also included is a free White Paper that outlines 6 steps to building a great culture in a start-up (and ultimately in any business).

How Does Culture Influence Start-ups?

Culture is one of the two most used words in exit interviews. It is also a common reason behind failures of companies of all sizes. However, it feels like although everyone knows what culture is, when it comes to building a culture that supports organisational growth, many believe that this “fluffy” concept just evolves as the start-up grows. This is a wrong and risky assumption. Culture is a product of leadership and management; it can and should be proactively lead. It doesn’t cost money, nor requires resources, yet this does not mean that cultures should be ignored. The risks of getting culture wrong are too big! For every start-up, the window of opportunity is too small to ignore culture and let it evolves to whichever direction it takes. By not taking an active part in leading your start-up’s culture, you are building the path for its failure.

The role of culture in start-ups is so important and on the other hand heavily misunderstood that I have decided to dedicate a blog for this concept.

The Cultural Complexity

What is culture and why is it so important for any organisation, let alone for start-ups? Culture is sometimes seen as a “fluffy” concept, however this is an inaccurate perception.

What Is Culture?

There are many definitions of organisational culture; all are based on the same notion that the organisational culture is a system of shared assumptions, values, and beliefs that “glues” (integrates) people and dictates their behaviours. In specific:

• Culture is how things are done in the organisation.
• Culture influences both the individual’s thinking and behaviours - it promotes what is “right” in the organisation and sanctions what is “wrong”.
• Culture is a process of “sense-making” that helps employees interpret what’s going on in the organisation and provides the basis for alignment of purpose and actions.
• The organisational culture is influenced by the national culture it operates within.
• The role of culture is to protect the organisation (like the immune system of the human body). As such, it sometimes can take the wrong direction and work against the company.
• Culture is a dynamic concept; it can and should change throughout the organisational lifecycle. Management can proactively lead and shape the culture as the organisation evolves.

So, whether you are aware of your company’s culture or not, this “fluffy” concept really makes the difference between success and failure. It can support or hinder the implementation of new initiatives, the achievement of company goals and hence its growth.

Why Is Culture Important?

Organisations often like to conduct SWOT analyses. They analyse the internal strengths and weaknesses and external opportunities and threats. Applying this same concept to culture provides an understanding of why culture is so important and shouldn’t be left unmanaged. While the organisational culture cannot directly influence external opportunities and threats, it does impact how the team reacts to and manages interactions with the external environment as well as how it operates internally.

Organisational culture shapes interactions with the external environment:

• The culture influences the brand image of the organisation.
• The culture affects the ability of the company to compete in the market.
• Attitudes and behaviours towards stakeholders, that is what employees consider to be appropriate behaviours and how they interact with clients, suppliers, investors and other stakeholders stem from the organisational culture.

The capacity for, and receptiveness to change and the ability to adapt to the external environment are determined by the culture.

The way things are done internally influences performance and productivity:

• A healthy culture encourages employees to stay motivated, engaged and be loyal. It inspires initiatives, innovation, collaboration and sets everyone to work towards the same goals.
• The culture guides decision making and people performance across all the organisational levels.
• How people interact with each other is an important part of the culture.
• How individuals and teams deal with deadlines, mistakes, challenges and the day to day work is set by the culture.
• The speed and efficiency with which tasks get done are also influenced by the culture. 

In other words, culture can be seen as the internal threats and opportunities of organisations. Once you get the right culture, it drives great results. If start-ups get it wrong, the culture can hinder success and risk sustainability, as the window of opportunities is short.

There is no perfect culture, but there are certain cultural characteristics that can support or hinder success.

The Cultural Threats

Culture, culture, culture… intended or not, it is always there! So instead of ignoring it, why not proactively manage your organisational culture and ensure that it provides opportunities for growth and success?

Signs Of Cultural Characteristics To Watch For

• The problem solving culture: this culture is seen in start-ups that are managed by technical founders that often “fall in love” with solving technological challenges. These companies are highly focused on specific technology tasks and solving challenging problems. I have worked with teams that were proud in this culture. For people that love problem solving, they find themselves engaged in what they are doing best and time flies fast when you are having fun. However, when not managed correctly, this culture has a critical downside. Once the focus is solely on problem solving technology challenges, many teams “forget” the big picture (the problem the start-up was established to solve) and the clients’ needs receive a low priority. When the market and client needs receive low priority, how will the start-up grow and succeed?
• The visionary culture: this culture is seen in start-ups that are managed by visionary and charismatic founder/s who have great ideas and focus mainly on the big picture. They run ahead fast with multiple ideas and leave a trail of “mess” behind them. The concepts are great, employees are inspired, environment is fun, no day looks like the day before… But, in this culture we often see lack of strategic planning and planning in general, so for the long term this is a great risk. No planning, no results! I had some discussions about it with founders who believe that start-up shouldn’t have plans, that strategy doesn’t apply to start-ups. If you don’t have goals and don’t plan how to achieve them, where are you heading?
• The lifestyle culture: this culture is seen when lifestyle entrepreneurs build start-ups to allow them to live the life they love and are passionate about what they do. The positive thing about this culture is that it includes a lot of passion, however it sometimes also emphasises outside hobbies (such as surfing), which then can “allow” employees to be comfortable, reactive and less productive. I can assure you that start-ups with this cultural characteristic could have grown much bigger and have a larger base of happy clients, if only the focus was external and not on the life style of the founders and employees.
• Small business mentality: is a culture that encourages thinking in small scales- establishing a business that works and without looking to stretch the company to different markets, products, sizes.
• The conservative corporate culture: is built on power and structure, defined roles and responsibilities. In this culture the founders manage the organisation by trying to duplicate the systems of big organisations. Employees work within their defined roles and responsibilities, there is lack of cross team work and the management leads the strategy and product direction, often with limited feedback from the team. These start-ups tend to be less agile and engaging, with a higher employee churn.

What If I Recognise One Of These Signs In My Start-Up?

Each one of the above cultural characteristics can bring results you don’t want to see.

The first point to remember is that a start-up’s culture is built by the founders. Whether intentionally or unconsciously, the founders are role models for the start-up’s employees and set the cultural tone. As the start-up grows and goes through different stages, the culture changes (or should change) as well. So, you have control of the culture and can change it as the start-up evolves.

The second point to keep in mind is that as with everything else in life, culture is about finding the right balance. You can enjoy problem solving, engage with brainstorming and visioning activities, but you also need to ensure that it is balanced with both market and client engagement and that your employees know what they need to achieve and are focused on that goal.

If you would like to discover more about how you can leverage the cultural opportunity in your organisation, download the White Paper below.

About The Author

Dr. Zivit Inbar is a People and Performance expert in the field of Technology VC’s and Startups.

An Industry Professor in the MBA Program at Deakin University (Melbourne), Zivit is a non-executive director, senior executive, advisory board member and acting chair with over 15 years’ leadership experience at board and executive levels.

Zivit’s expertise spans:

• HR strategies for Startups and VCs.
• Private and listed Australian and global technology organisations.
• China, APAC, Europe and the US.
• Technology product lifecycles.
• Cross-border governance and compliance.
• Global expansions.
• Cultural change management and integration.
• International M & A due diligence.
• Organisational development and growth.

Zivit has a PhD by research focused on strategic thinking and strategy implementation by Western companies operating in China. Ethical Kaleidoscope: The Role of Boards in Leading Corporate Ethics, co-authored by Dr. Zivit Inbar, is coming out later in 2016.

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