Four Steps to Building a Strong Company Culture

Successful companies do not happen by accident. They are a function of culture—a set of shared values. Culture does not guarantee success, but it increases the probability of winning. And culture is shaped by leaders. When leaders know how to inspire people, help them reach their potential, guide them through difficult situations, they are far more likely to lead that company to the next level.

If you are a first-time founder, and you have not yet thought deeply about the kind of leader you want to be, there is no better time to get started. Learning the art and science of culture-building is among the most important responsibilities you can undertake. As an entrepreneur myself, taking two companies from ground zero to scale, I have learned some hard-won lessons on this topic. Indeed, one of the most important roles I play for the companies we work with at Neotribe is to share these insights to help founders learn how to build more successful companies.

The truth is, everything a founder does, especially in the early days of a company’s growth, will shape that company’s culture, for good or ill. It is therefore far better to be intentional about the process. Following are some of the most important aspects to think about as you look to build the strong, self-regulating culture that will give your company a competitive edge.

1. Know the Difference Between Leadership and Management

Effective culture starts with effective leadership. In the early days of a company, however, when a first-time founder is likely wearing many different hats, it can be hard to know what great leadership actually means in practice. Most young founders have corporate work experience, so they know what it means to report to a manager. Often, they assume they understand what being a leader entails—that management and leadership are one and the same. However, they could not be more different.

Management is about efficacy, taking something that exists and making it more efficient. Leadership is about change, taking people in a new direction. Where management is about control, leadership is about influence. Where management aims to incrementally move people towards an objective, leadership can be disruptive, even revolutionary. Leadership is about breaking the status quo and knowing when and how to break it.

In my experience, no one really works “for” anyone else; we all work for ourselves. As a leader, I cannot motivate the people on my team. What I can do, what my focus needs to be, is to create an environment that inspires them to motivate themselves.

Countless books have been written on how to become a more effective leader. In my experience, however, here are three important aspects of leadership that can be easy to overlook, especially for first-time founders:

Be a storyteller. Storytelling is among the most important skills a leader can possess—and one that rarely shows up in traditional business education. Whether for fund-raising, acquiring customers, recruiting employees, or inspiring staff, there is no better way to connect with other human beings than with stories. As an investor, I listen to pitches every day. The ones that capture my imagination, that elicit empathy, that force me to put myself in someone else’s shoes—those are often the pitches that resonate most.
Use the bully pulpit that comes with being CEO. It can take years and multiple mistakes for some first-time founders to realize just how closely people listen to every word coming out of their mouths. That can feel uncomfortable when you are not used to that level of scrutiny, but it can also be incredibly empowering. When you praise an employee, especially in front of other employees, it means something. With this in mind, praise should be public as much as possible, while any kind of constructive feedback should always be private. The only person you should ever publicly criticize is yourself. Along those lines…
Don’t be afraid to be vulnerable. A leader’s ability to be vulnerable with his or her team can be incredibly valuable, but it is a skill seldom practiced. Most leaders believe that showing any sign of weakness is the kiss of death. There are times, however, when showing vulnerability conveys authenticity and a shared humanity. It can be tempting to want to pretend you know the answer to everything. Being able to say, “I don’t know,” however, can play a crucial role in cultivating a healthy culture—and in avoiding costly mistakes. You want your direct reports to be open with you about their own unknowns and concerns. When you are willing to show vulnerability, everyone else knows it is safe to let their guard down sometimes. That is what builds a cohesive team.

2. Recognize the Role Culture Plays in Your Organization

“Culture” can feel like a nebulous concept, but it has a concrete meaning: the shared values of an organization. Good or bad, the values embodied in a company’s culture will act as a guiding light for how people handle everything from a new customer to a crisis response. A company with a strong, well-established culture becomes a self-policing organism. No one has to keep looking over employees’ shoulders, because that set of shared values guides them to make the right decision.

It is important to formalize an organization’s culture when it reaches a critical mass. When a company has grown to about 20 employees—when it has developed clearly defined organizational functions and opinion leaders in key areas have emerged—that is the right time to codify the organization’s collective value system. Why then? Because the company is now at a key transition point. There is one set of employees who has been with the founder from the start. They feel a sense of ownership for what has been collectively built, and they are willing to do whatever it takes to make the business successful. Typically, these “first-wave” startup employees do not care about titles or roles. They know that if the company succeeds, they can expect a large, potentially life-changing windfall.

At approximately 20 employees, however, you are now adding a second wave of employees. These second-wave employees typically do not have the same expectations of personally reaping the spoils of the company’s success. All of a sudden then, title becomes important. Role becomes important. Delineating their fiefdom becomes important. If you are not careful, that second wave of employees can create a micro-culture that is very different from what the organization has had up to now. Before they sign on then, you should make sure that the company’s culture and values are codified in a formal statement. You should be able to tell new people, “This is how we do things here.”

Two of the most important lessons I have learned about codifying culture include:

Work collaboratively. Corporations are not democracies, but a culture statement is a decision that must be made collectively. If an employee gives a new hire your culture statement with an eye roll, it is probably because that statement was a top-down, ego-driven edict from the CEO. Instead, co-author your culture statement with the other key stakeholders in the company. Talk through what’s unique and important about your culture. Nail down your culture statement in a concrete, formalized way. As you do, you will not only build stronger buy-in. In my experience, you will also benefit from the lessons your colleagues have learned from their own prior roles about what works—and what does not—in defining an organization’s culture.
Be specific. It can be easy for culture statements to become lists of buzzwords and vague ideas that ultimately have little relation to reality. In one of my prior startups for example, the company’s culture statement noted that urgency should be a core part of the organization’s culture. But what does “urgency” mean in practice? A colleague from that startup who had joined me in my new venture noted that people worked 80 hour or more per week to try to demonstrate “urgency.” No one really understood what kind of behavior was expected of them. So, together, we came up with a better way to express what we wanted our culture to embody: Do today what you could put off until tomorrow. Now, everyone had a concrete sense of the culture we were collectively trying to build.

3. Preach what you practice

Everyone knows the adage, “practice what you preach.” For a leader, it is just as important to preach what you practice. Sometimes, the most important thing founders can do is to evangelize and reinforce the culture they are building. In one of the startups I led, I would spend part of every weekly all-hands meeting talking through one element of our culture statement. Here, I would exercise my storytelling muscles by sharing real-world examples of employees who epitomized our organization’s values.

I recall one story I told about a young customer service representative, Madison L. At the time, we had just added an 800 number for sales and customer service, and while I was out driving one morning, I decided to test it. On the first ring, Madison picked up the phone and said, “Hello Kittu.” I was shocked—how had he known it was me? Our service representatives could see a caller’s phone number, but I had never called Madison before. His response: “I make it my business to know my CEO’s cellphone number.”

This was not an employee trying to butter up his boss. Rather, this was exemplary attention to detail, exemplary commitment, exemplary sincerity that he brought to his job. So, at the next all-hands, I related this story and asked Madison to step up and take a bow. “Madison,” I said, “you are an inspiration to me.” The company applauded him. Even more important, other employees began amplifying and reinforcing that behavior. That is the power of culture.

4. Master the Different Styles of Communication

You may have noticed a common theme in these examples of strong leadership and culture: effective communication. As a leader, communication is always your first and most important job. To do it well, you should understand the three basic types of communication. Each serves a different purpose, and should be deployed in different contexts. They are:

One-to-Many: Use this mode to create awareness and disseminate information: This is what we are doing, these are our key initiatives, etc. When done right, however, one-to-many communication also reinforces your accountability to your team. Think about it as less handing down edicts, more like reporting to your board. Through your actions, you are telling your people, “I work for you, and I am accountable to you.” To that end, I would often ask my executives to give regular status reports to the entire team.
Many-to-Many: This type of communication is the discussion floor, the venue for facilitating constructive conflict. A well-debated decision is often a good one, so you want to create a forum where people feel free to question and discuss. One individual will always be empowered to make the decision and be accountable for it, but they should not do it in a vacuum. The goal is for your people to not just be aware of a decision, but to buy in and feel invested in its success. That only happens when everyone has a chance to share their issues, objections, comments, and suggestions.
One-to-One: One-to-one communication is exactly what it sounds like: engaging an employee in a personal way. Here, the goal is to build trust and commitment. You are showing that you care about this person as an individual. You understand their goals and challenges, and you intend to be an ally to help them succeed.

Take the Next Step on Your Leadership Journey

This list is not comprehensive. There is far more that goes into building an effective culture, and many other questions you will need to answer to ensure your organization is growing in the most effective way. However, thinking deeply about the culture you are building—even just recognizing that this question deserves your serious attention—is an excellent start.

In my next blog, we will consider another angle: the different situational leadership styles, and when and how to invoke them. If you are a first-time CEO of a new company, your journey as a leader is just beginning. By being intentional in the steps you take along the way, you stand a much better chance of reaching the destination you envision.