The critical role of culture in building great start-ups

Pankaj Raina | Updated on February 18, 2021 Published on February 18, 2021

Even if a company has the best employees, a negative culture can influence worker morale, increase employee turnover, and decrease organisational productivity

“Culture eats strategy for breakfast,” said Peter Drucker. This is a timeless lesson in building great organisations. One of the key growth drivers for India’s economic prosperity is start-ups. In the early phases of a start-up, all that matters is the team and its execution capability. However, not all start-ups survive, but some resilient and determined ones become great companies.

An important criterion driving this journey to greatness is “culture”. Start-ups must find a way of creating a flexible, innovative culture and encourage individuals to take ownership. It is not easy to build the right culture, as different members ascribe to it different meanings. However, a simpler way to define it is — what a start-up and its constituents believe? How they operate and live? It is not about building fancy office spaces or colourful walls, but rather about people, how they respond to challenges, how they work together as a team, and what they believe is good or bad for the start-up’s success in the long run.

Research has proved that culture also affects the bottomline. Even if a company has the best employees, a negative culture can influence worker morale, increase employee turnover, and decrease organisational productivity. For many first-time founders and entrepreneurs, defining and creating an optimal culture is an afterthought. They are busy sorting out licences, registrations, and figuring out revenue models, targets, and margins to survive. As founders, it is crucial to realise the building blocks of culture that can foster prosperity and innovation.

Visualising culture

Competitive advantage, unique value proposition, differentiation are words synonymous with start-ups raising PE-VC money. Moving beyond the tangibles, many intangibles make a company unique. The frequently documented ones are brands, service, quality, recall, etc. But the essential ingredient to building a competitive advantage is the culture.

It all starts with the employees (knowledge, skill, resources) and how they engage and respond to various situations. The right culture can help identify the right people and build a resilient organisation. More often than not, people are the organisation’s most significant differentiator. The pandemic has already reinforced the need to build resilient business models, and human resilience is an essential ingredient of these resilient start-ups.

Build an agile system

Covid-19 has already proven the need to be amenable and adaptable to change. Start-ups are deemed to be more “agile”. Founders can set the right expectations and behaviour from the start with a smaller team while being nimble enough to adjust and adapt quickly to business demands.

Change agility gives a clear competitive advantage to organisations and makes companies more resilient. Teams can build resilience and agility by clearly defining the need for change, its impact, controllable and uncontrollable factors, visualising what successful change would look like, identifying steps to work towards that change, and defining the top priorities.

Flexibility, an important virtue

As changes are inevitable in a volatile and dynamic business environment, organisations need to ensure their workforce possesses a “mindset” that allows them to view change positively and take actions that facilitate effective change. C-level executives and HR should understand employee mindsets and develop frameworks to foster their workforce’s right attitude to promote agility by unlearning, learning, and innovating.

Helping bring awareness about employees’ current perspectives, educating the workforce about mindsets conducive to agility, and developing the right mindsets are probably the most critical steps a company can take towards creating self-organising high-performance teams.

Hire right, sit tight

Consider “culture fit” while hiring and retaining talent is extremely important as your culture can transform employees into “advocates”. The attributes that employees value most relating to their work should match the organisation’s culture and core values. For example, an employee who values innovation should find the right avenues to communicate and demonstrate how they foster innovation by using opportunities available in their team or business unit.

That is when people feel like they contribute to your organisation’s culture and promote it internally and externally. The employees become “culture champions” and “evangelists” when their work is recognised, celebrated, and rewarded, thereby offering a sense of accomplishment.

Hire the right people for the right jobs. Focus on retention. Ensure proper assimilation of talent with company culture during on-boarding. Train employees on the right skills based on changing market conditions. Help move employees internally to the business units based on the skills, personality, and passion. Managers should identify what drives the employees and cultivate their passion for bringing more meaning to their work.

Decision-making model

Decentralisation of the decision-making process and empowering employees in tactical and strategic tasks fosters better accountability and trust. A company cannot base its success on the competence of a handful of high-performing leaders alone. Companies should embrace a bottom-up approach with senior management becoming accountable to employees.

This enables a culture of holistic problem solving where employees collaboratively offer solutions, and therefore alignment and success emerge on their own. This also has a positive effect of more profound commitment and accountability from employees towards execution.

In self-organising teams and collaborative companies, when a change is proposed, employees can offer three kinds of responses: (a) resisting the proposal due to fear of change and associated risks; (b) supporting the proposal towards changing the status quo with their justifications; (c) providing fresh angles and scenarios that should not be ignored while considering the proposal. The more teams engage members in such problem-solving and decision-making discussions, the more the responses shift from option (a) to options (b) and (c).

Empower but observe

Empower the workforce to be their authentic selves, and encourage inclusivity and individuality while balancing consistency in systems and processes. We will see that they can develop better solutions and ideas and help teams move forward fearlessly and boldly.

On the other hand, when leaders and organisations stifle individuality, people do not perform to their fullest capacities. Such organisations won’t be able to compete in a world where things change fast, and companies need to keep up.

Transparent communication

Encourage reciprocity at the workplace by having brown-bag sessions or impromptu huddles, which are think-tank sessions, where you can reach out to a handful of people uniquely equipped to help you. Reciprocity is a widespread practice in organisations because it improves productivity, promotes learning, and builds trust.

As a company grows from a team of 20 to 200 and beyond, it is all the more crucial to ensure that leaders continue to communicate with the workforce, to help individuals see how they fit into the company’s bigger picture. The leadership team can reinforce culture by coaching and mentoring. Another aspect is that the founders and leaders should continue to visit actual work sites as frequently as possible.

Do it the Toyota Way — also known as Genchi Genbutsu, which is expressed in the following way: “Go to the source to find the facts to make correct decisions, build consensus and achieve goals at best speed.” That is the only way to see how your business is doing, how teams perform, how customers are treated, and what value is generated. Set aside those spreadsheets, reports, and dashboards and experience it yourself.

Way forward

The evolution of an organisation shapes the culture, and culture reinforces and promotes “what,” “why” and “how” things are done at the organisation. Companies need to be mindful and aware that circumstances change and what was right five years ago may no longer suit the company’s interests now.

A rigid culture can become an impediment to survival when there are substantial environmental and market changes. Organisational culture also needs to continually evolve in light of the constant changes to prepare for a future we cannot predict. If the year 2020 has shown us anything, it is that situations can change radically in either direction, any given moment. We have witnessed how vulnerable companies are when they can’t adjust, upgrade, or customise the established standards. Be nimble and use nimbleness to allow employees and customers to influence the business in their ways.

The writer is Managing Director, Zephyr Peacock India. He oversees research and investments at the firm

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Published on February 18, 2021
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