When building a company, most CEOs have a few main areas that consume their attention: raising financing, hiring the team, setting company strategy and beating the competition. It is interesting that company culture and the strategy to develop one rarely tops the list of CEOs concerns or areas of focus.
Why is company culture the “black sheep” of entrepreneurial start-ups? I have asked myself this question often, especially given how challenging the process of recruiting and retaining talented people can be. Numerous examples exist, however, of companies that have created successful corporate cultures in start-up environments: Microsoft, eBay and Goldman Sachs, to name a few. I believe the general lack of attention devoted to corporate culture is due to lack of time and perceived importance. Too often, there is a belief that corporate cultures develop spontaneously, without guidance or resources. In a start-up environment, the concept of developing and nurturing company culture may be viewed as an ancillary concern in the midst of the 12 to 15 hour work days that are necessary to launch and sustain a new company. My recommendation is that CEOs make the time to clearly articulate their vision for an effective corporate culture and take the necessary steps to strengthen and develop it. This small investment upfront and over time could be one of a new company’s most sustainable competitive advantages.
Why is culture so important for start-ups? After spending the last decade at companies with very strong corporate cultures, including McKinsey & Co., Wasserstein Perella and most recently, Eve.com, it is clear that company culture is most critical when: 1) the pace of change is fast, 2) the company is facing difficult challenges in uncharted territory and 3) there is a great need for cohesion in the team to handle these ups and downs. Given the rapid changes and uncertainty experienced by most entrepreneurial companies, start-ups are in the greatest need for the cohesiveness and alignment that comes with having a strong company culture.
What is “culture”? Many people, especially those who have worked primarily in start-up environments, believe culture is the same as camaraderie-the kind of bonding that comes from working alongside each other in close quarters, and burning the midnight oil together; the type of closeness that develops among a team that has grown a business from nothing to something. While I do believe that camaraderie in the workplace is valuable, there is a big difference between camaraderie and company culture. Company culture is based on shared values and workplace norms (e.g., innovation, risk-taking) not necessarily personality likenesses. Company cultures pervade the entire organization, not just certain departments or levels of employees. And last, a strong culture can be developed at a company even if employees do not spend their evenings after work together socializing.
How does one create and implement an effective company “culture”? Creating a strong corporate culture is not an easy endeavor. Once a company is up and running, the CEO needs to ask: What is the company culture today? It is important to be able to articulate the key principles succinctly. At Eve, we built a strong corporate culture, the foundation of which was twofold: Hiring talented, team-oriented people and emphasizing a high standard of excellence in our customer service and website experience.
The key to developing a strong culture is to make it relevant to the company’s business and to assure that it reinforces the factors necessary for the company to succeed. This is what leading companies like McKinsey & Goldman Sachs have done. Their success depends on the talent of their staffs (since they are professional service firms) and thus they have made recruiting, professional development, and teamwork the focus of their cultures. The first step, then, is to define the desirable company culture, making sure to link that definition to the key success factors of the company.
Next, the key to building a strong corporate culture is to integrate the principles into everyday work. This is especially important for a start-up where there are limited resources, including time and money, to devote to off-site, team-building events. One way we overcame this obstacle at Eve was by encouraging people to create cross-functional task forces to solve complex problems. In this way, we were able to integrate team culture into the workplace effectively. We also reinforced our principle for excellent customer service by creating service level standards for each area of the company (e.g, stock levels for merchandising, maximum response times for customer service, no downtime policy for tech, etc.). We shared these results company-wide. My belief is that the only way a company builds a strong corporate culture is by weaving it into the fibers of the company. It cannot be something that resides on the surface and brought out every once in a while by the CEO at a company meeting.
Third, building a strong company culture takes a broad range of advocates and the right people; it cannot be an initiative exclusive to the CEO. In reality, a company culture only begins to take shape when people beyond the inner circle of the founders begin to articulate its principles and reflect it in their actions. As a CEO, you can take actions to help create a company culture that will hopefully spread virally within the organization. This begins by developing the shared values for the company with your team, (not simply issuing them top-down) and gaining consensus and agreement on what these core principles should be.
New employees should also be trained in the company culture. All too often orientations are carelessly dismissed at start-ups; however, spending a few hours upfront with new hires on explaining the company background and defining the company culture communicates from day one what the shared values of the company are. Also, decisions on hiring need to be made carefully since people in an organization are the key reason cultures either are strengthened and reinforced, or, alternatively, weakened and diminished. Taking the time to hire the right people who fit into the established culture is critical.
Finally, company culture needs to be reinforced throughout the company with consistent and clear actions. As mentioned above, principles need to be integrated into everyday work, but also generally in review processes and compensation plans. As CEO of a new company, fostering an environment of innovation and risk-taking requires rewarding rather than penalizing employees for such actions. Strong cultures are built when there is true alignment between actions that are desired and actions that are rewarded.
Varsha Rao recently founded Zoelle jewelry, a lifestyle jewelry brand. Prior to founding Zoelle, Varsha was Founder and Co-President of Eve.com, a beauty e-commerce company which was sold in May 2000. Prior to founding Eve, she worked on consumer and technology projects at McKinsey & Co. and at Wasserstein Perella, an M&A investment bank in New York. She has an MBA from Harvard Business School and a BA/BS from the University of Pennsylvania.