Rigid, Robust, or Resilient: Is Your Culture Worth Preserving?
Why your culture needs to drive a business result
My specialty is helping startups navigate transformative change on the path from $10M to $100M in ARR. Over the course of this quarter I’m exploring a question that’s been bugging me for years: Why aren’t we hiring leaders based on their ability to build teams of lieutenants?
If you’re joining us “mid-season” let me catch you up:
“Episode 1”: more questions than answers: Why aren’t we hiring leaders based on their ability to build teams of lieutenants?
“Episode 2”: what’s so magical about middle management?
Without a middle-management layer, the burden of cross-functional coordination falls to the IC level and devolves to being tactical – and, as a result, upward feedback on strategic decisions gets stuck with teams too busy chasing weekly goals.
Leaders can’t live up to their full potential without the shoulders of middle managers to stand on. As a leader, it feels like pure magic when your teams connect the dots on their own, close your blind spots without even asking, and operate autonomously across reporting lines.
“Episode 3”: When is the right time to start building your next layer of leadership?
18 months before $50M in ARR is the breakeven point when it comes down to talent and org design. Growing past $50M without a functioning middle management layer in place is an existential threat.
There are real hard limits driving this – your Go-to-Market management capacity directly constrains your quota capacity. This forces you to add middle management layers if you want to keep growing at 50%+ year over year.
At the same time, the complexity of your Marketing, Product, and Finance teams needs to mirror the complexity of your sales org.
Easier said than done.
To add a layer of middle management and nail this transition you need intentional and ruthless clarity.
Will you inevitably destroy your culture in the process?
You need to decide: is your culture worth preserving in the first place?
Ten years ago I used to think that culture didn’t matter. I was in Finance at the time. Employees, product, and customers were all just lines on a spreadsheet to me.
That is until I joined a new company with a strong culture as a middle manager myself.
Walking the halls of Pantheon I was taken aback by how friendly everyone was and how much easier it was to get things done when advocating for change. I genuinely felt that I was having more impact because of the culture – wasting less time on politics and spending more time debating our way to the right answer.
Over the course of my career, as an employee, consultant, and advisor, I’ve had the opportunity to experience the culture, review the compensation philosophy, and see individual salaries across a dozen different companies.
One thing is clear to me: there is a direct 10-20% cost associated with having a negative culture.
In my experience, companies with a negative culture tend to pay more for the same roles. You can consider this the “Wages of Fear” (which, incidentally is a must-watch 1953 French movie).
I want to avoid the term “bad” culture.
Your culture can be negative from an employee experience perspective but constructive from a business performance perspective (potentially justifying the payroll cost premium).
Amazon, famously, has a strong culture that’s not for everyone. The first time I interacted with an ex-Amazon leader, I felt offended and silenced. The second time I was cautious and focused narrowly on the task at hand. But by the third time, I recognized how the Amazon culture made them so effective in their job.
What makes a culture constructive? A constructive culture needs to be:
Easily summarized into a set of operating principles that employees can adopt,
Built into business processes and decisions – the what, not just the how or why.
Marketplace businesses are a great way to illustrate this because, compared to B2B SaaS, they have more ambiguous trade-offs to manage. For example, the perennial question is whether “by default” you choose to favor buyers vs. sellers. Or which teams are elevated to lead the growth charge when no team can single-handedly move the needle?
Take eBay, for example. Its culture stemmed from the belief, articulated by the founder Pierre Omidyar, that “people are basically good.” This showed up everywhere you looked: the trust required to transact online in the 1990s, the way employees treated each other, how the buyer-seller dispute resolution process was structured… even the way M&A was handled (which, incidentally, was part of my job.)
Compare and contrast this to other marketplaces which often have a version of this boilerplate: Trust - Team - Community - Results.
What is wrong with these values? There’s three too many; and all four of them are too generic to be built into your business processes.
The finance team measures results; The product team advocates for community; The leaders each focus on protecting their own team… …and trust is lost in the shuffle.
But if you do have a culture that drives a business result and warrants preserving — how do you add a whole new layer of management while protecting the culture and maintaining your growth in the process?
Is this article hitting a nerve?
Consider sponsoring a 1-on-1 engagement with me for your high-potential middle manager. Together, the three of us will work through a structured program that’s proven to remove their ceiling and enable you, as their leader, to do your best work.
Alternatively, if you’re looking to unlock the next phase of growth for your team and company, I offer project-based strategy & advisory work for Founders & CxOs. Together, we’ll work through your strategic options, close your go-to-market gaps, and elevate your team.
Enter the 3 Rs of culture:
Rigid – this is where most “strong” cultures fall. They’re driven top-down, often by the founder. They have a hard time with change. When they break, these cultures are hard to rebuild. And all of them do break eventually, because so much depends on the founder’s personality and their ability to be superhuman in the face of adversity.
Robust – next step up, are the types of cultures you’ll often find at successful public tech companies (like eBay). They’re stable over the years and a key driver of business performance. When new leaders come in, they adapt to the culture instead of shaping it in their image.
Resilient ← This is where you need to be as a fast-growing startup.
Let me illustrate with an example from another marketplace.
Within the span of less than 5 years, Upwork:
Was formed through the merger of two competitors: Elance and oDesk,
Went through a near-concurrent CEO and CFO transition,
Saw growth fall off a cliff, bottom out, and re-accelerate again,
Built an enterprise sales team from scratch,
Put in public-company-grade processes and had a successful IPO.
Almost the entire leadership team that took the company public pre-dated the merger.
Through all this, the culture changed. A lot. But it remained constructive: both from an employee experience and business result perspective.
The culture at Upwork remained constructive and resilient over 5+ years because of a strong sense of mission combined with a bench of middle management talent that propelled the daily operations forward and, in turn, freed up leaders to see around corners.
Next week I’ll continue exploring culture — and share what, in my view, made Upwork’s culture resilient (and constructive). And how you can build one within your startup.
This is the end of Part 1: Is your culture worth preserving?
We’ll continue with the 3 Rs of Culture next week:
Part 2: The recruiting strategy behind a resilient culture.
Part 3: Be your own culture demolition expert.
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PS: Today’s cover image depicts the execution of Savonarola in 1498 – a Dominican friar who captivated Renaissance Florence and led its people to burn their cultural possessions. Among those, reportedly, was Sandro Botticelli burning some of his own paintings. Needless to say, Renaissance culture turned out to be resilient.