At a recent entrepreneurship event I attended, an experienced serial entrepreneur looked at all of the young founders and aspiring founders in the room, and said, “The most important thing that you will overlook in your startup is your culture.” The growing attention to the importance of culture within startups suggests that this serial entrepreneur was not wrong. And yet despite the recognized importance of your startup culture, it can be difficult to know where to start. Isn’t it enough to host an annual off-site retreat and then perhaps invest in a foosball table?
To answer this, let’s start by unpacking the above quotation. According to the serial entrepreneur, culture is hugely important. Indeed, I would agree. It is widely recognized that many startups thrive or fail not necessarily because of the quality of their ideas but because of the quality of their culture. For instance, it should be apparent to many of you that investors are prone to scrutinize founding teams and team dynamics more than the specific details of particular ideas. Why? Well, because these investors recognize that while ideas change all the time, negative patterns of interaction between a team can be much harder to change and overcome.
Next, the serial entrepreneur is suggesting that despite the perceived importance of a positive startup culture, very few founders actually think about culture until it is too late. Why? I believe there are two key reasons. The first is perceived scarcity of time. One thing that I have never heard a startup founder say is, “You know… I just have too much time on my hands.” And so, in these time-scarce environments, entrepreneurs often feel they must prioritize “putting out fires” related to product development, sales, and fundraising, even as culture takes a back seat. For this reason, many startup cultures can be described as emergent, wherein the patterns of behaviour that define the culture—whether positive or negative—have become embedded through largely random interactions between team members.
However, there is perhaps a more important reason that many entrepreneurs fail to invest in building a positive startup culture, and that is because most entrepreneurs do not know where to start. While a growing set of tools and resources expose entrepreneurs to a scientific method for developing their startup ideas, the same cannot be said for startup culture, which is often viewed as abstract and thus difficult to prescribe a step by step process for improvement.
In the remainder of this article, however, I’d like to suggest that entrepreneurs should not be leaving their startup culture to random chance. Instead, entrepreneurs should take the opportunity to prioritize the design of a positive startup culture from the outset. In particular, there are three features which existing research suggests are likely to lead to a startup culture that thrives: 1) Purpose, 2) High-quality connections, and 3) Psychological safety. In the sections that follow I will define each of these features and offer suggestions for how you can develop each within your startup.
Purpose
The term ‘purpose’ has been thrown around a lot recently, but the reason for this is obvious and well justified. People want their actions to mean something. Employees want to believe that their work is more than just a labour transaction. Customers want to believe that their purchases are more than just a consumer transaction. External partners want to do business with companies that are meaningful and trustworthy. As a recent study from Deloitte revealed, companies that prioritise purpose-driven cultures achieve 30 percent higher levels of innovation and 40 percent higher levels of workforce retention (O’Brien et al., 2019).
Purpose can be best understood as the claims which offer the startup a clear raison d’etre (or reason for being) while serving as a core feature of the organization’s overall identity—the central, distinctive, and enduring features of the organization. Let’s unpack this.
For purpose to be central to your startup, the associated claims must resonate with all stakeholders and offer a platform for those stakeholders to engage effectively with one another. If your purpose is to maximize remunerations for the founders and your investors, this can marginalize many stakeholders who are likely to view such statements of purpose as peripheral to their everyday actions. A simple exercise to determine the centrality of your purpose would involve, first, listing out your key stakeholders, their interests, and motivations. And then second, consider how your stated purpose aligns with each of those interests and motivations, while also offering a critical source of meaning to your startup’s engagement with those stakeholders.
High Quality Connections
We live in a distracted world. Our attention is pulled in so many different directions, and this is particularly true for founders and teams within early-stage startups. In a world that seems to care most about the size of your network or your number of followers, the result is that our interactions within and across organizations can oftentimes feel transactional. And this prioritization of transactional efficiency within startups can perpetuate a sense of disconnection that makes it hard to avoid the emergence of more corrosive relationships. The ultimate irony is that when key relationships within and around a startup start to corrode, the result is not only diminished creativity but also limited efficiency.
Professors Stephens, Heaphy, and Dutton (2011) distinguish high quality connections from other types of connections by their emotional carrying capacity, tensility, and connectivity. In other words, connections exhibit higher quality when they allow for greater expression of (both positive and negative) emotion, are able to withstand strain, and are more open to new ideas.
Although there are a wide range of possible interventions to develop such high quality connections, the most effective ones will often involve changes that stem from the top. As founders of a company, you have the opportunity to shape the culture of the organization merely by how you choose to show up each day and engage with connections.
Specifically, research suggests that founders can foster higher quality connections by prioritising the following 5 steps (Dutton, 2003):
Convey presence – When meeting with a team member, set aside other distractions in order to be more fully available to connect
Be genuine – Respectful engagement cannot be mandated, it must be practiced authentically
Communicate affirmation – Look for opportunities to publicly recognise team members’ unique talents and human qualities
Listen effectively – Learn about individuals’ points of view rather than seeking for opportunities to assert your own point
Communicate supportively – Seek opportunities to make requests rather than demands
Psychological Safety
One of the ironies of building a strong startup culture is that if the culture is, in fact, too strong it can encourage conformity and undermine out-of-the box thinking. How then might you encourage a strong purpose-driven culture without encouraging group-think? The answer is psychological safety. Harvard professor, Amy Edmonson, defines psychological safety as an aspect of an organizations culture, specifically “a shared belief held by members of a team that that the team is safe for interpersonal risk taking” (Edmondson, 1999).
Such interpersonal risk taking is critical, as it allows organisations to capture the benefits of diversity. Although prior research has often celebrated the potential effects that diversity can have on important outcomes associated with innovation, creativity, and organizational success, some studies point to the potential for conflict that can emerge as team diversity increases. By fostering a startup culture that is characterised by psychological safety, team members will feel opportunity to surface new or critical ideas and express vulnerability. Although founders may not necessarily act on every idea that is surfaced, they are taking active steps to welcome those ideas and use those ideas as important inputs in the decision-making process.
One simple step that many startups have taken to foster such a culture is to issue a regular team survey, asking how comfortable they feel in challenging other team members’ approaches or in asking for help.
As you look back on the founding period of your company five years from now, I hope you will be able to prove wrong the initial quote from this article, because you now know where to start to build a startup culture that thrives. Specifically, when it comes to developing a startup culture that thrives, investing in these three cultural features—purpose, high quality connections, and psychological safety—are well worth your scarce time.
References
Dutton, J., 2003. Fostering High-Quality Connections. Stanford Social Innovation Review.
Edmondson, A., 1999. Psychological Safety and Learning Behavior in Work Teams. Administrative Science Quarterly 44, 350–383.
O’Brien, D., Main, A., Kounkel, S., Stephan, A., 2019. Purpose is everything [WWW Document]. Deloitte Insights. URL https://www2.deloitte.com/us/en/insights/topics/marketing-and-sales-operations/global-marketing-trends/2020/purpose-driven-companies.html (accessed 6.23.22).
Stephens, J.P., Heaphy, E., Dutton, J.E., 2011. High-quality Connections. Oxford University Press.
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