The company culture that fueled early growth in now ineffective and diluted. Many times, founders take culture for granted as they get consumed with other demands of scaling. One day, they wake up to find their small startup is now larger with 20, 30, 50 employees who are disengaged and unproductive.
Culture mismanagement is the 4th major reason why startups fail.
Major Reasons Why Startups Fail
- Lack of market need
- Insurmountable business/economic issues
- Inability to secure funding
- Organizational culture
There are 3 factors that play into the scaling of culture: Clarity, Design, and Practices.
- Clarity of Culture: A business’ desired culture must be defined precisely and communicated consistently. Why does the business exist? What are its goals/core values. These should be consistently communicated to all employees.
- Culture Design: It’s not enough to talk about the desired culture. Moreover, leaders must also be role models and create an environment that supports and nurtures it. Employee Experience (EX) is another design feature. Just as companies now identify Customer Experience (CX) organizations must do the same for employees. Airbnb scaled quickly and successfully because their mission of creating a world where anyone could be anywhere, that became part of the employee experience. Free vacations were offered to all employees including extending that perk to potential new hires.
- Culture Practices: Merely intending to make culture a priority doesn’t ensure it will happen. Nevertheless, leaders must engage specific practices to build culture into the way their business is run and include culture audits.
In addition to skills, experience, and job fit, potential employees should be screened for ‘values’ fit. Businesses must develop ways of identifying the attitudes and behaviors that indicate alignment (or lack thereof) with the company’s core values. Use them to evaluate every candidate.
Document promises that keep the company’s founders aligned with the culture. Admit mistakes and unknowns immediately. Vow not to hinder company growth for any reason (personal or professional). Try not to do everything yourself’. Slow down and be thoughtful, collaborative, and patient. These actions build culture.
Like financial performance, a firm’s culture needs to be assessed on an annual basis. Walking around offices and work areas and taking notes of what you see and hear. How are employees reacting to each other and their environment? The audit should be conducted by a cross-functional team with outsiders who can offer a fresh, objective input. Then, management should review the audit and assess if the health and values of the culture matches the companies values and goals.
Scaling is impacted by things that are outside the control of management such as competitive developments and market conditions. Culture is within the control of management. By implementing culture clarity, design, and practices, management can scale culture — and successfully go from startup to scale-up.
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