The Actual Point Of Company Culture

G+D #9 | Corporate Variant #8

Trying to discuss the quality of an organization without discussing their company culture is like trying to discuss The Sopranos without bringing up gabagool, depression, and Green Grove (it’s a retirement community!) - it just doesn’t work.

Research from Glassdoor shows that a good company culture was the highest predictor of employee satisfaction with a job, even above categories like compensation and business outlook.

When thinking of company culture, we immediately look to successful, high profile businesses like Apple and Google to examine what makes their teams stand out. Tony Fadell, one of the creators of Nest and an original key contributor to the creation of the iPod and iPhone, discusses company culture in Build (his reflection on his expansive career). Fadell shares lessons on life and work he learned from his time at General Magic, Apple, founding Nest, and ultimately being acquired by Google.

Fadell is an outlier who built and participated in some of the most notorious company cultures on the planet.

Despite all the wisdom on company culture in Build, the story that stands out to me centers around yogurt. Literally cold, goopy yogurt:

I once saw a person stand up at TGIF, Google’s weekly all-hands meeting - literally a meeting of tens of thousands of people - and complain that their preferred yogurt had disappeared from the micro-kitchens. These snack centers are required by Google to ensure that no employee ever has to walk farther than two hundred feet in search of food. This person felt it was their right, nay, their responsibility, to complain directly to the CEO, with all of Google as witness. About yogurt. Free yogurt. Why is the brand I like not within arm’s reach? When is it coming back?

This is decadence masquerading as company culture. It’s one of those examples where I can’t comprehend the level of delirium necessary to act this way. Maybe this is the type of Eric Cartman entitlement that’s encouraged with such overt office luxury. In fact, the original Googleplex designer doesn’t even think that such a posh office setup is healthy or necessarily in-line with the original intent.

Company culture is critical. It defines how businesses operate, the satisfaction levels of employees, and how effectively teams work together. But it’s not about yogurt or nap pods, it’s about intention, effort, and the fundamental DNA of the business.

Overlapping Interests

In researching corporate culture and its effects, Gallup concluded, pretty much across the board, that team members who strongly agree with the statement “I feel connected to my organization’s culture” are happier, more effective contributors, and more likely to both stick around and promote the organization to potential candidates.

On the other end, while conducting their own research into corporate culture, specifically the perspective of senior leaders, PWC found that “the majority (67%) of survey respondents said culture is more important than strategy or operations.”

Regardless of what happens once the survey data is collected, one thing is clear: tons of people believe company culture is important.

Who cares?

Well, it shows there’s more commonality here than people might initially think.

Businesses, generally, want to execute on their mission and vision, achieve a reasonable level of growth and productivity, and be profitable.

Workers, generally, want wealth (time, money, autonomy), experience, and purpose.

And as those company culture research polls showed, there’s significant overlap in potential solutions to the separate goals of these two groups. Most of that overlap exists within the idea of corporate culture - i.e. how a company is run, its values documented, its work executed, and all those ideas being codified, reinforced, and defended.

Real company culture (i.e. not yogurt guy) matters. When built with intention and effort, it makes stronger companies, teams, and products.

Perception vs. Reality

Yogurt man highlights a key issue with company culture today: the narrative around it. What should people expect? What should companies offer?

Similar to a journey for purpose and peace in your life, the real rewards come from focusing on the fundamentally important components of corporate culture and work (for both companies and employees). Things that improve employee lives, raise employee satisfaction, and increase team productivity and effectiveness.

People easily develop a poor understanding of what company culture should be, how to implement it, and how to evaluate it.

To better showcase this gap, there are two common but critical concepts to highlight:

1. Perks versus benefits - superficial improvements versus quality of life and work improvements

2. LARPing and mimicry - going through the motions - the checklist - of company culture and looking to other companies on what to do in our own organizations

Starting with perks versus benefits, let’s go to Tony Fadell again to help articulate the difference:

Beware of too many perks. Taking care of employees is 100 percent [the CEO’s] responsibility. Distracting and coddling them is not. The cold war of ever-escalating perks between startups and modern big tech has convinced many companies that they need to serve three gourmet meals a day and offer free haircuts to attract employees. They do not. And they should not. Keep in mind there’s a difference between benefits and perks:

Benefit: Things like 401(k), health insurance, dental insurance, employee savings plans, maternity and paternity leave - the things that really matter and can make a substantive impact on your employees lives.

Perk: An occasional pleasant surprise that feels special, novel, and exciting. Free clothes, free food, parties, gifts. Perks can be completely free or subsidized by the company.

Perks are nice, but superficial. Benefits are substantial and fundamentally improve quality of life.

The difference between the two can cause serious problems in resource allocation and strategic planning for culture. If a company focuses on getting beer and coffee kegs instead of fixing a fucked up performance review process, they’re worrying about perks instead of benefits (i.e. real, meaningful changes). This happens all the time. People don’t feel like they have upward mobility, a competent manager, or any real purpose at work, but they can join the happy hour committee and make sure everyone gets two beers next Friday.

I’d argue people leave companies for a lack of a benefits, not a lack of perks.

The other big issue is a one-two punch where companies pretend they’ve done the work to establish a real company culture. They throw this costume party by doing 2 things:

• LARPing - They present the right decorations, design, and buzz words on their website and in their company handbook

• Mimicry - They look at what other marquee companies are doing and select a handful of the “best” culture elements to copy and adopt

Here’s how Ben Hunt from Epsilon Theory explains LARPing:

LARP is an acronym for Live Action Role Play.

It’s what Civil War reenactors do when they dress up in Union and Confederate garb to fight a pretend battle, or what Dungeons & Dragons aficionados do when they dress up as wizards or paladins to fight a pretend monster.

[Side note: the original Epsilon Theory article on LARPing is much more serious in tone and MUCH more important than what I’m writing here, you should read it.]

You know, like when companies talk about transparency and the exciting new re-org at the all hands meeting. Or when the company website gets updated to include words like “meritocracy” and “integrity”. Or when HR releases the updated employee handbook that articulates how dynamic and rewarding your work environment is.

All while you sit in your annual review session, alone, waiting for your manager to show up late and unprepared. Or while you stare at your laptop screen at 10pm, going the extra mile to ensure the 12 month project finally goes live on time, only to find out your raise request was “temporarily shelved while we navigate the changing economic landscape”.

LARPing is putting up window dressings so a company can check all the boxes to pretend they have company culture.

The other side of the window dressing coin is mimicry. A company outsources their organizational identity. Leadership teams look at companies like Google, Apple, and Amazon to pull over whatever elements of culture catches their eye, hoping it inspires similar success.

The only problem is you’re not working at Google, Apple, or Amazon, so why the hell is your first step in defining company culture to try to be like someone else?

Conceptually, of course it makes sense. It’s always beneficial to examine other companies and attempt to improve your own. But outsourcing something as important as the identity of your company to a simple “what did Jobs and Bezos do?” is ineffective and naïve. Building a company culture is incredibly hard and important - you can’t and shouldn’t just outsource it. There’s another key reason not to simply mimic companies around you: The Halo Effect.

The main problem Rosenzweig describes in the book is that attributes we tend to think cause great performance (culture, leadership, etc.) are often just things that are attributed to companies we already know are high-performing. There’s a Halo around everything they do.

How many current high-fliers would ever be described as having a bad culture, or bad leadership? It would be nonsense to say it. Thus, we run into a recursiveness problem. High performing companies have a great culture, and great culture is defined as the attributes that cause high performance.

In other words, when you ask someone if Apple has a great corporate culture, they will tell you it does. (And it’s an extremely successful company, so of course it does.)

But when we try to pinpoint which aspects of Apple’s culture make it more successful than its peers, and which would be predictive of success at other companies, we run into a difficult problem.

The Halo Effect tells us that we will find a lot of false positives. The attributes we think are causal of success are the same ones we often deem causal of failure when company performance deteriorates. This is the strategy paradox. - Farnam Street

Ultimately, people are lazy. We like to look for shortcuts. Perks are a shortcut. LARPing is a shortcut. Mimicry is a shortcut. An example like the Halo Effect, shows the damage and trickery these shortcuts can cause.

The ultimate issue with these shortcuts is that companies spend an insane amount of energy, time, and money building culture that is inherently not theirs, ineffective, half-baked, and thoughtless. It establishes a culture that doesn’t adequately represent the company, because the leaders never took the time to sit down and do the work to define who they are, what they stand for, why it matters, and how it can help their team members. Which, when you read it, is sad.

These solutions miss the point of corporate culture entirely. Corporate culture is the mechanism to define and reinforce the DNA of a business, and thereby maximize the clarity of its strategy and the effectiveness of its team. It’s about connection and purpose for everyone involved.

Margaret Heffernan, author and former CEO, highlights how important a company culture is on The Knowledge Project by discussing how the relationship between coworkers is fundamental to the function of an organization:

…the whole premise of organizational life is that together you can do more than you can do in isolation, but that only works if people are connected to each other. It only really works if they trust each other and help each other. That isn’t automatic.

Start With A Better Framework

I believe company culture is has 6 fundamental components:

• Mission - what the organization builds, why and how it does it, and who it’s for

• Autonomy - the ability to take chances, make decisions, and have some independence on how the work is done

• Leadership - the linchpin; culture is a top-down system - leaders must establish culture then vigilantly promote, defend, and embody it at all times

• Community - the types of individuals the company hires, how they work together, and the sense of support and comradery on teams

• Opportunity - how team members are compensated, the quality of skills or knowledge they can gain, upward mobility potential, and ability to contribute to the mission

• Communication - the consistency, tone, proactivity, accuracy, and level of kindness expected from interactions across all levels

The success of any corporate culture is the direct product of how much effort and thoughtfulness an organization puts into building out their own definitions, values, processes, and quality assurance around these critical elements, and ensuring it’s represented in their team and everything they do.

Each organization has to determine what blend of these concepts is right for them. However, none of these categories can be ignored without having a broken element of corporate culture.

For instance, former Navy Commander Michael Abrashoff put a special emphasis on autonomy while commanding the USS Benfold:

When people feel they own an organization, they perform with greater care and devotion. They want to do things right the first time, and they don’t have accidents by taking shortcuts for the sake of expedience.

[…]

I am absolutely convinced that with good leadership, freedom does not weaken discipline— it strengthens it. Free people have a powerful incentive not to screw up. - Michael Brashoff, ref: Farnam Street

Again, no single solution.

Another example, Ken Iverson ran steel company Nucor. He had developed a company culture that led Nucor to be extremely successful over a long period of time in a brutal industry. Some highlights:

• A strong focus on decentralization that allowed each plant to operate as their own entity (autonomy)

• An unfluffed goal to “build manufacturing facilities economically, and to operate them efficiently. Period.” (mission)

• A removal of unnecessary hierarchy and status structures, creating an environment where “managers don’t have to waste time fretting over their chances to get the fancy corner office or arguing over who gets to use the company plane. We don’t have those perks, and we imagine they would cause a lot more stress than fulfillment.” (opportunity, leadership, community)

And my favorite example?

And when it came time for pay cuts, everyone shared in the pain. What a simple, yet generally unused concept:

Why, then, would workers who had endured deep cuts in pay and who had every reason to fear for their futures reach out to share a laugh with a manager passing through a mill? Simple. No employee was being asked to carry more than his or her part of the burden.

You see, their department heads had taken pay cuts of up to 40 percent, and the general managers and other officers of the company were earning 50-60 percent less than we had made in preceding years. My own pay dropped that year to about $110,000, from about $450,000 the year before. We not only shared the pain, but doled out the lion’s share to the people at the top. - Ken Iverson, ref: Farnam Street

[Side note: seriously go read that entire Farnam Street article on Ken Iverson and Nucor, it’s truly impressive and inspiring.]

Ken Iverson sounds like he ran a pretty fantastic company in a pretty brutal industry. He did it without the Googleplex, wellness rooms, company cars, and micro-kitchens. Sounds like a place that understood what they were trying to do, valued people as human beings, and their company culture showed that.

That’s the big trick - company culture isn’t branding, perks, and status symbols. It’s not how well a company can coddle you - it’s the level of focus, integrity, and effort a leadership team can establish, live by, and share with their team.

It’s about creating a community where everyone gets to work hard, is treated fairly and honestly, and where the stakes, goals, and dynamics are clear and consistent.

Real company culture is purpose, not perks.

What’s It All For

Establishing and evaluating work culture is insanely subjective. It’s an intangible art that requires constant effort. The questions we ask to understand company culture are simple, the answers and implementation are not easy. We all have to do what we can to figure out what works for us - at our companies and in our lives. It’s a deeply personal experience.

After all, there’s no right answer. Work being hard doesn’t necessarily mean you have a bad company culture. And work having nap pods, pool tables, or record players certainly doesn’t mean you have a good company culture.

What matters is remembering the truly important things. Like love and relationships in life. And community, depth, and purpose at work. There’s no time to waste confusing superficiality for substance. Oh, and never, EVER be yogurt man.

The species that endured for millions of years (bees, ants, etc.) have several shared attributes: They cooperate, are remarkably adaptable, and work. The temples we pray in, the media we stream, and the vaccines that protect us are a function of other people’s work. Your work, whether at home or for an organization, will play a huge role in your happiness. Early in adulthood, work is a vehicle for establishing self-sufficiency. Later, hopefully, it becomes a source of self-esteem and a way to feel connected to others and society. Opportunity, relationships, and mental health can be difficult to recognize, as often they come disguised as work. - Scott Galloway

Company culture is the scaffolding that enables many of the beautiful heights of life to be reached. Things like professional relationships, earned knowledge, mentorship, and purposeful contributions all emanate from our work. It’s a fundamental mechanism on how we get to participate in the world. How we get to meet incredible people and learn incredible skills.

When you frame it this way - that it’s a core support structure for cooperation, progress, and contribution - the importance of company culture becomes undeniable.

It’s something that deserves (and requires) intentionality and effort.

Because we deserve it.

With love/paranoia,

Nick