Startups Need To Scale Corporate Culture During Rapid Growth To Survive
(Originally Posted on Forbes)
As Paul Graham taught us, startups are classified by their rapid growth and ability to reach and serve a large customer base. But startups are also known for spectacular implosions, when rapid growth strains the resources or structure of a company, leading to a complete collapse.
Good startup executives keep their fingers on the pulse of the finances and business mechanics of their companies. They are always seeking the next round of funding, developing an exit strategy, and working to increase their market share.
While these are critical to a startup’s longevity, equally crucial is internal stability, and a motivated and productive workforce. Rapid growth can yield profit and investment wins, but in the startup world, extremely fast growth can lead to structural problems if the corporate culture does not grow at the same pace. For example, Twitter recently experienced some of these growing pains, as employees publicly questioned the direction that CEO Dick Costolo was taking the company, and some key executives left the company as the pressures of growth and internal company dynamics combined to create a public crisis for the company.
So how does a startup create a corporate culture as innovative as the software, hardware or mobile apps that are the base of its business?
First, founders must be willing to adopt a office protocol and evaluation process that sets clear objectives but is not so rigid that it eliminates individuality or inspiration. Dusty Wunderlich, a man who founded his first private equity firm at 29 and is now taking on underserved industries with the digital financing organization Bristlecone Holdings, believes that a combination of objectivity and flexibility is crucial for scaling his first-year finance startup. Despite the company’s accelerated growth (it’s on track to close the year with earnings around the $20 million mark), this entrepreneur is turning his focus inward to foster future growth.
He insists that startups can not grow rapidly if leaders micro-manage or set tight restrictions that prohibit innovation and risk-taking. He stresses that having faith and trust in all of a team is essential. “If you hire good people that believe in the core values of the company and give them objective performance measurements, they will do whatever it takes to be successful and adjust their habits based on objective feedback,” said Wunderlich.
Profit and expansion aren’t the only lightning-speed factors startup leaders need to worry about. Because industries and their respective technologies and consumers also evolve at a rapid pace, startups must establish and cheerlead core values to maintain stability for their team and maintain focus on the core mission. President of San Francisco’s Endeavor America Loan Services, Darius John Mirshahzadeh, works tirelessly to assure employees are hired into a professional family and adopt the values of the company immediately. “If you want your employees to feel invested in your business, get your people to eat, drink, sleep and live those values day in and day out,” said Mirshahzadeh.
The scaling process doesn’t stop upon hiring, however. To keep the passion and energy riding high, Mirshahzadeh implemented daily and weekly “huddles” both in-person and via cloud, makes personal calls to employees each month to exchange updates, and utilizes incentive-and-reward software like YouEarnedIt to keep everyone on the same page and aligned. Mirshahzadeh attributes these corporate culture-scaling successes to his team’s ability to adapt and react with ease and cooperation. In the short year his company has been in practice, it boasts a 90 percent overall retention rate, and continues to add employees and offices that “feel more in sync than ever.”
Finally, it’s important to accept there is no one-size-fits-all for startups, and what does not fit must go. Win Cramer, president and founder of JLab Audio, found early success with his startup’s affordable headphone and speaker products. Cramer’s quick growth forced him to consistently evaluate his team against corporate culture standards and make tough decisions about who stays and who goes. “Weed out those that don’t fit, fast,” advises Cramer. “Nothing can be more problematic to the culture of a corporation that’s growing fast than the person that just doesn’t fit in. I’ve made this mistake and hung on too long, and it bit me in the bum.”