For Entrepreneurs HR Challenges

Designing a working culture for your start-up

Start-Up Culture is important for the success of any start-up. But it is important to not come up with a dreamland solution to the problem. This is still hardcore business at work. It’s not a make a wish list for an utopia.

So the hard facts first:

  • Your culture will attract different people
  • The culture and people you hire will change the execution and success path of your company

I know that sounds trivial. But this is really important to know. Bear it in mind.

Where does culture come from?

As a general rule, your culture comes from your business objective and is the result of meticulous planning. Again, this is not a wish list. It is a cut throat calculation and probably no founder will ever tell you this even if you are in the same circle.

So bear in mind first that you have to (a) create a product, (b) market a product, (c) sell a product, and (d) grow your business.

Let’s do an exercise. Consideration 1 – place: If you want to be a hard core A.I. company, where do you start your start-up? Choose one of the below:
1. Silicon Valley
2. Tel Aviv
3. Beijing
4. Paris
5. A random city of your choice where you are currently located.

Yep, so here it comes: if you want chose 4 or 5, you suck. It is that simple. The idea that you can create any company anywhere nowadays is bullshit. You have to first go to where the people are that supply you with R&D. It is that simple. If you compromise on that, you will compromise on a lot of other things. But you first of all will hire shitty A.I. guys and you will overpay them. Simple supply and demand. You need A.I. guys/gals, and they will not be around. So yeah, that sucks.

Next: Consideration 2 – culture: Now let’s assume you have no other worries than to attract the right folks for your start-up. Well, life isn’t a chillout lounge. So you gotta understand that people are not simply coming because you are there and you have money to pay. Even “A.I. people” are people. And they are attracted by completely different things.

Consider the following options:
1. Breakthrough A.I. research that will change the world and will burn hundreds of millions of dollars. => Go to DARPA or Google. Forget doing it.
2. Cutting edge A.I. to solve a hard, but a big market problem: Yes, maybe Beijing, maybe the valley is a place to get the talent. But that sounds like boring A.I. R&D work and more work on the business side. Is that attracting people intrinsically or for the money?
3. Build anything on top of A.I. that is easily marketable and generates exit proceeds withing three years. Yes, that is the “High execution, high pressure, get things done” attitude that generates dollars for your early employees in form of ESOPs. That will attract high velocity and skilled people who want to make money so they can do what they like doing at home. Those guys typically are mercenaries and they are pretty good at it.
4. Do something illegal with A.I. and make shitloads of money: Yes, that is for the ultra mercenaries that are maybe even better than the guys in 3 – or not. But you won’t get them. Unless you do really really illegal stuff. Mabye some blockchain startups got those guys in the early days.
5. I raised money and want an utopia of happyness culture. Yes, even that will attract people. People who don’t care about execution and just enjoy that they can spend 20% – 50% on their clock doing cool stuff for which they are getting paid. And which are completely not relevant for your business. But hey, people will come, learn and jump ship once something better comes along.

So assuming you have a clear businss vision, clear focus, and you have defined what type of company you want to run, you can differentiate three categories:
a) a try hard fail hard high risk reward company that might change the world and will attract the geniuses of your time,
b) a fast execution company that gets the fast execution skilled people to execute your idea fast and turns everything into cash and a good entry on the resume
c) a relaxed atmosphere leizure company where people study on the job for salaries untill it tanks or somehow gets sold.

I would assume that if you are not yet a lauded serial entrepreneur and a Class AAA visionary, you don’t go for a). And if you are not completely out of your mind, you will not go for c). So you end up with b).

Once that part of your culture is clear – you are a high execution company -, you will need to find out how to attract high execution A.I. folks. And that means a really good story and vision, a decently good office and culture, a good payment schedule including stocks and bonuses, and you must be savvy enough to not hire many of the pitfalls you can hire. And you must be ridiculously good at hiring all the other guys and gals that make this work for everyone.

The pitfals

Now that we understood that location must fit your mission and culture must fit your desired company operating mode, your next job is to also find out how to not hire the wrong people. Here are some basic frameworks:

  1. Framework 1: Givers, Takers, Matchers
  2. Framework 2: Drivers, Visionaries,
  3. Framework 3: Chillers, Killers, Billers

Enough frameworks for now. Let’s look at Givers, Takers and Matchers. 

Givers enjoy sharing their knowledge and collaborating. Matchers try to give as much as they take. Takers try to take credit for other peoples work and push work and blame to others. They are selfish optimizers of their own fate. In any company, the mix makes the music. Too many takers, and your matchers start burning out the givers. Givers leave. Success goes lowball. Takers leave. Matchers remain the company becomes mediocre or dies. The management part of hiring and retention is to identify and eradicate takers from your company in a successful and fast way. The administrative side is to maintain a healthy balance between givers and matchers.

What about Drivers, Visionaries, Dreamers, and so forth. 
Drivers are people that get the direction, and they start to execute fast and meticulously against a plan. They are 80/20 people. They want to get things done so they work and do it fast. They are not perfectionists. They drive towards results in a meaningful way.
Visionaries understand bigh pictures well and have profound understanding of their domain, and see where things are going. But they tend to lose focus on the hard work on the ground. Strategy folks that don’t know how to cook an omelette and don’t do it when it needs to be done. Too many generals kill an army.
Dreamers are even worse, they don’t even know the vision. They are completely misaligned with reality and their visions are dysfunctional utopias that make no sense. They are easily isolated in good environments and are driven to the ground when they want to back up their claims, which they will never manage. They are hard to control and typically leave fast or kill the execution of everything beneath and next to them.
Perfectionists want to do everything perfectly. At some point also detail-dreamers. But they can cut down your velocity quickly. They are less likely to cooperate well and even if they are givers, they will make everyone worry too much about the nitty gritty. Fail fast, fail forward. They are good for some jobs, especially if they have a driver feature in their personality.

What about chillers, killers and billers. In short, chillers enjoy the work life in your company and they maximize their enjoyment of the worklife. This can be by contributing to a positive atmosphere. By connecting people that otherwise would not connect. So they have good aspects. But they also slack around a bit. Too many slackers and no connecting work to be done, and they start throwing footballs around, go ice cream tasting every hour and the whole work joint is an amusement park with no execution.
Killers are mission driven. They work extremely hard, and they want the reward for it. A group of killers can still cooperate, when they all want to achieve the same goal and their fate is intertwined. So killers are the types you find in consulting and banking. They are execution monsters and they frown upon anyone non-killer as weak. But they might still be empowered by a chiller, if he reduces the team conflict. Killers alone typically create terrible and highly political environments that can be managed with perverse incentive mechanisms, but that typically isn’t the route forward for a product business. It does more better in services businesses.
And billers, of course, those that are only in for the maximum amount of money returned for minimal work. They are the rogue politicians and rats, the ones that bargained well when you hired them. They put others down if it increases their perceived value. And they want more and more and more than the others. They want to be the ones that hack the system. The classic kiss up and kick down folks. Just like takers, billers must be identified and let go.

Mix means music

Now you cannot hope to only hire high performers. And you cannot hope to have a superior culture without friction. You will hire people that are not killers. You will hire billers and takers. The culture you create in your start-up must, however, ensure that the right incentives are given to the right people. And that brings us to another anecdotal view on how founders misunderstand culture.

Let us be honest: Putting a billard or a soccer table and playstations into your company offices will very very likely not attract killers, high performance or intellectually smart folks. If you think adding this table in the company will create a friendly culture, you are the most stupid founder on earth.

Team cohesion is driven by the attraction of the culture not because of the culture alone, but by the mix of people it attracts that then become cohesive and create the culture.  The mission and human resource pool is what you put together to create culture. And to nurture the positive aspects of that culture and lower the impact of the negative aspects of that culture is what creates a fun work culture.
If people want to hang out late at night, then they want to do so because there is a reason and some sort of cohesion. Put a bunch of math people in a room with lots of white boards and time to discuss models and algorithm and give credit if they solve a really hard and relevant problem of your organization, they might stay in late to do exactly that. Put a bunch of punching bags into your place and create an enemy – for example competition -, and maybe some killers will punch it out in the evening and discuss their successes and weaknesses and how to be even more fierce warriors of success.

Put a smokers room and a lot of weed into the recreational area, and you highly stressed vegan execs might use it to come down and discuss things they otherwise wouldn’t discuss.

But putting a billard or table soccer somewhere will only invite boring people to play a boring game and talk about boring stuff. Who talks code, strategy, numbers, sales or whatever on a table soccer table? Repeat this question 20 times in your head and try to find a correct answer. The thing is entirely different when the founders enjoy table soccer and crank it up every evening and that joy was visible and shared by new joiners and is one of the reasons why they joined. Putting a soccer table into the office and having nobody really love playing it is idiotic and creates a culture of unauthenticity and disgust towards the management vision of culture. If nobody really likes the recreational activity opportunity put in place and nobody puts an effort into getting it, it is a piece of waste. And it will not sell your culture.

By not doing a “hey we are hip and fresh” atmosphere, but by actually creating and living a relatable culture, people know what they get into. And you attract the right people to join your already right team.

Defining culture top-down

WIth all that prequel information, the way you design culture is fairly straight foward. You have a clear business vision and SWOT of different location options and have an organizational planning model in your head and you know who you want to recruit for what reason.

You define your core values in a way that (a) you have a clear direction on expectation management – “Execution culture” -, (b) a clear and achievable goal everybody will work against, (c) a mix of attributes you know will sell the job to the audience you want to sell to. Not a single item here talks about what you as a founder would like to have as a culture or what your negative experiences were in the past. Culture is about setting expectations of success, a metric or goal of success and smoothening out towards market demand. That market demand part is as much subject to testing and validation as your product-market fit exercises. Your culture is a product to employees. And not just any employee. The employees you need to hire and manage to get from A to B.

Your culture should be authentic. If you are a fun culture, then define what the fun part is, when it is acceptable to have fun, and make sure everyone you hire has fun with this fun part. If your fun part is going out with the team every evening, I can assure you that you will not attract A players. A players enjoy the work with smart people, getting things done and then having a solid private life.

Your culture should be transparent and sincere. If you run a high velocity, high throughput and high stress company, you should ingrain that in your culture statements. And you should plausibly connect this negative aspect of your culture with a strong motivational context. Be it market leadership. A solid exit. A win in a very challenging environment. A tiny step towards a better world. But don’t talk or write about culture just saying you do good things and everything is fun. People that join a company that isn’t tellking them what is expected by them will wait for cues. If you don’t want to spend all you days shipping cues to everyone, make it explicit and hire people with the right expectation in their heads.

Focus on intrinsic rewards and cultures that create success under the intrinsic reward system. If the intrinsic reward is state of the art application of A.I., make sure you hire people that know how to operate in state of the art A.I.. Or you become unauthentic and the intrinsic reward of someone being great in A.I. will be low. The intrinsic rewards can relate to personalities you attract, mission and vision of the company, the actual work done and successes earned, the ROI on learning and growth.

Extrinsic rewards can matter, too, but must be authentic, too. Worklife balance is good. But only if the company succeeds. Don’t advocate work life balance if you are in the hardest market in history. You run against the clock and your burnrate. Competition isn’t sleeping. The world isn’t sleeping. Don’t sleep as a company. Or your intrinsic reward systems fall apart. Again, sports and food is good. But again, if you want healthy employees, hire healthy employees. Don’t force feed health and sports into a culture when nobody you hired wants to participate in your view on food and sports. Maybe everyone prefers surfing on vacation or weekends. In that case it might make more sense to cut down to 4 days work per week and 16 hour days and have them enjoy the beach rather than getting gym cards and showers.

Fairness is king. If you pay your best foot soldiers less than your self and you own 20 times their equity, you are not a king, but a greedy dictator. Rumor has it that good founders have solid vesting and ESOP pools put into place, and negotiate hard on their funding rounds, while paying themselves a low amount of salary and being very picky on spending on bullshit. The relative amount of cash burned on the happiness of your best employees against what you pay yourself as a founder is what makes you a leader. Remember that all you are selling pre-exit is a burning dog. It can die any time, and any job can die any time. The people working for you aren’t your idiots or dogs. They deserve proper treatment. And this also includes getting rid of people that are not supporting the cause of your business and focusing the resources on supporting those that do support the business in exceptional way.

So far so well. If you now acknowledge that every hire impacts the culture and cultures are steadily changing themselves, you have to undertand how to navigate culture in transit. And you need to understand when to change the wheel and when to dispose of a dead limb. If you do that well, your culture will grow as your company grows and will become more and more successful.

Summarizing

Your goal as founder is to create a company and a culture that is either sellable – if you head for a trade sale – or competitive – if you head for IPO. In order to get there, you need to create a culture that attracts.

But not just attracts anyone, but the people you need to make the company work. Don’t build culture on utopist views or vague feelings. Culture ultimately evolves, runs, survives and can be created alongside the evolution of the company and all its employees.

Hope this was interesting.

 

 

 

 

 

 

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