Why creating your business culture is so important – and sustaining it can be so hard
How should founders define, measure, evangelise, and evolve their business culture? How should CEOs ensure that their organisation continues to stay relevant and innovative in the face of competition? Insightful and provocative answers are offered in What You Do Is Who You Are: How to Create Your Business Culture, a book by Ben Horowitz.
The book draws on dozens of examples from contemporary businesses, and from outside the corporate world as well. The writing style is direct, fast-paced and provocative (and liberally sprinkled with profanities).
Ben Horowitz is the co-founder and general partner of Silicon Valley VC firm Andreessen Horowitz, with investments in Airbnb, GitHub, Facebook, Pinterest, and Twitter. He was also the co-founder and CEO of Opsware (formerly LoudCloud), which was acquired by Hewlett-Packard for $1.6 billion in 2007. His earlier book is The Hard Things about Hard Things: Building a Business Where There Are No Easy Answers.
Here are my four clusters of takeaways from the 275-page book, summarised below. See also my reviews of the related books Multipliers, The Culture Code, Trillion Dollar Coach, The Messy Middle, InGenius, BlitzScaling, and The Moonshot Effect.
Culture is how a company makes decisions. It is the set of assumptions employees use to resolve everyday problems, ranging from product colour and length of meetings to choice of hotel and integrity in customer interaction. It is reinforced in micro-behaviours and not just big actions, Ben begins.
At the same, culture is not enough for a company to succeed – it must also have a good product/service offering, and an effective and profitable strategy to thrive in a competitive market. Companies that have been successful for a while also had toxic cultures, Ben cautions, citing Enron as an example.
Culture is an alignment of a founder’s personality and strategy of the company. As markets and societies evolved, founders and CEOs will need to modify the culture to make it relevant and effective. A culture’s strengths in some contexts may lead to weaknesses in other situations, hence the need to focus on evolution for success.
“Culture only works if the leader visibly participates in it and vocally champions it,” Ben emphasises; leaders must walk the talk. “Your culture is how your company makes decisions when you’re not there. It’s the set of assumptions your employees use to resolve the problems they face every day,” he adds.
Unless care is taken to formally define culture, it forms accidentally and can lead to ineffective performance. Even practices not formally addressed can become culture if ignored.
Values are much more than posters, marketing campaigns or even beliefs. They are manifested in your behaviours and actions. Not all companies fully live up to all their values all the time; the aim is not to be perfect, but to be better each day, Ben explains.
Values like integrity and honesty can be hard to live by, in particular. This is because they can lead to loss of business if a company refuses to engage in certain types of deals or eschews corruption.
Sometimes, cultural designs have bugs and can lead to unintentional side-effects. Even ethically designed principles can interact in unexpected ways; it takes hard calls and negotiation to reconfigure them, Ben explains.
“It’s impossible to design a bug-free culture,” he cautions. “Ethics is not easy, it’s complex,” he adds. It is not just the what but why and how of values that matter.
New employees are a good source of insights to understanding what is good (or bad) in one’s business culture, and what can be fixed, based on their prior experience with other companies. The orientation period is a good time to explain and reinforce core culture as well, in terms of what practices are rewarded or punished.
First impressions are lasting impressions, Ben emphasises. Cultural principles should be transferred to employees in a way that sticks. Diversity in the workforce should go beyond quotas to cultural cohesion. Rules specified for the company should be memorable, straightforward, and encountered daily.
As a company grows, founders will have to change their own culture as well. For example, getting an investment or going public means being willing to be audited by an outside firm and living by their rules of compliance.
There are also variations in sub-cultures within organisations (e.g. sales, engineering) as well as cultures in broader industries (e.g. tech, legal) and even regions and nations (e.g. Silicon Valley, east coast; Japan). Hip-hop artists created a new culture based on candour and a hustler’s mentality, Ben observes.
Examples from history
Examples in the book are drawn not just from other businesses, but also social movements and traditional communities. They include Haiti’s Toussaint Louverture (leader of the only successful slave revolt), the Samurai (who ruled Japan for 700 years), Genghis Khan (who built the world’s largest empire) and Shaka Senghor (reformed prisoner and author of Writing my Wrongs).
Toussaint Louverture inspired Caribbean slaves to not just revolt but become builders of the economy and nation. The Haitian forces eventually beat Spanish, British and French colonisers. Toussaint built a hybrid culture, included outside leaders, led the way by example, and enforced some rules which were shocking at first but made sense in the long term.
Japan’s samurai called their principles virtues rather values, with an emphasis on practice and not just beliefs. They were crisp, coherent and comprehensive, and explained in the form of detailed stories and scenarios.
The eight virtues are justice, courage, honour, loyalty, benevolence, politeness, self-control, and sincerity. The samurai culture of carefulness and attention to detail has its roots in appreciating that death may strike at any time, and pride in quality is important to be remembered for.
Shaka Senhor reformed himself and his prison gangs through deep introspection, reading books (eg. The Autobiography of Malcolm X), forming study groups, and bonding through discipline and regular activities. To become better people, they reformed themselves and their group culture.
Genghis Khan drove a range of cultural innovations in military and governance to ensure loyalty, meritocracy and inclusion. He went beyond ethnic and religious ties in recruiting leaders and engineers, and accepted the linguistic script of the Uighurs.
Cited business leaders and companies in the book include Reed Hastings (Netflix), Jeff Bezos (Amazon), Steve Jobs (Apple), Travis Kalanick (Uber), Bob Noyce (Intel), Stewart Butterfield (Slack), Diane Greene (VMware), Don Thompson (McDonald’s), and Maggie Wilderotter (Frontier Communications).
For example, frugality as a culture is practised at Amazon, whereas generating brilliant designs is paramount for Apple. Amazon had desks made from old doors in its early days; Apple spent $5 billion on its new headquarters.
Apple’s desire for well-integrated products led it to combine hardware and software; it stayed focused on a small product range but in a few critical categories. The company’s culture is of “user experience perfectionism.”
Apple’s clearly-defined focus contrasts with Google’s pursuit of a broad range of breakthrough ideas. Larry Page eventually reconstituted the myriad ventures under the Alphabet umbrella.
Amazon has a culture of ‘no PowerPoint presentations in meetings.’ Instead, short written documents are circulated before meetings, to help absorb information faster.
Bob Noyce of Intel created a culture different from the ‘feudal’ east coast approach. The focus was on empowerment and meritocracy, manifested in office cubicles and casual dress code. Engineers were given stock options and treated as co-owners.
Facebook initially had a culture of ‘move fast and break things’ in its early phases when speed was paramount. This was later changed to ‘Move fast with stable infrastructure’ when a reliable platform became important for its partners as well.
When LoudCloud was under pressure to increase sales, Ben brought in a hard-driving outsider who changed the culture of cordiality and consensus into competitiveness and urgency. Mark Cranney insisted on a sales team culture defined by ‘4 Cs’ – competence, confidence, courage and conviction.
VC firm Andreessen Horowitz practices some samurai principles in its commitment to respect for founders and startups, and telling the truth even if it hurts. This is not the same as being ‘founder-friendly,’ which may lead to a ‘culture of lies’ while avoiding uncomfortable truths.
Reed Hastings launched Netflix with a DVD rental model. But when the time came to shift to broadband streaming, his new management team did not include any DVD executives, since he wanted a culture that focused more on technology than logistics.
Uber’s original culture code had 14 principles and eight qualities, but some of them interacted in unexpected ways to create a toxic culture where competitiveness at all costs was valued. This led to unethical practices like hacking competitor apps and ignoring harassment practices of high performers.
Stewart Butterfield of Slack promoted a culture of empathy. But to deal with people who objected that feedback could hurt feelings, he emphasised collaboration as a core value. This helped employees raise the performance of the whole group.
Tom Coughlin of the New York Giants enforced a culture of punctuality by fining those who came late for meetings. VMware strengthened its industry partnerships with a 49/51 sharing formula, in favour of its partners.
Lee Endres of Nation Builder reinforced habits of better cash collection through constant contact and persistence with the sales team. Maggie Wilderotter of Frontier Communications gave blue-collar workers a stronger voice, and tore down the ‘internal caste system.’ Todd McKinnon of Okta refused a lucrative deal with Sony even though an employee erroneously oversold it.
Cultural principles are followed at the recruitment stage as well. Suresh Khanna of AdRoll recruits people who are smart, humble, hardworking and collaborative. This combination of values is sought in recruits by Slack as well.
Innovative giants and startups have a culture where ideas are embraced even if controversial or not easily understood at first. Failure is not punished or avoided but treated as valuable learning.
For example, Wikipedia was first regarded as a joke. The iPhone was almost laughable as compared to Blackberry in terms of security and battery power when it was first launched. Western Union passed on an opportunity to buy Alexander Graham Bell’s patents because phone calls were considered too noisy.
All the above examples should serve as insights into creating an organisational culture, but are not templates. It is not effective to try and reengineer the above practices; the culture must be true to your own unique personality and business strategy, Ben cautions.
Culture must begin with first principles, and not just copying others’ best practices, he explains. For example, the casual dress code of the tech sector may not apply to others like law or luxury hospitality.
“The first step in getting the culture you want is knowing what you want,” Ben advises. The culture must be authentic, durable, aspirational, vibrant, and sustainable. The principles should be actionable, distinguishable, impactful and testable.
Leaders must be self-aware of their own flaws, and ensure that it does not propagate in the company’s culture. For example, being too talkative does not fit into a fast-paced culture; leaders should surround themselves with people who have the opposite trait, and agree to have meetings with clearly-defined agendas.
“The truth is that culture and strategy do not compete. Neither eats the other. Indeed, for either to be effective, they must cohere,” Ben emphasises.
The culture should reassure employees that what they do matters, and will not be met with indecision, apathy or bureaucracy. Those who work hard should clearly see that they will be rewarded more than those who don’t.
In growth stage firms, founders should also pay attention to the culture of the board of directors. Some investors may drive hard decisions for short-term gain rather than long-term resilience of the startup and founder.
Warning signs of a faltering culture include high attrition and misalignment between product and sales teams, which may lead to flagging business metrics. Rewards should probably be given for customer delight, not just meeting target numbers.
In serious cases, object lessons or dramatic warnings should be given to those who transgress core values, eg. firing fraudulent employees and their teams. Challenges can arise in dealing with “heretics, flakes, and jerks.”
Individual performance and idiosyncrasies need to be balanced with cultural cohesion in this regard, Ben advises. Approaches like counselling, coaching and negotiation may help to a certain extent.
Ben recommends a decision-making style that combines efficiency and empowerment, and is neither too authoritative nor endlessly consensual or democratic. Mid-level managers should not blame tough decisions on the leader’s whims, but internalise and communicate the tradeoffs involved.
Decision-making should also find a balance between speed and accuracy, depending on the frequency, stakes and inputs involved. The author also distinguishes between the styles of ‘peacetime CEO’ and ‘wartime CEO’ in terms of adherence to protocol, use of profanities, aggressiveness in competition, and business line priorities.
The book concludes by stressing the cross-cutting importance of trust and loyalty as foundations of all business cultures. It calls for adherence to the truth, but telling the truth requires courage, judgment and skill so that it can be told without breaking the company.
Ben notes, however, that there are many companies which thrive on pitting employees against one another and letting the best ones win. Getting ahead is more important than building trust, in those firms.
Winning trust implies encouraging people to report problems and bad news, even if they are unable to fix it themselves. Criticism should be directed more at the issues than people involved, and commitment to solutions must be shown. The culture should not be secretive or defensive, Ben warns.
“Your company’s culture should be an idiosyncratic expression of your personality, beliefs and strategy,” he wraps up. “Culture begins with deciding what you value most,” Ben signs off.
(Edited by Saheli Sen Gupta)