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Monday, June 01, 2009

key characteristics of a great startup culture

This article is dear to my heart, I have experienced at first how the culture of an organisation can make or break it, not just the start up but it's investors as well, these cultures need to mesh cleanly. This article was written by Greg Gottesman who is the managing director at Madrona Venture Group, a Seattle VC firm.

Greg Gottesman: For the last decade, I have been convinced that the three most important factors in determining the success of a start-up are (1) team, (2) product or service, and (3) market (timing, size, etc.). Take an A+ entrepreneur, with a great idea for a new product or service, at the right time, and about as fast than you can tweet Susan Boyle you’d have a success brewing.

Recently, I have added one factor to the must-have list: the right start-up culture. In other words, add a dose of bad culture to a team of superstars, a killer product and good market opportunity, the result is almost always death by a thousand backstabs.

What defines a great start-up culture?

Justice Stewart’s “I know it when I see it” standard seems particularly apt here, but not actionable.

I am hoping to start a dialogue about what a great start-up culture is and what it isn’t from those of you who are actually living it day-to-day. To kick off the debate, below is my best attempt at defining the characteristics of a great start-up culture. I was aiming for a top 10 but ended up with a bakers’ dozen (because in life it’s hard to beat a free bagel). How does your company’s culture stack up?

1. No politics. In great start-up cultures, everybody is giving everybody else credit. Ideas are judged on the merits, not on who came up with them. People feel comfortable that they will get their due. In not-so-great start-up cultures, everyone wants to make sure everybody else knows what he or she did, even if he or she didn’t do it.

2. It’s not a job, it’s a mission. Redfin’s CEO Glenn Kelman likes to talk about how invigorating it can be once you realize that you don’t have to be doing what you are doing. Great start-up cultures are comprised of people who could be doing a hundred other things, but actually choose to work themselves silly over the particular product or service their company is building. These cultures are often centered around the belief that the company is working on something important.

3. Intolerance for mediocrity. Great start-up cultures are psychically rewarding for A players and thoroughly awful for those who are not pulling their weight. Instead of performing to the least common denominator, great start-up cultures quickly reject those who are not meeting a high bar. Those who remain revel in the fact that they are surrounded by colleagues who are as good or, in many cases, better than they are.

4. Watching pennies. Great start-up cultures make every dollar count. Expenses are viewed with the same kind of discretion as they are on the home front. The beauty of the Amazon.com making-doors-into-desks tradition was not that it was cheaper (it probably wasn’t), but rather the mentality that it engendered that Amazon.com was a place that didn’t waste money on fancy furniture. In its early days, Intrepid Learning Solutions used to give out “Scrappy Awards” to employees that demonstrated superhuman abilities to save money. The CEO won one for renting a U-Haul and personally picking up and then moving in a free conference table from a local company that was moving. A cost-conscious attitude can be cool and, in great start-up cultures, contagious.

5. Equity-driven. Great start-up cultures create a sense that everyone on board is building something significant, an enterprise that will be valuable long-term. Employees want a piece of that future. Less optimal cultures are focused almost entirely on short-term cash incentives. That’s not to say that short-term cash incentives are always bad; in fact, in many cases, they can be helpful in driving toward short-term goals. But when employees are focused solely on cash and not the least bit interested in equity, that’s a sign that they may have lost faith in the business.

6. Perfect alignment. Great start-up cultures are well-aligned. The strategy makes sense and is aligned with the vision. People are doing what they are good at and in the right roles. Every employee, from the CEO to the office manager, is on the same page. McKinsey, the well-known consulting firm, developed a good framework for assessing alignment.

7. Good Communication, Even in Bad Times. Transparent communication is a hallmark of a great start-up culture. No one is confused about the vision and where the company is headed. Communication is open and free-flowing. Hard issues are addressed directly, not ignored. Every start-up goes through ups and downs. The tendency is to not want to share bad news. It’s not as much fun. In great start-up cultures, communication to all stakeholders actually increases during the down times.

8. Strong leadership. The leader of a start-up should the “cultural soul” of his or her company. A good leader takes that responsibility seriously and leads by example. I love this quote by former Secretary of State and Army General George Marshall about the importance of leading by example and maintaining a positive attitude. “Gentleman, enlisted men may be entitled to morale problems, but officers are not. I expect all officers in this department to take care of their own morale. No one is taking care of my morale.”

9. Mutual respect. In not-so-great start-up cultures, the business guys think the technical folks are more interested in cool technology than in building what the market wants. The technical side of the house thinks the business side isn’t smart enough (or technical enough) to understand what the market wants. The architects look down on the devs who look down on QA. The sales team thinks marketing isn’t doing its job in generating leads. Everyone thinks the sales team is overpaid and should be selling more. In great start-up cultures, everyone shares a mutual respect for what each party brings to the table and celebrates wins from wherever they come. Heated but healthy debate leads to decisions that are accepted, even if not everybody agrees with them.

10. Customer-obsessed. Great start-up cultures are manically focused on defining who the customer is, what the customer wants/needs, and what the customer will value enough to pay for now. It starts well before a single line of code is written. These cultures value talking to as many potential customers as possible before a product is conceived. They make customer feedback a key part of the process once the product or service is delivered. Great start-up cultures are rarely surprised by customer issues because they are proactive and process-oriented about understanding everything they can about their customers.

11. High energy level. You can literally feel it when you walk into a great start-up culture. The room has energy. There’s a buzz. Doors are open. Whiteboards are filled with hieroglyphics. People are getting stuff done. Meetings are short and to the point. You might trip over a dog.

12. Fun. Start-ups should be fun. In great start-up cultures, everyone reinforces that fun is happening, even if it isn’t at that particular time. Employees tell their friends how much fun they are having. Whining is unacceptable.

13. Integrity. Great start-up cultures do not cut corners. They maintain the highest integrity in the way they treat customers, handle employee issues, write code, and go about their daily business. They have integrity when it is easy and, more importantly, when it is hard. This kind of integrity should not be confused with lacking toughness. Integrity in this sense means having a team with enough confidence in what it is building, and then delivering to customers, that cheating in any form, or even just going halfway, is unacceptable.

What did I miss?

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