On company culture and culture keepers

Why is culture so hard to preserve as an organization scales?

Culture is the set of beliefs and practices that belong to a particular group of people - in this case, the group of people who work at the firm. The initial culture is woven by the founders, stitched together by what they say and what they do.

Among small groups of people, say up to 10, a single, coherent culture can persist without any explicit guidance. However, beyond such a point, implicit culture does not propagate well. Each additional hire can no longer meet individually with each of the original team members to emulate their way of working. Explicit guidance becomes necessary to overcome the constraints of space and time. This is invariably why all medium to large organizations codify their culture into mission and values statements.

The moment we codify our culture, however, we run into the general problem[0] that an implicit culture continues to exist in parallel, and the two can fall out of sync with one another. Even if a company claims to value “honesty and integrity”, it is not a foregone conclusion that every individual within the company will identify with or actualize it. 

Because people follow company values to varying degrees, the degree of fidelity between explicit values and implicit behavior is variable throughout the firm. A high degree of fidelity means that everyone is bought into the firm’s mission and values; a low degree means instead that people mock them.

How exactly do these two cultures fall out of sync? Were the explicit and implicit ever aligned, even at the very beginning? If so, when did they drift apart, and why? Most importantly, how do we keep them aligned so that implicit practices conform to explicit values, enabling the organization to broadly deliver on its stated objectives?

Codifying work standards into an explicit mission and values statements #

As people perform work, they inevitably discover ways of working which are more effective for themselves and ways of working which are less effective. For example, when I work, I try to:

• Be responsive and overcommunicate
• Focus on outcomes, not implementation
• Focus on velocity, not perfection

To me, this is simply how I work. I don’t need to tell anyone this, and thus it is an implicit culture - a “culture of one”. 

Once I codify these practices into values or operating principles, they become explicit. One would hope that I, of all people, embody these values, but that is not necessarily the case. Leaders can practice “vacuous leadership”: saying one thing while doing another. In this case the fidelity between explicit culture and implicit behavior begins to degrade at the very inception of the organization.

Even if all original team members abide by their own values, there is nevertheless the problem that future team members will not, bringing us to the question of how such adherence can be widely adopted throughout the firm.

The alignment of explicit and implicit culture #

In an ideal world, company values are general enough to be unobjectionable to the majority of employees, yet specific enough to delineate between better and worse behavior. For example, Amazon’s well-known value of “customer obsession” is unobjectionable insofar as it is not obviously wrong or vague, yet it is still able to trade off against other stakeholders like “shareholder obsession” or “media obsession”. In the world of Amazon, the most important stakeholder is unambiguously the customer.

Given a generally unobjectionable set of corporate values, it then follows that the majority of employees should adhere to them. In practice, this often does not occur. It may not occur because of self-interest, disagreement or, most commonly, inattention. Whatever the reason, company leaders should be sensitive to such a “normalization of deviance”, a tacit endorsement that people are free to do as they please and ignore company values.

In an informational sense, the normalization of deviance can be interpreted as “signal loss”. When you start out with 100% signal at the source, it can only deteriorate over time - to 98% to 95% to 92% and so on - until, after several hiring cycles, the resulting culture bears no resemblance to the original one. 

At work, I often request that my team provide a brief, written weekly update, which can be anywhere from 1-5 bullets. This serves as an operating principle for my team - a best practice if you will - because we invariably need to report upward on what we are doing each week. In crafting this, I solicited my team for a format which balanced both information value and convenience. We settled on just a few bullet points. Given majority agreement then, I expect it to be completed each week, the lack of which would constitute the normalization of deviance.

Promoting culture keepers into leadership positions #

I, on my own, can encourage adherence to our corporate or team values, but this does not scale to large numbers of people. As the organization grows, this responsibility - like any other - must be delegated.

To whom should we delegate this? If we delegate it to people who are excellent at their jobs - rainmakers, marketing whizzes, software architects - but who are not necessarily good at following the company values, then what inevitably occurs is that the people they manage will also not adhere to the company values. If your goal is to preserve the company culture as the company expands, leaders must not only be good at their jobs; they must also adhere to and encourage the company values among those they work with. 

Just as there is a “Peter Principle” stating that people are promoted up to their level of incompetence, I propose there is similarly a “Repeater Principle” stating that those promoted into positions of leadership who are not “repeater nodes” will lead to the attenuation of company values. 

By this definition, being a leader is equivalent to exemplifying, instantiating, embodying and living the firm’s culture code. Leaders broadcast the culture, develop standards to further enrich it, adhere to it and encourage others to do so as well. 

Netflix famously popularized the “keeper test” for employees, which asked managers whether they would fight to keep an employee who was considering leaving the firm; if not, the manager should preemptively let the employee go. Perhaps an extension of this is the “cultural keeper test”: if new managers would not uphold the company culture in their new leadership positions, then they should not be promoted into leadership positions.

If instilling company culture into new hires is not prioritized by current and future leaders at the firm, then no one will, so new recruits are free to “bring their own”. That works up to a point - integrating new ideas is always useful, as we’ll see below - but too much cultural heterogeneity can also lead to fiefdoms, information silos, paralysis, and outright conflict between teams.

Cultural evolution within integrative versus retaliatory regimes #

If leaders are responsible for exemplifying the company’s values and instilling it broadly among employees, does this effectively make leaders nothing more than loyalists, yes men and women, uncritical spokespeople and enforcers of company values?

Obviously such blind loyalty and subsequent coercion is undesirable. There is no guarantee the original culture set by the founders is optimal, and even if it was at company inception, there is no guarantee it will continue to be as the company scales. A company culture - that is, generally accepted “better ways of doing things” - must constantly adapt to new information and new environmental pressures.

If a company has less than optimal company values and practices, what are leaders within the organization to do?

Here, it really depends on what type of “regime” the company operates as: (1) a retaliatory regime or (2) an integrative regime. A retaliatory regime punishes public disagreement, rewarding those who toe the party line, while an integrative regime rewards public debate and ultimately consensus.[1]

Retaliatory regimes move quickly and dictatorially while integrative regimes move slowly and democratically. A retaliatory regime is extremely low-cost in time and energy, but suffers in the long run from private dissent, doubt, sabotage, and obscured information flows. An integrative regime is far more costly upfront in time and energy, but benefits in the long run from rewarding those who surface new information and those who debate it.

Both regimes feature failure modes: for the retaliatory, it is tyranny, and for the integrative, paralysis. There is no “right” regime, which is why we observe both in nature. A regime persists to the extent it is adaptive in a given environment.

When a company promotes its values to all of its employees, it must decide whether to pursue a retaliatory or an integrative approach. The retaliatory approach declares: “This is good. You must follow it.” The integrative one inquires: “Is this good? Should we follow it?”

Ultimately, the regime that any organization adopts starts from the top. If senior leadership punishes those who question them and rewards only those who agree, then retaliation and coercion will cascade down throughout the organization. On the other hand, if senior leadership rewards those who question them and those who surface new information, then the firm’s corporate values will evolve to incorporate these additional perspectives.

An integrative regime, which adapts to new information, is always more desirable, but in practice many leaders cannot or choose not to pay the cost.

All leaders, however, recognize the importance of maintaining cultural consistency throughout their organization. Codifying this culture and promoting those who embody it helps ensure the culture is preserved as the organization grows.

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[0] Any explicit encoding will always produce a separation between “the encoding of the thing” and “the thing itself”. See: esoteric vs. exoteric, internal vs. external, reality vs. superficiality, map vs. the territory, Plato’s Cave.

[1] Here, I borrow heavily from Timur Kuran’s Private Truths, Public Lies, although he never uses these terms explicitly.