Building a Great Start-Up Culture

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The early days of a start-up throw a lot at entrepreneurs.

There's cash flow to worry about. There's staffing. There are often patents or leases to secure. It's easy for tasks to slip through the cracks. All too often, though, the first to do so is serious thought about the company's culture.

Corporate culture sounds like a touchy-feely thing — something that's great to think about in those fleeting moments, when you're not being inundated with 100 other pressing items. But serial entrepreneurs and small business experts say it can be the key to a company's long-term success.

"Culture is what takes a group of individuals and melds them into something greater," says Robert R. Ackerman, Jr., founder and managing director of venture capital firm Allegis Capital. "It's the sum of the parts argument. They have a vested interest in the outcome and in identifying and addressing challenges. Culture is what changes that environment."

Cultures vary depending on the business, of course. There's no universal formula. But there are a few rules of thumb that can make creating one that fits your needs easier.

One of the most important is creating something that's unique. Too many small businesses attempt to clone another company's culture — and fail in the process. Others simply thumb through a few how-to-start-a-company books, picking and choosing themes.

"The early culture decisions set the trajectory and course of the company. It has a major, major impact," says Dharmesh Shah, a serial software entrepreneur and the founder and CTO of HubSpot, which provides marketing software for small businesses. "The biggest mistake start-ups make when building and defining their culture is that they don't make it distinctive enough. It's often littered with broad, generic, feel-good platitudes. That's not useful. If a company describes their culture as being one of 'integrity and excellence' and other such platitudes, they've essentially failed at understanding their culture."

Similarly, he notes, too many companies confuse culture with activities. A game machine in the lobby or free beers on Friday might support a culture, but they don't define it.

"The cultural statement is something more like: 'We value team interaction — both during and after work, and will invest time and energy in helping make those interactions happen.'," Shah says.

Cultures also aren't put together by an individual. While a founder can have a dominant voice in establishing a corporate culture, it's the founding employees who cement it. That adds another level of importance to early hires. Each person a company brings on board should not only be willing to put in the sometimes excruciating hours that go with a start-up, they should also fit smoothly into the company's core values.

"If you're building that culture in the early days, it's essential that every new employee that comes in can fit into it," says Ackerman. "That means the CEO is interviewing every new hire up until a certain threshold – maybe 50 or 100 employees. … And spend time with them. You want them to feel they were expected and you're excited they're there."

Open communication at the company is also a good building block. Limiting employees to only offering input from their designated sector can stifle opportunities for the company to grow. Additionally, don't be afraid to let workers challenge decisions. Everyone should be able to point out that the emperor has no clothes.

Ironport Systems, for example, built a culture where employees could say anything negative they wanted about ideas, as long as they could back up their arguments and ended their statements with the word "dude". The company was acquired by Cisco in 2007 for $830 million.

One of the best ways to encourage this sort of discussion is transparency.

"Our default position on information within the company is 'open' (and someone has to justify it being 'closed')," says Shah. "We share detailed information about company financials (cash in the bank, burn rate, how long the money will last, company funding rounds, revenue growth, sales performance — just about everything). We share this information with every employee in the company. Because we set this early tone — people don't have to debate whether a specific piece of information is 'shareable' with others in the company."

Finally, while the hierarchical structure of a start-up is up to the founder and executive team, it's important to show solidarity.

"Management should be at every company event," says Ackerman. "There is nothing that is not important enough for the CEO to be there. … I've had companies that, when they start out, go over to Ikea, buy furniture, then spend the weekend building it together. And the CEO is there, bringing in pizza and helping out. It demonstrates that nobody is better than anyone else."

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