4 Types of Company Culture, Ranked From Best to Worst
If you don’t have a corporate culture. You should — and the best kind is customer-focused, rather than performance-driven. Here’s why.
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Culture is what people do when the CEO is not watching. When everyone is working together in a single room 80 to 100 hours a week, startups do not need to articulate culture explicitly. However, once a company adds new employees and begins to locate people away from headquarters, the CEO must define and communicate the culture and the company must use it to make key decisions and act.
After talking with hundreds of CEOs, I've found four types of cultures -- and I think the two best are customer-focused and performance-driven.
A customer-focused culture seeks to excel at providing customer benefits at a low price. Such cultures seek to attract and motivate employees with a passion for developing innovative products, delivering service that makes customers keep buying from the company; and a willingness to work with other departments in the company to get and keep customers.
Amazon's culture focuses on delivering value to customers (rather than extracting it) and not wasting money. At its inception, founder and CEO Jeff Bezos, wanted Amazon to become a price and customer service leader. To signal that he did not want to waste money, he made it mandatory that all desks would be built from cheap Home Depot doors with legs nailed to them. Employees who do not like sitting at a door don't last long at Amazon.
A performance-oriented culture sets specific goals for everyone and expects people to exceed their performance targets consistently. Such a culture tends to focus on measuring what the CEO believes matters most to startup investors--which is revenue growth. People who meet the CEO's ambitious quarterly performance targets are rewarded and those who do not are quickly fired.
Performance-oriented cultures often have negative side effects--for example, some may not care how results are achieved--so if those who get results do so by hurting other employees or short-changing customers, they are not punished for their under-handed behavior.
Netflix sees itself as a sports team rather than a family. It seeks out the most talented person for each job and fires those who don't measure up. So far, Netflix seems to have benefited from the positive aspects of a performance-oriented culture and minimized the bad side effects.
In a 2015 class taught at Stanford, CEO Reed Hastings explained that Netflix wants to hire the most talented people and create an environment that motivates talent to work effectively and stay at the company if they are producing at the highest level. Hastings also was eager to replace people who were not top performers as soon as their managers decided that they were not worth keeping.
As Netflix grew, it opted out of the commonly used approach of adding formal processes to limit risk. Instead, Netflix promoted employee freedom. As Hastings said, "If you want to operate with very few rules, you need to set context. We added a chapter to our [100-page PowerPoint] culture deck, Context, not Control."
An employee-focused culture places primary emphasis on the development of employees' abilities. It hires people with entrepreneurial potential, encourages them to develop their skills and take on greater responsibilities. The risk of an employee-focused culture is that the company develops the skills of its employees and rivals hire them away.
Agiloft, a Redwood City, Calif.-based supplier of code-free development tools, enjoyed 45 percent 2017 revenue growth while encouraging employees to enjoy their personal lives without raising venture capital. As CEO Colin Earl, who founded Agiloft in 1992, told me in an interview, "We give our employees time to enjoy their personal lives -- encouraging them to work no more than 45 hours per week -- and pay everyone substantial bonuses from our revenues."
No articulated culture.
In such companies, the CEO has outstanding technical skills but less impressive leadership abilities. If such a CEO can lead a technical team that builds a product that sells itself, the company may not need to articulate a culture. But such companies generally do not scale.
A case in point is Justin Moore, who founded Axcient in 2006, a supplier of computer disaster recovery services, and sold it in 2017. In a 2011 interview CEO Moore told me he spent 20 percent of his time on culture. At one of his earlier companies, he neglected culture which caused unwanted turnover and low morale. This made him realize that culture must be created and managed and should be an important part of the CEO's job.
Culture can make a big difference in your company's success. Choose the right one for you -- and if you're not sure, go with a customer-focused one.