The significance of company culture in startups

The birth of a startup is an exciting and frightening time for an entrepreneur, since one has to step outside of his or her comfort zone and enter an unknown marketplace. The majority of the anxiety comes from an unpredictable source of income: who are the customers and how are they going to be convinced to procure one’s service or product? A viable business consists of four critical elements (Boxall & Purcell, 2011):

  • Marketing, discovering and pitching to the customers
  • Funding, acquiring the necessary financial backing to pursue the business goals
  • Production, is particularly interested in technology and operational processes that reliably deliver the promised value to customers
  • Human resource management, is engaged with recruitment, development, retention, and motivation of people with the relevant knowledge and skills, employed at an affordable cost

Without funding, the production cannot produce the products which the marketing department has to sell. The founder of a startup is occupied with achieving these three structures since they are ‘hard’ in nature, this means that facts and numbers can be less of an effort to produce for these structures. Furthermore, the tasks which the human resource department is occupied with requires personnel; if the startup consists of just a few employees, the importance of human resources is at its lowest and is one of the tasks of the founder. However, human resource management, which is a critical element of the viability of the business, is undervalued and the creation of an intentional company culture needs to be part of the primary objective for the founder of the startup. It is paramount for founders to consider what kind of company culture best suits them for the branch they operate in to ensure success and becoming and remaining viable in its chosen market.

Defining company culture is necessary because it is comprehensive and it helps with understanding what it represents. Schein (2009) defines company culture as:

Culture is a pattern of shared tacit assumptions that was learned by a group as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems. (p. 27)

These shared tacit assumptions are hidden from plain sight since they are unconscious thought patterns, values, and collective behaviours. What makes company culture so important is the fact that culture defines the modes of operation, goals, strategy, mission, vision, public image, customer relationship and so forth; i.e., all the processes in the organisation. Company culture has such a dominant role because it helps with solving external adaptation and internal integration, it needs to be one of the central points in the organisation. The founder needs to think intentionally about how to structure it and present it on paper for existing and future employees.

One could argue that in such an early stage the organisation should be flexible and it should grow organically since the market is an unknown terrain and it is unknown what works well enough to be considered valid (Sharma, 2012). However, best practices (which are universal) can be acknowledged and written down for the employees. The founder can find these practices in books specialised in company culture and in the marketplace there are consultants with expertise in organisational theory. Placing the values on paper may feel cumbersome but when one has invested effort into this in the early stages, figuratively speaking, the foundation is put in its place and one can build on this by steadily developing into the mid-life organisation phase.

The subconsciousness of the human mind processes thought patterns, habits and behaviour, these routine habits feel like second nature because humans process information extremely quickly without being aware. If individuals had to consciously think about every action one daily performs, individuals would be mentally exhausted and not have the energy to undertake the more demanding challenges at work. While individuals are completely conscious of what is going on in the conscious mind, the unconscious mind remains a stocked depository of information which individuals have no direct control over (Dijksterhuis, 2007). This is precisely the challenge every founder of a startup (un)knowingly has to face, as in the early stages of a startup (the first two to five years) the company culture and leadership are two sides of the same coin to which the founder has to give meaning. It is the founder who has the leadership role and will have major influence on which direction the organisation goes, who is coming aboard as an employee and especially which beliefs, values and assumptions are tolerated. The founder brings his or her own cultural background and shared experiences into play. Therefore, if a startup desires to be efficient and effective from the foundation, the founder needs to understand the role culture plays in organisational life. Effective leadership begins by being aware of one’s own unique role as cultural architect, evolver and manager.

As stated, company culture is comprehensive and open for interpretation, it needs to be intentionally nudged by the founder because company culture has a profound effect in the stages of organisational evolution. In the startup phase, the organisation tries to stabilise and profligate the culture so it has a competitive advantage (Porter, 1985). Since the founder is the main contributor to the early stages of organisation culture, he or she (un)consciously attributes to it and protects it defensively since one’s feedback on the company culture is a direct feedback on the personality, belief and values of the founder. Success can lead to broader acknowledgement of those beliefs and values across the whole organisation, even if these are not best fit according to the branch the organisation is operating in. Therefore, it is necessary for the founder to realise the importance of presenting company value’s in writing so that the founder can distance him or herself personally from the feedback one can have on these company values. In this manner, the ego is safeguarded from discomfort, and it is comparable to a discussion; the topic of discussion is central, not the individual.

When the company culture is structured and formalised, the selection of new employees can be more deliberate and the search for the right individuals made more straightforward (Boxall, 1996). In the initial stages of organisational life, every new employee will aggregate a significant amount to the entire company culture, and this coherence is principal. A healthy culture empowers everyone in the organisation to view themselves as part of a team and their work important for the success of the team. If the company culture does not emphasise coherence and teamwork, the individuals will feel unmotivated and unfairly treated. The organisation will indirectly promote high turnover intention, tardiness and an attitude of indifference from employees while customer satisfaction decreases with every interaction. This, in turn, will have a tremendous impact on organisational performance, which is a key factor for organisational continuity. Therefore, it is important to match company culture with the right individual who will contribute and enhance it instead of competing it.

Organisations which best match individuals with company culture have a distinct human resource advantage; when the organisation builds a remarkable, hard-to-imitate capability through the special quality of its human resources (Boxall, 2003). Human resource advantage can be broken down into two dimensions (Boxall, 1998). Firstly, human capital advantage rests on the exceptional intellectual, emotional and physical accomplishment of individuals employed in the organisation when it employs more capable individuals than its competition. Secondly, social capital advantage which occurs in those organisations that have developed remarkable methods of combining the expertise of individuals in collaborative activities. Thus, an organisation can outperform the competition by deliberately focusing on the company culture and finding the right individuals who want to help distinguish the organisation in the marketplace. After all, this is and should be part of the primary objective of the founder.

In conclusion, company culture refers to the beliefs and behaviours that determine how a company’s employees and management interact and manage outside business transactions. Company culture, whether shaped intentionally or grown organically, reaches to the core of a company’s ideology and practice, as well as affecting every aspect of business from each employee to customer to public image. The current awareness of company culture is more acute than ever. A company’s culture is reflected in its employee satisfaction: communication practices, hiring decisions, treatment of clients and every other aspect of operations.

Countless company cultures are implied rather than defined. They develop over time from the cumulative traits of employees. Understanding why its culture works enables an organisation to hire the right people – and to avoid the wrong ones. This, in turn, will influence the competitive advantage of the organisation which is paramount in our highly competitive contemporary marketplace. Thus, the combination of a structured, intentionally thought out and written down company culture with the combination of cherry picking highly intrinsically motivated A-list individuals will contribute to the continuity and performance of the organisation which is, as argued, part of the primary objective of the founder of a startup organisation.

References

Boxall, P. (1996). The strategic HRM debate and the resource-based view of the firm. Human Resource Management Journal, 59-75.

Boxall, P. (1998). Achieving competitive advantage through human resource strategy: towards a theory of industry dynamics. Human Resource Management Review, 265-88.

Boxall, P. (2003). HR strategy and competitive advantage in the service sector. Human Resource Management Journal, 5-20.

Boxall, P., & Purcell, J. (2011). Strategy and Human Resource Mangement. Hampshire: Palgrave Macmillan.

Dijksterhuis, A. (2007). Het slimme onbewuste. Den Haag: Bert Bakker.

Porter, M. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. New York: Free Press.

Schein, E. H. (2009). The Corporate Culture Survival Guide. San Francisco: Jossey-Bass.

Sharma, G. (2012, 9 11). www.forbes.com. Retrieved from www.forbes.com: http://www.forbes.com/sites/gaurisharma/2012/09/11/culture-organic-or-established/#3af4e5e645cd

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