Understand Your Roadblocks

6 min read

We combine industry knowledge to empower you with the tools to stay on top of the top cultural trends through the company transitions you may be going through or will go through in the future. 

As your organization evolves and changes, your cultural needs and challenges will change as well. You will face new cultural challenges with each and every type of transition.

 

The number one question I receive from leaders when their company is scaling or transforming is, "what can I expect in the coming months?"

To help you make better decisions in the future, here is the breakdown of three key company phases and the cultural elements that come with them. 

  • Funding stage, for venture-backed companies or those that are looking to become venture-backed. 
  • Company size, as measured by employee headcount
  • Company trajectory, growing, shrinking, or stable. 


Each of these phases can uniquely impact your organization's culture. It is essential that you understand what to expect as you transition between phases.

Cultural Lifecycle Image

Funding Stage: How Culture changes through the funding stages.

The strategy, culture, and mindset that takes a company from seed to series A are not the same strategy, culture, and mindset that take a later stage company public.

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(Image: Carocked)


When you are traveling through the funding stages, you will notice three core cultural areas most impacted:

  1. Workload: Your employee's workload or perception of workload tends to change as you receive more funding. Employees in later-stage companies see their workload as less reasonable. This explanation of this is based on expectations. Employees in earlier-stage companies may expect to have a large workload, while those in later-stage companies are taken aback by it.
  2. Product & Company Confidence: As a pre-funded organization, confidence in the product is quite low for the most part. You are selling a vision at this point. Series B and up tend to have the highest confidence in the product they are providing.
  3. Innovation: Early-stage start-ups focus on establishing product-market fit and iterating on a single product. As a company receives funding, you are able to increase the scope and prioritize innovation to secure additional investors and customers. However, once more investors are brought into the mix, companies face more pressure from the board to hit higher targets and may play it safe to get there. Innovation may or may not decline depending on if innovation is a strong cultural element of the company. Or if they were doing it in the short term to validate a product. 
Overall, there are predictable changes in culture as you flow through different funding stages. Such as, how acceptable failure and innovation are, employee perceptions and confidence they have in the product and the company, and employee expectations in terms of workload that will change along with resourcing. Being aware of these trends can help you prepare for and counteract them

Does culture matter in fundraising? 

The short answer is, yes! 

There are many tangible variables that determine if your company will receive funding, such as how unique your product is and the companies track record. However, intangible factors such as what the company values, are also crucial to consider because they highly impact tangible variables that influence fundraising. For example, if a company values innovation, it is more likely to have a unique product, which will attract investors that are looking for products that disrupt markets. 

We also now have data (See Culture Crunch report by Culture Amp linked at the bottom) that shows the culture and employee sentiment are strongly associated with the funding and can provide an organization a competitive edge. Research shows that the companies that receive funding typically have employees that are already more engaged, more confident in the company, have a deeper sense of belief in the leaders, and feel a culture of innovation. 

Companies that are hoping to raise funds should focus on finding and training strong leaders and creating this type of culture described above. If employees are not confident in the company or the products, ask them why. By creating a culture of consistent feedback (both receiving and acting on it), you can gradually improve the culture over time. 

 

Culture Impact on Company Size.

In general, as a company grows in headcount, processes become more complex, roles become more specialized, and collaboration becomes more difficult. Without intentional people practices, culture at growing companies can take a major hit. 

There are predictable challenges that organizations face as they get larger, specifically with employees losing connection with the leaders. One of the most consistent insights from front-line employees is the disconnect with top leadership. As companies grow, there is also the feeling of less autonomy and flexibility in their work. If your organization is actively growing into a larger company, keep an eye out for these specific challenges.

What matters to employees differs depending on the size of the organization and what employees expect in that size company. Companies that are able to provide the benefits of other sizes (e.g., large organizations that provide autonomy or small organizations that have effective processes) will receive very positive dividends from doing so. 

But ultimately, you won’t know what matters for your employees until you ask them.

As a small company, you must add systems and processes, and ensure they are lightweight and effective. You can enjoy the high levels of employee engagement you are currently experiencing, but know what you are up against. As you grow, your goal should be to maintain levels of employee engagement, rather than improve it.

As a mid-sized company, you should focus on enabling your employees and making effective and efficient decisions. More people are ideally going to have decision-making power, so effectively enabling your people to do their roles and make quality decisions is a must! Recognition is something to put additional thought into as this is an important driver of engagement, as well as a demonstration of what you value as a company.

As a large organization, leadership capabilities and leadership style are extremely important. Leaders need to be consistently communicating the vision and keeping employees informed while working autonomy into the mix. Another element you will need to put additional effort into is your employee feedback practices and unlock clear communication channels. It's essential to encourage employees to participate, but what ultimately matters is the changes being made as a result of their feedback. Listening and acting are two sides of the same coin: listening without acting is thin and ineffective—and so is the reverse, acting without listening. Alone, each one can create a sense of disingenuousness and ineffectiveness.

 

Culture Impact through periods of growth... Or periods of shrinking

Each of these different growth trajectories (growing, stable, shrinking) requires a different set of strategies when it comes to culture. For example, while shrinking companies are making tough decisions regarding which budgets to cut, growing companies are making tough decisions on who to hire to fulfill key roles.

If your company is currently growing, you are most likely feeling a few core pains. This can include:

  • Enablement - information employees need to do their job effectively is readily available.
  • Work-life balance - Workload continues to rise as you may struggle to hire and onboard talent.
  • Role clarity - when a company is in hypergrowth, roles change rapidly, making it more complicated for employees to clearly understand what success looks like.

Another core challenge while growing that is complicated is employee perception. Some variables are leading indicators of growth, some are byproducts, and some are both. If you’re hoping to grow in the future, focus on creating a motivating vision, making decisions based on quality, and acting on the innovative ideas that come to you.

One thing that you can do is enjoy the positive feedback loop of growth – With growth, comes higher levels of employee engagement. But keep an eye on enablement and recognition to ensure your employees don’t burn out. As teams and roles change rapidly, employees need updated enablement materials and clarity on what success looks like for their roles. They also need to know the work will be divided fairly and they’ll be recognized for going the extra mile if doing so.

If your company is shrinking, alignment is going to be your number one priority. When companies are losing employees or revenue, it’s crucial to focus on creating alignment among those that choose to stay. These employees can ultimately decide to patch the hole that is bleeding your company or make it bigger. They want to feel like they play a valuable part in helping the company pick itself back up. That's why it's crucial to clearly establish how their work contributes to company goals, and that there's a clear strategy in place for moving forward

No matter your growth trajectory, employees’ perceptions of leadership and company confidence have a strong correlation with overall engagement. For companies that are growing, remember that your employees want to be recognized for the large workload they’re carrying. Meanwhile, employees in shrinking companies want to know how they can play a part in forging a new path forward.

So what can you start doing if you are shrinking? Focus on creating a motivating vision for how you plan to get back to a stable place and share it widely. Then, turn your eye towards alignment. Make sure each employee understands how their role contributes to the vision, and how their contributions can help make this vision a reality.

What about if we are stable as a company?

Well for starters, keep doing what you’re doing if you do not have aspirations to grow. Overall, there aren’t many pitfalls for stable companies. Instead, focus on the drivers that are important for all employees – instilling confidence in the company’s direction, keeping them engaged in their roles and aligned with the purpose, and providing an avenue for employee growth. 

 

To uncover what's on the horizon for your unique organization and what you can do to prepare, connect with us today! 

Want to read more about culture and the organizational life cycle?

Download the Perennial E-Book

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References: 

Culture Amp. (2021). The Culture Crunch. Www.Cultureamp.Com. https://www.cultureamp.com/resources/employee-experience/the-culture-crunch

Laloux, F., & Appert, E. (2016). Reinventing Organizations: An Illustrated Invitation to Join the Conversation on Next-Stage Organizations. Nelson Parker.

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