We recently explored the challenges technology companies face as they grow, what we now call the culture crunch. Our team of data scientists reviewed data from over 700 companies, analyzing scores for employee engagement at different stages of venture capital funded companies. Engagement is tied to the level of self-determination a person feels at their work. As a measure of cultural health, it tends to decrease over time, which is what we call the culture crunch.
The Culture Crunch was further explored in a one-hour webinar facilitated by Steven Huang, Insights Strategist & Hyon Chu, Data Scientist from Culture Amp. In addition to walking through the insights from the Culture Crunch, Steven and Hyon were able to chat with the audience about their experience and answer some questions. Here are some of the key takeaways.
Should early-stage companies be worried about benefits and perks?
Huang says, “Don’t get caught up in the rat race of perks and benefits.” Oftentimes, especially in an early stage company, budgets are limited. It’s more important to have core benefits like health care, than it is to have other perks. As Huang says, “If you want a 401K [pension benefit], are you willing to give up your meal plan, or transportation benefit?”
Culture Amp data suggests that when people believe their work makes a difference, compensation becomes less important. However, series A and early stage companies scored the highest on overall compensation, including base salaries, bonuses, benefits, and equity, suggesting that a highly-engaged, nimble organization can often overcome what is perceived to be lower compensation. So, there isn’t too much to worry about if your workforce is engaged.
Does the passion of employees diminish from early stage into the growth period?
Our data suggests that Series B is actually a very high confidence period. Chu says, “A lot of people call Series B the most difficult round to raise. If you made it to Series B, you have a proven product, and you've raised relatively big money at least twice.”
Problems come up because Series B is a period of growth. In early stage companies, employees tend to be generalists who wear many hats in their roles. As companies grow, roles become more focused. Chu says, “If we look at the negative sentiments at this stage, it's going to be around things like: my job performance is evaluated fairly; my manager gives me useful feedback; and the information I need is readily available. The low sentiment means there's a lot of confusion around the company, despite the positive sentiment of being able to make a really big difference.”
Post Series B or C, is it inevitable that a company will lose many of those who thrived in the early-stage environment?
“I wouldn't say it's inevitable,” says Chu, “But, I think with the clash between generalists and focused roles, along with confusion about job responsibilities, you're going to lose some people going into Series B.” He attributes this to the observation that many people join a Series A company because they get a diverse set of responsibilities. In a Series B company, people will often feel like they’re not doing the same role they had been previously. He adds, “I think it's important to be aware of what's going on with your company. When you know what touch points you need to address, I think you can lose significantly less people.”
Huang agrees, but sees the situation as more glass half-empty, than half-full. He says, “In every organization that I've either worked in or helped, thinking about their experience with the crunch, it is inevitable that at least one or two or many good people will leave. The mistake that some organizations make is to do everything that's possible to try to keep them. I don't think that sets a good precedent.” An employee might be great, and even an essential part of your growth from Series A to B, but it’s okay to let them go if it’s the right time. Huang adds, “While it may or may not be inevitable, approach it from a human standpoint and think about how you can do best for these people that have contributed so much to your organization.”
At later stages, culture seems to break down from its organic origin and you have to intentionally build structure to maintain what's special. What kinds of structure and processes have you seen be effective for companies?
Huang says, “I think what you might be sensing is your culture evolving. The original set of values that you set, and your mission, and your vision, and your values are extremely important to Series A and B and C. That's actually allowed to change as you evolve.”
However, as a company’s customers and products or service change, it can be important to revisit company values. Ask if they’re still being utilized in decision making. “If you start to lose sight of your values and how they actually matter for you, then it's time to revisit.”
Could hiring diverse talent from the start help mitigate the culture crunch?
Definitely, and it’s important to make diverse hiring a priority from the start. Huang says, “A lot of people make the mistake of not thinking about diversity until Series C or Series D. We're talking here about diversity of thought and diversity of experience.” Having diverse teams can help the business better meet its needs at any stage. This means hiring people from non-traditional career backgrounds and education. Some companies use temperament or behavioral assessments during selection to create a mixture of personality types.
An encore of the culture crunch webinar was also hosted by Chloe Hamman & Myra Cannon, Insights Strategists at Culture Amp for our UK audience.