How to Start a Startup: Creating Company Culture

Zappos is renowned for its core values and culture. In fact, the online shoe and clothing shop is so adamant about culture fit that they pay people who don’t fit into their culture to leave the company.

Every person the company hires, no matter what department she’s in, goes through a four-week training program. New hires answer phone calls for Zappos customers for the first two weeks of training. But it’s after the first week that Zappos offers to pay people for the training with an additional $2,000 bonus if they quit right on the spot.

It may seem like a ludicrous way to operate a company, but it’s effective at weeding out the people who are just in it for the money.

Alfred Lin was Zappos’ number two in command for five years. During that time he brought the online retailer to its first profitable year in 2006 and was integral to its $1.2 billion acquisition. TechCrunch says that Lin has the Midas touch, because every company he’s ever worked for has been acquired, with the smallest deal amounting to $265 million. Now he’s a partner at the venture capital firm Sequoia Capital.

As part of Y Combinator president Sam Altman’s How to Start a Startup course at Stanford University, Lin gave a lecture on the importance of culture when it comes to developing a high-performance team.

(For more startup advice, check out How to Start a Startup: The Book. It’s the ultimate reference guide to creating a successful tech startup.)

What Is Culture?

Lin says that the real question is what the company culture is going to be. In its most basic form, company culture can be defined as ___ member of the team in pursuit of a company’s ___.

It’s all about how you fill in the blanks. Assumptions, beliefs, and values fill in the first blank, and an action fills in the second blank.

Why Does Culture Matter?

When determining why culture matters, Lin quotes Gandhi:

“Your beliefs become your thoughts. Your thoughts become your words. Your words become your actions. Your actions become the habits. Your habits become your values. And your values become your destiny.”

It’s impossible to pursue your company’s destiny if you don’t have a good culture. When you define your company culture, you’ll always be using it as a guide for business decisions. This provides you with “stability to fall back on” because “it becomes a way to align people on values that matter to the company,” explains Lin.

A defined company culture does three things:

  1. Provides trust. People like to know what type of company to which they’re committing themselves. And, as a founder, you’re trusting that you made a good hiring decision because they share your values.
  2. Helps you figure out what to do and what not to do.
  3. Allows you to retain the right employees.

In a popular Medium essay, Brian Chesky of Airbnb, pinpoints why culture is so important to him as a founder.

“The stronger the culture, the less corporate process a company needs. When the culture is strong, you can trust everyone to do the right thing. People can be independent and autonomous. They can be entrepreneurial. And if we have a company that is entrepreneurial in spirit, we will be able to take our next ‘(wo)man on the moon’ leap,” Chesky explains.

“Ever notice how families or tribes don’t require much process? That is because there is such a strong trust and culture that it supersedes any process. In organizations (or even in a society) where culture is weak, you need an abundance of heavy, precise rules and processes,” he adds.

Not every hire is going to be a good fit. There’s no way around that. But the benefit of a strong company culture is that it makes it that much easier to weed out the bad hires from the good hires. Being able to know who to keep and who to let go right away will save your company.

Creating and Defining Culture

A company’s culture begins with the founding team and leaders of the company. The definition of that culture is based on the values of those people. Lin advises that you ask yourself these questions to determine the direction of your company’s culture:

  • What are the values that are the most important to you? Of those things, which are most important to the business?
  • Who are the types of people you like working with? And what are their values?
  • Now think about all the people that you’ve never liked working with. What values do they have? Think of the opposite of that; maybe those should be considered values for your company, too.

Keep in mind that the values must align with your mission and be uniquely tied to that mission.

“So at Zappos, in terms of uniquely applied to the mission, we were focused on creating a culture that was going to provide great customer service. So the first core value we had, was to deliver ‘wow’ through service. We wanted to deliver great customer service and it was going to be a wow experience. And then below that we wanted to serve,” Lin says.

So by now you’ve probably made a list of your core values. But you’re not done yet. When Zappos began the process of identifying their core values, they listed 37 values. It took a year to get the list down to 10. It might seem odd that it took them so long, but Lin says there’s an important reason why it took a year for them to really define their culture.

“You just come up with the word honesty. Give me a break, everybody wants the culture to be honest. Nobody is going to say: ‘I want to be lied to every day.’ What do you mean by service? There’s got to be a lot more depth in this than that. And everybody talks about teamwork. How do you dive deeper into teamwork? What are the things that don’t work for a team?,” Lin explains.

It’s easy to say that you want to be this and do that. But actually investigating what that means and what it looks like is an entirely different story. Delving deeper into the connotations of those values takes time and effort.

Why Do Teams Fail?

In The Five Dysfunctions of a Teamauthor Patrick Lencioni deconstructs why teams fall apart. Team dysfunction happens because of a lack of trust and a fear of commitment. And if people move past their fear of commitment, then the next thing that goes wrong is a lack of accountability. Without that accountability, you won’t get any results.

If you’re taking team performance into consideration (and you should), then you’ll need to spend more time ruminating on your company’s values. Lin thinks it’s a big no-no when companies don’t interview for culture fit.

“You can have the smartest engineer in the world but if they don’t believe the mission, they are not going to pour their heart and soul into it. [You need to think] about culture – from the interview process, to performance reviews, to making sure that’s a daily habit. You get a lot further with making a great culture,” he says.

Think of all the things you want your company to do. What’s keeping you from reaching those goals? Making it a daily habit.

It’s like fitness. Wishing to be in-shape won’t make it happen (even though that would be awesome). It takes going to the gym on the days you don’t want to, making exercise a part of your routine.

Because if you don’t make fitness a daily habit, what happens? You lose your fitness level, and then soon you can’t recognize your reflection in the mirror. The same goes for culture. Your company’s culture needs to become a daily habit, and it must be the cornerstone of your business decisions.

Next Steps

If you want to learn more about Zappos’ approach to business and culture, check out the book Delivering Happiness: A Path to Profits, Passion and Purpose by the company’s CEO Tony Hsieh. You can also read a full transcript of Lin’s lecture here.

Finally, if you enjoyed this post, be sure to check out How to Start a Startup: The Book. It’s the ultimate reference guide to creating a successful tech startup.

How to Start a Startup: The Book

Featured image of Alfred Lin was taken from the video of his lecture at Stanford University.

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