When is the best time for startups to focus on building culture?

It's crucial to think about culture early, particularly when the company is in the idea stage and before significant scaling begins. The first 20 employees are key as they form the 'cultural DNA' and will influence subsequent hires and training.

What are the key steps to building a strong company culture?

Key steps include being proud of the problem you're solving, creating an inspiring long-term vision, defining core values and behaviors through co-founder conversations, modeling these behaviors, focusing on external orientation, embracing diversity of opinions, and having a structured hiring plan.

Why is an externally focused company culture important?

An externally focused culture, like 'don't be evil' at Google, provides guide rails for employees on how to behave in complex situations. It's more effective long-term than internally focused mottos like 'move fast and break things', which can lead to issues like privacy violations.

How does diversity of opinion contribute to company culture?

Fostering a culture where people with strongly-held, even opposing, opinions can coexist and engage in loud-but-respectful conversations can lead to increased creativity and better problem-solving. This diversity needs to be intentionally built from the early stages.

Should startups worry about diversity from the beginning?

Yes, it's essential to address diversity, including diversity of opinions, early on. Trying to implement diversity programs when a company already has a hundred employees is significantly harder and often too late.

How can founders ensure their hiring process supports culture?

Founders should implement a hiring process that incorporates the values and diversity conversations they've had. It's important to assess if this process is effectively filtering candidates from day one and to refine it as the company grows.

Key Moments

Tim Brady - Building Culture

Y Combinator

Science & Technology5 min read19 min video

Aug 29, 2019|59,812 views|1,008|18

YC Y Combinator Startup School

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Key Moments

TL;DR

Startup culture should be defined by implicit behaviors, not just explicit rules, and needs to be intentionally built with the first 20 employees to avoid costly mistakes later.

Key Insights

Culture is defined as the implicit set of behaviors inside a company that inform employees how to act when things aren't explicitly laid out.

Culture DNA is established by the first 20 employees; mistakes in hiring early on will be propagated and difficult to correct.

Identify with the problem you're solving and be proud of it, as this provides the necessary energy and enthusiasm to sustain a company through difficult times.

A long-term vision, like Tesla's 'accelerate the world's transition to sustainable energy,' can inspire a broad range of people, not just those with specific technical skills.

Values should be a short list, less than five items, co-created by founders, and used as a filter for hiring, not just a polished corporate document.

Cultivating diversity of opinions, not just demographics, leads to more creativity and better problem-solving, and must be addressed early.

Culture as implicit behavior

Tim Brady defines company culture not as a complex set of policies, but as the implicit set of behaviors that guide employees when explicit instructions are absent. When done correctly, this ingrained behavior supports the business, even in intangible ways. It’s crucial to establish this early, as the initial employees act as the ‘cultural DNA,’ heavily influencing the company’s trajectory, especially when scaling requires significant hiring. The first 20 employees are particularly vital, as they will be instrumental in hiring and training subsequent waves of staff.

The danger of early hiring mistakes

The foundational employees set the tone for the entire company's culture. If these early hires embody the desired values and behaviors, the likelihood of building a strong, coherent culture increases significantly. Conversely, if mistakes are made and the wrong people are brought on board early, these errors can be amplified as those individuals participate in future hiring and training. Correcting such cultural missteps later becomes substantially harder, highlighting the critical importance of thoughtful hiring from the outset. This isn't about perfection, but about being deliberate.

Passion for the problem fuels persistence

A core tenet of building resilient company culture is the founders' genuine pride and identification with the problem they are solving. This passion provides the essential energy and enthusiasm needed to navigate the long and often arduous journey of building a startup. Choosing an idea based on ego or superficial appeal, rather than a deep connection to the problem, can lead to a lack of motivation when challenges arise. An example cited is a YC alum company that pivoted from inventory liquidation to makeup for teenage girls; their eventual failure was attributed to the founders not identifying with the problem or their customers, leading to a visible disengagement that impacted employees.

Crafting an inspiring long-term vision

Beyond identifying a problem, founders must articulate a long-term vision that inspires others to join and contribute. This 'North Star' should communicate the purpose of the work, not just the product itself. For instance, Tesla's vision to 'accelerate the world's transition to sustainable energy' is broad and inspiring, attracting diverse talent beyond just engineers focused on electric vehicles. Similarly, Microsoft's early vision of 'a computer on every desk in every home' resonated with a wider audience in the 1980s, fostering a culture capable of achieving that ambitious goal. Such visions are crucial for attracting the right people who will help build and sustain the desired company culture.

Defining core values as a hiring filter

Co-founders should engage in conversations to define the core values and desired behaviors for their company. This list, ideally short (less than five items) and informal at this stage, serves as a critical filter during the hiring process, supplementing skills-based assessments. Examples like Spotify's 'innovative, collaborative, sincere, passionate, playful' or Atlassian's 'open company, no bull; build with heart and balance; don’t do it for me or for you, do it for every customer; play as a team; be the change you seek' illustrate how these values can shape hiring decisions. If a candidate's behavior or attitude clashes with these values, they should not be hired, regardless of their technical proficiency.

Modeling behavior and external focus

The founders and early leaders must actively model the desired behaviors; employees will take their cues from leadership's actions, not just their words. It’s essential to 'walk the walk.' Furthermore, Brady emphasizes that externally focused values, such as customer centricity, are more beneficial in the long run than internally focused ones like 'move fast and break things' (Facebook). While internal focus is necessary, an external orientation, like Google's former motto 'don't be evil,' provides better guidance for navigating complex ethical decisions and preventing negative outcomes, even unintentionally. This external focus guides employees towards beneficial actions for the company and its stakeholders.

Embracing diversity of thought

Beyond demographic diversity, fostering a diversity of opinions is crucial for creativity and effective problem-solving. Companies should strive to create an environment where individuals with strongly held, even diametrically opposed, viewpoints can coexist and engage in productive discussions. While relying on existing networks (rolodexes) for early hires is common and often effective for cultural alignment, it can quickly lead to a homogeneous team. Founders must consciously consider the importance of diversity of thought from the outset, as implementing such programs later, around the 100-employee mark, becomes significantly more difficult. This requires intentionality and difficult conversations about the desired balance.

Implementing a structured hiring process

Once values, vision, and diversity considerations are established, founders need to implement a hiring plan that integrates these elements from the very first employee. This structured process ensures that cultural fit and desired behaviors are assessed alongside technical skills. Crucially, the effectiveness of this hiring process should be regularly reviewed, especially after the first few hires. Gathering feedback with co-founders a month or two later to discuss whether the process filtered correctly and if the right people were hired is vital. The plan should be adaptable and improved upon, ensuring it is robust and reliable by the time the company needs to scale rapidly.

Mentioned in This Episode

●Companies

●Concepts

●People Referenced

Building a Strong Company Culture: A Founder's Checklist

Practical takeaways from this episode

Do This

Be proud of the problem you're solving and identify with your customers.

Create a long-term, inspiring vision that gives purpose to your work.

Have co-founder conversations about desired values and behaviors.

Model the values and behaviors you want to see in your company.

Prioritize externally focused values, especially customer-centric ones.

Foster a culture that embraces diversity of opinions and constructive disagreement.

Implement a structured hiring plan incorporating culture and diversity from day one.

Regularly assess and refine your hiring process and cultural initiatives.

Avoid This

Choose a business idea solely based on ego or social status.

Let mistakes in early hiring propagate and become difficult to correct later.

Create a company values list that remains purely theoretical or un-modeled.

Focus solely on internally focused mottos ('move fast and break things').

Wait until your company has 100 employees to start a diversity program.

Rely only on your rolodex or friends for early hires, leading to a homogeneous environment.

Let hiring happen casually without a defined process from the start.

Common Questions

Tim Brady defines company culture as the implicit set of behaviors within a company that guide employees on how to act, especially when no explicit rules are in place. When done right, the correct culture and behaviors support and sustain a strong business.