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Company founders are forces of nature. Their dedicated personalities lead their businesses from garage to multi-million dollar businesses while inspiring the passion of those who work for them.
However, when their companies focus on large-scale affairs with hundreds of employees, that close sense of collaboration and mission can change or be lost altogether. There is so much to do, so many people to manage, so little time to communicate. Culture often has to develop by itself – and not always with the best results.
This is not a minor problem. Your culture is an indicator of the character, values, behavior and attitudes of your company. Culture attracts talent, affects happiness, and promotes performance. It addresses the very quantifiable question of customer and employee loyalty. This is one of the most important factors investors look for when deciding where to put their money.
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This is especially true during these troubled times as the COVID-19 pandemic, economic downturn, and key issues related to corporate governance and race are changing American business.
I learned the hard way the importance of prioritizing culture when my company is considering potential investments. Here are five hallmarks of a strong corporate culture that I'm looking for. If they are missing, we can go away.
1. Does the collaboration start at the top?
Our company said goodbye to an investment just a week after financing. The negotiations were difficult, as is usually the case. That wasn't the problem. Instead, we kept hearing feedback from the company's business partners and contractors that the founder could be persistent and challenging. At first we ignored it, but we found the same thing in the pre-investing discussions when we introduced ideas that we hoped would materialize.
Without a strong culture of collaboration, the chances of success are significantly lower. Today we look for these signs in the first conversation and trust our instincts when we don't see them. Questions we ask: Are leaders present, approachable, and accountable? Do you support, recognize and empower your employees?
2. When professional behavior is not required of everyone
Early on, we look for signs that leaders are ready to change their behavior and interaction, even if their previous behavior has been accepted or even encouraged. Years ago we invested in a company that is run by two very different executives. The founder may have been a great business partner and was perceived as the perfect gentleman – maybe too kind and forgiving. His COO was the die-hard partner who formed the kind of tandem that might have worked in the company's early days.
That tough edge, however, hasn't smoothed out as the business grew. Eighteen months after our investment, it was chaos and toxicity. The board was forced to let the COO go. The business world is hard enough to navigate without someone exploding bombs from the inside. And all employees – whether managers or not – must behave professionally. It's even better if the company defines a set of standards and behaviors as part of a cultural manifesto.
3. Lack of purpose
Cultural problems are not always that obvious. Sometimes well-meaning people just haven't taken the time to develop a strong sense of purpose that encourages inspiration and growth. I once had dinner with a management team in a noisy restaurant. I asked the operations manager what was most critical to the business. During dinner, I asked the managers at the table the same question.
Everyone gave different answers.
The company had yet to come up with a simple, unique roadmap. Managers had to set their own priorities and directions. A purposeful culture, on the other hand, arises when executives induce their employees to build, collaborate, and uphold the company's purpose and priorities.
Related: 11 Bad Personality Traits That Are Costing Your Business
4. Reluctance to change
Companies must constantly focus and realign themselves. That's OK. In fact, stronger companies do this on a regular basis. And the more transparency you bring to your endeavors, the better.
I know a CEO who checks employee reviews on Glassdoor every week and then takes care of the feedback. At another company, the founders were some of the most purposeful people I have ever met. They were introspective, keen to bring people together, and authentic in their approach. As the company grew, the biggest complaint from employees was that they didn't spend enough time in the company of the founders.
Change and transparency don't have to be difficult. You can start with simple ideas like empowering lower-level employees. If a customer is dissatisfied, give these reps the authority to fix the situation on-site. You saved time and turmoil so that problems could arise in the organization. You have empowered your staff and the customer feels that this is a company that strives to do the right thing at all levels.
5. Lack of social mission
After all, we are looking for founders who are committed to more than just sales. Diversity and inclusion are not negotiable. As startups, founders tend to load their companies with personalities and backgrounds that are similar to their own. But as a business grows it requires different skills, a broader perspective, and removing the blind spots that come from running on that unique personality. We also want companies to advocate a higher social mission.
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Employees are more engaged, more productive, and more willing to go the extra mile if they believe their calling is bigger. Adequate data shows that consumers pay more and are more loyal to businesses whose purpose is greater than profit. According to an IBM study, 87 percent of consumers base at least some purchase decisions on a company's social behavior. This is especially true for younger consumers who only justify their brand loyalty.
We respect passionate founders who use whatever they have to grow their business. But by the time they meet with us, we hope they have grown to respect collaboration, new perspectives, the benefits of change, and the vital need for social mission. Without these we will likely take a pass.