I wrote this way back in 2018, after a month at a company. My goal was to flag potential issues that could lead to org/culture debt down the line and proactively prevent these through our actions.
Fast forward 3 years, and I’d say, with 20/20 hindsight, that this list was spot-on. And that we were mostly successful in avoiding some of the truly negative and toxic outcomes that can come from culture debt. I have worked in places that ignored these flags when they were yellow, and had to address them them when they became burning bright red (usually hiring a Head of People to handle it). It’s not fun, and by the time you get to this point, it’s very difficult to turn things around.
So I want to share this with you all, in case you are starting to build an organization today. Some of this is outdated (see the point about WFH/remotes, for example) or specific to the time, but I kept everything in from the original memo. And apologies for the terrible table formatting below — I’m not sure what drives WordPress’s column width!
Ideas and idea-sharing
| Common areas of culture/organizational debt | What does this look like and how does it hurt the business | What we can do now to minimize this | Longer-term tactics |
| Lack of psychological safety / avoidance of conflict | People don’t express their ideas for fear of rejection or judgment. They avoid disagreeing with others. This leads to a reduction in creativity, alienation among employees from the work, and generally less-good/less-vetted ideas being implemented. Longer-term, this leads to ineffective teams and employee dissatisfaction. | As leaders, ask, listen, and engage. Be the last to pitch ideas. Thank people for their opinions. Don’t judge harshly. Across the company, encourage a culture of openness, idea-sharing, and tell stories of junior employees raising great ideas. | Consider training for people to raise well-fleshed-out ideas / business cases, especially when we are devising company goals / strategy. |
| Loss of risk and innovation; sense of ‘too much to lose’ | Once we have some success, a deeper fear of losing our footing can emerge. This leads to people being less willing to experiment and take risks, and deferring to the status quo. The end result is fewer experimental ideas, and fear of making mistakes. | Emphasize our value of ‘inventing the future’ and that our competitive advantage versus banks is our ability to innovate and be nimble. Publicly explain how we balance risk / rewards in moving towards action. | Embed this into performance reviews to check on employee’s penchant for innovation. |
Decision-making and communications
| Common areas of culture/organizational debt | What does this look like and how does it hurt the business | What we can do now to minimize this | Longer-term tactics |
| Centralized decision-making by a few members of leadership | As we scale and grow, it will be necessary to push decision-making down / out, or else several negative outcomes may emerge: 1) the leadership team will become the bottleneck to action; 2) we won’t be building a bench of leaders who can make cross-functional decisions; 3) employees will become frustrated with the disconnect between Responsibility and Authority — they’ll have the responsibility to do something but not the authority to make the decisions. This is the opposite of empowerment. | If we believe that we have the right leaders in place, then push decisions down to them. Clarify which decisions truly need to be made at the highest levels (e.g., when dealing with partners? when there is disagreement at cross-functional leadership level?) and stick with that plan. If we don’t believe we have the right leaders in place to make these decisions, either determine a way to apprentice / train or consider supplanting them. | Check in regularly with the ‘middle layer’ to see if there is more we can do to promote decision-making at their level. Over time, create a management team at this level, with its own off-sites, development programs, etc. |
| FOMO among employees who are used to being in the flow/know; increasing difficulty of knowing what’s happening across the org | Early employees are used to knowing what’s happening across the business, but as we grow and become more complex, this becomes more challenging and unnecessary. However, due to FOMO, these employees may insist on attending meetings they don’t need to attend, leading to time wasted and bloated meetings. | Cap meeting attendance to those who are R and A in the RACI model: Responsible and Accountable. Not Consulted or Informed. Ensure that, at the end of the meeting, attendees know how to disseminate information and next steps to others who are affected. Discuss rationale for change with the uninvited, and ask for their feedback on how things evolve. Ideally we can help people build trust that they will get the information they need from others. | Consider more explicit meeting management/training. Determine overall internal communication strategy — which forums cover which topics; which tools to use; etc. Explore communication and project tools such as Facebook for Work; using Slack in this way; etc. |
| Silo-ization and territorialization by leaders | As leaders hire teams, it’s natural for them to become more emotionally invested in their team’s success and happiness over the company’s success. Add limited resources, and that brings us to silo-ization and territorialization. People begin optimizing for their own interests, and the impact of this orientation can be seen in strategy development, hiring plans, compensation planning, etc. It can lead to arriving at decisions that aren’t the best for the company. | Reemphasize the value of ‘putting the customer first’, often. Ask leaders: “If you were the CEO and your job is to do the best thing for the company, how would your perspective change?” or “How is your proposal aligned with our key goals as a company?” Call people out if it seems they are optimizing for their own team versus the good of the company. | Hold quarterly off-sites for the leadership team to a) get to know each other as people, and b) to think more holistically about what the company is trying to achieve and how each contributes — this could be during a strategy session. Make everyone read, “Five Dysfunctions of a Team”. |
| Exclusion of key stakeholders from decisions (intentional or not) | As a company grows, people lose sight of what everyone does, and may neglect to include important consultants into decisions. This can cause interpersonal tension, but also derails progress. | Get people into the habit of thinking through the RACI framework, always asking, “Who else needs to know what I know?” | When we have an intranet, consider adding roles/responsibilities for each employee. If we decide to implement a goal-setting app, can also include explicit goals and KPIs. |
Leadership
| Common areas of culture/organizational debt | What does this look like and how does it hurt the business | What we can do now to minimize this | Longer-term tactics |
| Loss of trust and belief that leaders are committed to employee well-being | This is the essence of ‘culture debt’. It’s the degradation of trust in leaders as small commitments are overlooked, promises are perceived and broken, and continuous change renders all new policies and programs seemingly ineffective. While there may not be any immediate negative impact, its presence can ignite toxicity if a catalyst — such as hardship or an undelivered promise — is set in motion. | Be very careful about what you commit to and tell employees. Think through the ‘what-if’ scenarios ahead of time. Consider being forthright with employees about what the unknowns are so that, should they arise, we have managed their expectations. Build trust by being open about potential pitfalls and challenges. And deliver on your promises. If you can’t, then explain why in detail. | Build out structures around the areas where trust tends to be low: compensation models (cash, equity), evaluations, offer negotiations. Explain the rationale and how we get to these answers. |
| Fear of speaking out against leaders | Even if we are able to build a culture where people feel comfortable raising issues up to leaders, there may be some topics that feel too ‘heavy’. Concerns about retaliation may emerge. This can lead to an unhealthy workplace where employees gossip and consult each other, where real, legal issues aren’t surfaced in time to be addressed, and where employees go to Glassdoor/Medium to vent about company leadership. This type of negative employee review/press can be very damaging to the internal culture and our ability to recruit. More importantly, we would fail as employers in creating a safe environment for our team members. | I can reinforce (with other leaders’ help) what my responsibilities are re: confidentiality and escalations. | Train managers to know how to handle lower level issues. Engage a 3rd-party ‘whistle-blower’/counseling service. |
Norms and policies
| Common areas of culture/organizational debt | What does this look like and how does it hurt the business | What we can do now to minimize this | Longer-term tactics |
| Meeting bloat and poor meeting management | This is a problem every company has, not just growing startups. But we have the opportunity to avoid the pitfalls of poor meeting management/scheduling by addressing this early. | Before our office move, consider running a meeting diagnostic (free) by CoPilot (https://copilotme.com/), and use this information to set new schedules for recurring company meetings. This is an opportunity to change how we use/think about meetings. | Continue to gauge how we are doing on meeting hygiene via surveys. Consider having anonymous polling after each meeting to ask how effective it was. Engage in meeting training for managers/others. |
| Inconsistencies in pay practices | In the urgency of hiring, a few thousands of dollars here or there can mean the difference between having an engineer or not. Over time, this can lead to inconsistencies that benefit great negotiators, versus paying for experience and effectiveness in role. One way of thinking about comp is to assume that everyone at the company knows each other’s comp — and, in this day and age, it’s pretty common for employees to speak freely about their pay and/or consult websites like Payscale or Blind or Levels.fyi to see how much peers are paid. Employees care a ton about fairness, and learning that there is a discrepancy can very quickly erode trust. | Finish a comp review of all employees + new hires to identify any inconsistencies. Consider paying these out proactively. Set hiring plan with pre-determined budget range, based on experience needed. Ask about comp expectations upfront during recruiting to make sure expectations are managed. Use benchmarks from Option Impact and elsewhere to develop rough compensation bands for roles. | Conduct annual comp review to make sure there aren’t any unaccounted-for inconsistencies. Fine-tune comp bands every 6 months. |
| Ignoring policies and guidelines | Startups revel in the lack of bureaucracy and constraints, and so there may be a bias to make decisions in the moment, led by the most urgent/pressing issue at the time. However, without consistent policies or guidelines, we can end up with confused employees, overspending, perceived favoritism, lack of fairness, etc. People may not like rigid structures, but they do appreciate knowing what’s what and how to get what they need. | Whichever policies/guidelines we’ve agreed to, let’s try to apply. When we don’t apply it, discuss why not. | Develop a holistic ‘handbook’ for employees that include policies and guidelines, which should be pre-vetted by the management team. |
Management
| Common areas of culture/organizational debt | What does this look like and how does it hurt the business | What we can do now to minimize this | Longer-term tactics |
| Poor management under the guise of ’empowerment’ and ‘trust’ of team members | Managers often don’t like being the bearer of bad news, or be seen as bureaucratic. Frankly, nobody does. However, they are asked to approve PTO, WFH, expenses, etc., and — too often — they will shirk these responsibilities because they don’t want to say ‘no’. This can lead to multi-week PTOs being approved, rampant WFH, no filter on expenses, conferences trumping work, etc. | Create company guidelines on PTO, WFH, expense reimbursement, etc., with approval matrix. | Train managers to understand their responsibility is to balance the needs of our customers and the company, with the needs of their team members. |
| Inexperienced managers | Too many startups will promote tenured employees into manager positions, with little regard for training or whether the person is qualified to be a manager. Typically, this is because of the long-standing notion that the manager should be the person who knows how to do the work/understands the technical details the best. This doesn’t have to be true, but regardless, inexperienced and bad managers can truly disrupt the working conditions of their teams. Remember, people leave managers, not companies. | Create manager standards and expectations and disseminate across managers and teams. Note that these will be the assessment criteria during 360 reviews. | Engage people managers on basic manager skills via in-house training that covers: giving/receiving feedback; conducting 1:1s; coaching and motivating; etc. Develop IC and manager paths for most functions at the company, to avoid the belief that you need to manage in order to progress. Create 360 reviews that include feedback upward to managers. |
Employee composition
| Common areas of culture/organizational debt | What does this look like and how does it hurt the business | What we can do now to minimize this | Longer-term tactics |
| Lack of diversity and inclusion among employees, especially at senior levels | Companies that don’t focus on D&I until they are large struggle to then make progress in changing its culture and employer brand to be more welcoming to candidates from different backgrounds. This results — not just in lower D&I statistics — but also in less self-questioning, innovation, understanding of other people’s needs (e.g., see Band-Aids). These skills are important for a company to be successful in creating a compelling product for a wide range of customers. | Inclusion and belonging stem from having an open culture of dialogue and discussion; curiosity about others; and empathy for people who are new or different. We can foster this type of environment now, and in doing so, set the stage for more diverse hires. Review our recruiting practices (interview slates, times of interviews) to ensure there is minimal bias and to present a more welcoming environment for candidates. Reinforce our value of ‘being different, together’. | Create an overall D&I plan. Discuss with leadership if we want to institute any D&I targets, offer different referral bonuses, etc. Consider using our intern program as a channel for underrepresented groups. As a company, we could institute something like the Rooney Rule to ensure we are interviewing a broad swathe of different profiles before we make hiring decisions. |
| Overly compensated and titled employees | In the beginning of most startups, titling and compensation won’t match experience or even, roles. If we don’t rectify this, headcount budgets will get progressively larger, employees may receive job enquiries for higher-paying jobs that they are not qualified to do, and we’ll have less money left over for other staff on the team. It will also get more challenging to hire more experienced candidates to take on leadership roles under less-qualified employees; and there may be some erosion of respect among employees for those with grand titles but who don’t appear to be equipped for the role. This isn’t what a meritocracy is about. | Be careful about hiring people with inflated titles. “Managers” should be reserved for people managers. “Senior” should equate to some level of experience/knowledge/years of work. “Chief” should denote true industry knowledge and influence. | Some time after product launch, we should align titles to compensation and expectation bands. On compensation, while we wouldn’t lower amounts, we may need to think about how to message that their rate of increase may not be as rapid as it has been or as they may be expecting. |
| Employees whose skills don’t scale with the company | It’s not uncommon for startups to rotate through leaders in the early years. As a company becomes more successful, the requirements for the role grow, and –fortunately — it can attract better talent. While we want to invest in early employees who have the potential to grow with the business, that may not be the case for all. Rather than keeping employees around, we should think proactively about how we can move them to other parts of the org (where their skills will be better utilized) or to exit them compassionately. This will enable us to maintain high performance expectations and to support those who will likely be successful elsewhere. | Look specifically for high-talent, curious, and agile learners when recruiting. This should be at least on-par with experience and know-how. | Along with performance reviews, institute development planning conversations between managers and their reports. Would like to explore with GC how we can institute an approach similar to Netflix, where expectations are set upfront about leaving the company when your skills aren’t growth sufficiently quickly with the business. Develop a formulaic severance policy. |
Employee morale
| Common areas of culture/organizational debt | What does this look like and how does it hurt the business | What we can do now to minimize this | Longer-term tactics |
| Focus on entitlement versus contribution | This may be specific to some companies that have very generous perks, employee-centric policies, etc., but as we raise more funding and become more well-known, employees may start asking about ‘what have we done for them lately’ instead of ‘what can they do for us’? | Reinforce that employees should take ownership of their careers and how they contribute back to COMPANY. Take care to always make it clear that we are working here for our customers, that as a company, we care about our employees and want to do the right thing by them, but that we can’t do that if we aren’t a business first. | |
| Disconnection from mission, what the company is striving towards; not understanding how one’s work connects to the larger whole | As companies grow, the mission can seem to get muddled or, even, forgotten. This can lead to employees losing that thread. | Always remind the team about our mission and how our goals/work are getting us closer to achieving that mission. Communicate internally and externally all that we are doing to enable credit access — e.g., the Community Affairs work. | Develop company goals and functional goals that line up more clearly with the mission. Make sure that we continue to have onboarding program that emphasizes mission + values, led by CEO |
| Resistance to change in company direction, in leadership | At some point, people become comfortable with the status quo: where they sit in the office, where they sit in the org structure, who is leading the company, etc. This is when resistance to change and complacency builds up. So when a big change does occur — which is 100% likely at a startup — people get really freaked out. | Underscore continuously that we are working in an industry full of change. That change is our only constant. That complacency has no place at this company. | Think about ways to incorporate these steps to build a resilient organization: (https://www.forbes.com/sites/brentgleeson/2017/08/17/how-leaders-build-the-resilient-organizations-of-tomorrow-a-navy-seals-perspective/#58c979721ba8). |
Recognition and rewards
| Common areas of culture/organizational debt | What does this look like and how does it hurt the business | What we can do now to minimize this | Longer-term tactics |
| Sense that there is little accountability | Accountability is, for many, how you gauge fairness in an org. However, when someone fails to do something, it isn’t often broadcast across the company; it’s usually a 1:1 conversation with a manager. This lack of transparency, plus a high tolerance for middle-of-the-road performance, can lead to a sense that a company doesn’t hold its leaders or managers accountable. This can cause employees to question whether things are fair, whether the company is genuine in claiming to have a high-performance culture, etc. | When discussing accountability at COMPANY, tie the notion to metrics, results. Make the connection between accountability and ownership — if you aren’t able to deliver on a specific metric, you should acknowledge it and then fix it. It’s still your responsibilitly, until a pattern emerges and we realize that someone else should take over. Consider whether we want to be more open about failures? |
If there is one thing I think is missing from this list, it would be Staffing the Leadership Team with Members of Tomorrow, not Members from Yesterday. What I mean by this is that a company needs to make decisions based on what’s needed for the business’ future, not decisions based on past relationships and professional pride. Everyone knows this, but it’s hard to know when you are IN IT. As a CEO, you have to elicit feedback from others about the members of the LT; it’s awkward but how else will you know what’s going on? In my role, I am often vocal about what I observe and perceive, but I believe I am in the minority and granted clearance because my job is about people; others don’t want to ‘tell’ on their colleagues. As CEO, make it easy for people to provide their candid opinions to you. Even a simple ‘report card’ about other functions every 6 months could open up a dialogue about what is missing, what could be better.
Curious to hear what people think of this.
suechoeblog.com 