Thursday, October 6, 2022

Organizational Culture: Part 1 - What is Culture?

Every organization has a culture. Culture is the behavior of people in the organization. It’s the worst tolerated and accepted behavior. It's also how a group rewards and celebrates successes. It’s how a group documents things, it’s how they run their meetings, it’s how they communicate and how transparent their finances and decision making is. In the same way that Japan and the United States have different cultures, so to do Apple and Tesla have different cultures, even though their main offices for years were 20 miles apart and they definitely shared workers.

For a long time I thought culture, the soft skills, was something that was harder to measure, but as I get older, you can put concrete numbers to it, I’ll give some examples. A company with a median tenure of 9 months. A company with a median tenure of 12 years. A company that fires 4% of it’s employees. A company that lays off 30% of it’s people in 2020 versus a company that had company wide pay cuts with higher earners having higher pay cuts. It’s a company where the normal meeting is an hour, and typically goes over time, versus a company where the average meeting is scheduled for 30 minutes and it often ends early. It’s a place where only released drawings are used in manufacturing, versus a place that routinely uses unreleased drawings. It’s a place where 100% of people in operations can pick up any part and find the part history using it’s serial number, versus a place where you’re not sure what the part number is let alone the serial number and part history. It may be a place people yell every day, or almost never. It’s a place where someone can question the CEO, versus a place where people are afraid to speak up to middle management let alone the CEO. It’s a place where managers try to build their fiefdoms versus a place where managers strive to give their people the best resources and the best coaching. 

Those are topics you can ask about in an interview to get an idea of what the culture is. You might not get good answers to all of those questions, but some of those questions will have numerical answers you can use to quantify the behavior of the company. There is no perfect place and no perfect culture. And many of the things that make a culture good, or at least fun for some people, are often things with difficult downstream consequences. For example, design engineers can often bristle that they need to release all part drawings and assemblies before the parts and assemblies are made. Having spent more than two years in manufacturing at this point, that’s laughable because without something in black and white (which a printed drawing is) what are we supposed to build? Once, I was in a meeting getting some feedback from a different functional group and my group was being told we built the thing wrong. So we compared the picture of what we built to the work instructions, and they matched. Then we compared it to the CAD model, and it matched again. Then we compared it to the original test article we had built, and it matched too. All of the documentation was in order. Moral of the story is, don’t hold meetings after 5 PM when people are tired, but 5 PM meetings are a cultural thing too.

A friend recently left a slow moving four person startup because the team hit some roadblocks and he realized that his voice wasn’t fully being heard. To paraphrase him, a company is always going to have a little bit of it’s founder in the culture and either you get on board or get off at the next stop. As I get further into the world of startups, I get to hear about more companies all the time first hand from people living those startups. It’s fascinating because there are so many really really cool technologies out there that have the ability to disrupt the world. Yet there are also a whole bunch of people out there making the same people relationship mistakes over and over. To give an example, don’t threaten an engineering team because half of them will just leave in the next few weeks. But then again, if that is your culture, one of threats, and a constant turnover of people, maybe that works for your organization. One of the big companies in my industry published a turnover rate of 21% last year, and given what I know, it’s probably been around that level for years. This company is known as the benchmark, and it’s clearly a market leader, and yet 21% of their people are leaving every year. I haven’t worked there, so I can’t really say, but the stories do seem to be a place that burns people out. Yet another example, an industry incumbent that several of my acquaintances recently left was described to me as having a “terrible culture”. When I asked if it was so bad that it would not be around in 20 years, despite having legendary status and a long customer backlog, the answer was that it might not be, it was hard to say. Surprising to say the least.

So, I’m going to write about organizational culture. Mostly companies, but also non-profits, sports teams (yes there will probably be some Ted Lasso examples), even social groups, all have their behavior norms and what is acceptable without being pushed out of the group. Let’s talk about those things. Let’s dive in and talk for example about how when a first time manager micromanages, how is that person’s manager supposed to know, and quickly, that the new manager is micromanaging? I’ll have to come back to that because I don’t know. 

This series is partly inspired by the Big ERN’s Safe Withdraw Rate series, which is an open ended series where he dives into a bunch of details, and attacks the same problem, how to withdraw money in retirement so that you don’t run out, from a wide variety of angles. Most recently how using a line of credit, like a reverse mortgage or home equity line of credit, could be used to pay for part of a retirement. In short, every person’s retirement is different, so there is no truly one size fits all answer. Similarly, as I write about culture, it’s will be based on my experiences, and how I hopefully lift up those I spend my days with so that we accomplish great things. Yet, in large part this will subjective, as quantifying things like individual productivity and the turnover and firing rate are not things usually published by companies, so I'm not sure how much I can speak to them. To be clear, I’m not actually trying to change that, I’m just trying to articulate and quantify things that could be described as the culture of an organization, so that as people are looking for their ideal culture, they can ask the right questions. 

Again, there is no perfect culture. A culture that is super high performing likely has a fair amount of turnover. A culture that doesn’t document things well, probably is a lot of fun sometimes just doing experiments, but that failure might come to bite them. This is my attempt, between culture’s I’ve lived, those my friends have lived, and those I’ve read about, to quantify organizational culture.

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