Founder's guide to managing culture change for startup growth

Sarah Walker

Company culture should be a top priority for startups entering hypergrowth. Yet, most founders struggle to define what "culture" even means. 

To clear things up, we sat down with Sarah Walker, our Head of People at LTSE, and learned how founding teams can understand, define, and structure their company cultures for longevity. She gave us a masterclass on topics like: 

  1. The importance of documenting team culture for new hires
  2. Why company culture impacts your bottom line more than you think
  3. How to support unhappy team members at the macro and micro levels
"Building a company culture or vision is not one-and-done. It's a moving target, meaning you should work with your team to check on it regularly, to redefine what it is based on data and business plans."

What Does ‘Company Culture’ Even Mean? 

If you’re scaling a team for the first time, start by defining what exactly a “team culture” or “company culture” is. If you can’t understand what you’re building, your efforts are misguided. 

Based on theory alone, Sarah defines culture as a set of values, goals, attitudes, and practices shared by members of a team. 

Unfortunately, this standard definition has left founders more confused than anything. 

She prefers two alternative definitions: 

  1. What people do when no one’s watching — Let's say the founder takes off for a week. How will the team operate on its own? A culture emerges from the independent day-to-day of the people comprising the business. 
  2. Core decision-making filters — What questions do you prioritize when making decisions? For instance: "Do we value quality over quantity in our output or vice versa?" "Do we value the company's growth vs. security when making big-picture choices?"

You can also understand culture as a mix of the intangible and the concrete: 

  • Intangible, unspoken norms — These include expectations around work (i.e., remote vs. in-person, PTO allowance) and communications (i.e., whether Slack messages should be read after hours). 
  • Concrete, measurable goalposts — These include a defined set of company values or goals and the behaviors you want to promote or incentivize within your company. 

At a high level, a company culture comprises all of these factors, from concrete benchmarks to unspoken comms rules. What sets one organization’s culture apart from another’s is what they choose to emphasize from that laundry list of items. 

“Theoretically, a company’s culture is a set of values, goals, attitudes, and practices. But a lot of founders struggle with what that tactically means.” 

Documenting Company Culture Helps It Scale with You

Once you've named your company's unique culture, you must document it as you scale and establish mechanisms for passing that knowledge on to new hires as quickly as possible. 

With startups, the founding team typically develops their unspoken norms and ways of working together throughout the first years of the business. 

Once they enter hypergrowth and begin adding new teammates, they should ideally have best practices in place for hiring and onboarding. 

When founders fail to do so, things can fall apart during hypergrowth. 

Actively Introduce New Hires to Your Company Culture

As an example, Sarah once consulted for an organization where team lunches were the norm. 

The 10–15 teammates would take the hour as a chance to build trust and casually collaborate. A new hire joined and was never told about the undefined norm – others wrongly assumed they didn't want to be a team player. 

“The team kept thinking, ‘How did this person miss the memo?’” Sarah explains. “It’s because there wasn’t a memo in the first place.” 

You also have to take the person’s previous team experiences into account. 

For instance, the new hire had just left a company where "top performers" took lunch at their desks to demonstrate their dedication. 

Overall, when bringing new people into your organization, Sarah has three rules of thumb: 

  1. Nothing should be left unsaid. 
  2. If something matters to your team, you need to define it. 
  3. Give every new hire a proper avenue to participate in the company culture. 
“My advice for founders is really simple. Spend the time upfront defining what ‘culture’ means to your company. Then, set up mechanisms to pass that knowledge to new team members ASAP.” 

How Your Company’s Culture Impacts Your Bottom Line

Too many founders make the mistake of treating company culture like an afterthought. 

It's almost understandable since those early stages are usually entirely dedicated to driving product growth, outputs, and revenue as much as possible. 

However, it’s not enough to invest in what you’re doing. You need to consider how you do it. 

Soon enough, they see how this tangibly impacts their bottom line. Even if you're growing impressively on all fronts, having a negative reputation and high employee turnover stunts your ability to scale efficiently down the line. 

As such, Sarah affirms that every founding team should understand how company culture and people ops hurt or help your bottom line — and prioritize these functions accordingly. 

Company culture isn’t just a feel-good saying. It should be factored into: 

  • Annual priorities & strategies — Company culture and relevant verticals (i.e., hiring, onboarding, DEI) should be proactively built into plans and budgets and considered alongside critical matters like strategic biz dev or fundraising. 
  • Fundraising & investments — As you assemble your deck and pitch for your next round of funding, consider how much money will go toward a people or HR department. Build it into your proposal early on; don’t squeeze it in as a last-minute ask. 

Hypergrowth is the Best Time to Invest in Leadership Development

As your business scales, your responsibilities evolve accordingly. 

Early on, founders are usually both the strategizers and the execution. 

Once they welcome new team members to take over hands-on functions, many founders realize they have limited managerial or leadership skills. 

That’s why Sarah advises setting aside part of your budget for leadership development (even if you don’t know exactly how to spend it yet). Resources like HR consultants or outsourced chief people officers are readily available and worthwhile investments. 

After all, studies have demonstrated that one of the most common reasons people leave organizations is due to poor leadership. 

To avoid the tangible costs of high employee turnover, invest in company culture from the ground up, from the get-go — starting with transitioning your founders from "doers" to leaders.

Tactical Tips for Addressing Unhappy Team Members

A natural growing pain for startups is the unhappy new hire or team member. 

To address a dissatisfied co-worker, Sarah recommends the following approaches — at both the macro and micro levels. 

How Founders Can Show Up for Their Employees

If someone is unhappy with their work experience on a macro level, they might feel disconnected from the bigger picture (i.e., the team’s unifying mission). 

To ameliorate this, founders must put themselves in front of their team members. As the face and day-one leader of the team, you can't disappear on your people. 

Some ways to do this on a company-wide scale include: 

  • Sharing a physical space — Host town halls or some similar open-forum meetings. 
  • Maintaining regular digital comms — Go beyond Slack to send a newsletter with updates on growth, setbacks, upcoming projects, etc. 
  • Soliciting team feedback — An easy starting point for founders is conducting regular internal surveys, whether they’re online surveys, group chats, listening sessions, 1:1 meetings, etc. It’s the simplest way to learn what matters to them. 

Common Reasons Why Startup Employees Stagnate

At the micro level, it comes down to team members and managers checking in and having open, interpersonal conversations vs. stewing in an unhappy workplace. 

Standard (but illuminating) questions to ask include: 

  • Do we share the same expectations of your role? 
  • Do you have the tools you need to get the job done? 
  • How do you define what you’re working toward? 
  • Do you feel attached to the company’s larger mission? 

According to Sarah, one common reason startup employees grow dissatisfied or feel they've plateaued in their role is the scale of the company itself. 

Someone who made huge waves as an early hire in the first year or two may feel like their accomplishments have only shrunk since the business tripled in size. 

This also goes back to Sarah's point on company-wide solutions. Leaders should amplify what stage of growth the startup is at and what kind of behavior and output they're seeking (and rewarding) over the next several months. 

Beyond this, she emphasizes creating healthy conversations and spaces where employees feel empowered to evaluate questions like: "I helped this company get from point X to Y, but am I equipped and willing to stay on from point Y to Z?" 

“A single conversation is valuable for gauging whether someone has clear job expectations, feels attached to the company mission, etc. Those indicators help build healthier micro-cultures within teams.”

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Disclaimer
The information contained above is provided for informational and educational purposes only, and nothing contained herein should be construed as investment advice, either on behalf of a particular security or an overall investment strategy. Information about the company is provided by the company, or comes from the companies’ public filings and is not independently verified by LTSE. Neither LTSE nor any of its affiliates makes any recommendation to buy or sell any security or any representation about the financial condition of any company. Statements regarding LTSE-listed companies are not guarantees of future performance. Actual results may differ materially from those expressed or implied. Past performance is not indicative of future results. Investors should undertake their own due diligence and carefully evaluate companies before investing. Advice from a securities professional is strongly advised.
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