On building your CULTURE and your team

Is culture revealed or created?

Most of the time when you need something at a company, you make it. If you want to sell a product, you create it. If you need a head of marketing, you hire one. If you want to create a great company culture, what do you do?

The lack of a clear answer on this is why I believe most companies don’t have a great culture. They want culture to matter so they say it does—but wanting culture to be great doesn’t mean it will be. The reason: it’s not obvious how to make great culture. It can feel as if—instead—it is revealed to you, and what is revealed at best can be articulated. It’s not unlike a religious experience in that regard.

Culture is an output of a bunch of inputs that have to come together the right way. Specifically it is the collision of people and their context, how they interact with each other in that context, and then how that context evolves based on those interactions as they multiply. By the time you observe culture is bad—or more often (and just as pernicious) only okay—it’s a complex thing you’re dealing with, like a mole with 29 ingredients that tastes funny but you don’t know why.

People

The most important people to the culture are those who leave.

This is hard to say because it sounds mean: the people you fire are more important to your culture than the people you hire. It’s a half-truth, as you have to hire people who are an outstanding, but it’s an important half-truth because the best way to protect the environment is to recognize where you have erred and course correct. You reveal that culture as a by-product of who stays and who goes, and to effectively “experiment” your way into what your culture is by learning who fits and who doesn’t—and by learning what precisely it is they are fitting into. To do this requires courage and confrontation. You muster both of these by telling yourself it’s what you must do to make the company “safe” for your best people, who should—by the way—be the only people.

It is like a sculpture revealed by what you chip away. Unlike a block of stone, though, you can add and chip iteratively, which means you don’t necessarily have to be Michaelangelo. Most companies know they have to be superb at the adding. What is less talked about is how important it is to become excellent at the chipping.

As an organization you want to get really good at sending people off the pitch. As Jeff Weiner observes it is rare that someone takes themselves out of the game. If you develop a reputation with yourself for treating people respectfully in transition, for being direct, for generous severance, and for being proactively helpful in their search for what’s next, you will find firing people isn’t so scary. You then will be more likely to be decisive in borderline cases; if something’s a borderline case, it’s probably not.

You may even (rightfully) come to view a firing as your own atonement for getting the hiring decision wrong. Or maybe that the hire was right three years ago, but isn’t anymore. You can’t keep someone around out of loyalty; your loyalty is to the mission, not to any particular person pursuing that mission. It doesn’t matter how vital they have been historically, it is only your judgment of how important they are going forward that counts. This is a sports team, not a family.

A company that can’t fire people well is like a forest that never has a fire. It becomes overgrown, full of weeds, and it fails. A company that fails to fire people based on culture is simply a company that is never going to have a great culture.

Don’t hire people based on their experience

When hiring it is tempting to employ someone who has done it before. You actually don’t want that person. You want someone who is about to do it. After all, if they’ve done it before, why would they do it again? Either they’re not ambitious, not growth-oriented, or weren’t that good in their previous role. No matter which it is, you don’t want em.

Don’t get me wrong, experience is critical: it must show judgment, endurance, and growth. But experience is typically thought of as the main hiring criteria, and this is the problem. It is the obvious hiring criteria, and therefore by definition it will get attention. It’s like reminding an adult to chew their food.

My belief is there are two things which should be elevated to equal importance by being thought of as more so: fit and passion.

Fit with the core virtues

During a scary moment of meaningful turnover during Bonobos’ early days, we articulated what we viewed to be the five core human values of the best people we had ever hired. I made the list by grouping the thirty people we had hired up to that point into three buckets: the ten best, the next ten, and the ten who hadn’t worked out. I asked myself what really separated the top ten from the bottom ten in terms of their humanity. I wrote down five traits which I thought they embodied, and then I got really nerdy in creating a rating scale for each of them.

These traits became what we at Bonobos call core virtues—self-awareness, positive energy, empathy, intellectual honesty, and judgment—the centerpiece of what we look for in who we hire, promote, and fire. For a few years we even rated folks 1 to 5 on these scales not as a perfect science, but as a way to assess cultural fit. A 1 in positive energy is “a fun sponge: takes energy from the room when they walk-in”, a 5 in self-awareness is “a jedi: admirably non-defensive in talking about why they suck.”

How can you get empirical about something as soft as culture? My belief is the more subjective something may is, the more it demands a framework, however imperfect, to be made more discussable. Like Rotten Tomatoes and Zagat.

The bad news? It’s hard to find people who meet all of your criteria. The good news? There are a lot of people in the world, and the difference between being willing to do the hard work of finding them and not doing so is the distance between mediocrity and greatness.

Passion for the mission

To gauge passion for the mission, you need to actually know what the mission is. Most founders I talk to can’t articulate what their organization’s mission is—I know, as I was one of them. When we finally articulated ours, it enabled us to hire the right technology leader for the first time in six years after multiple tries. We’re now building the best software engineering team in the history of branded apparel retail because we finally did the hard work of finding a technology leader who loves technology and who loves clothes.

The best way to test for passion for the mission is watch who values title and cash over equity. People who really love your company will want more stock than salary, and they won’t care much about title. A wise man once told me: watch intently what people negotiate for, for it reveals more about their intentions than their words do. Someone I know calls it the “start-up hiring intelligence test”: you make two offers, $Y cash and X stock options, or 0.8$Y and 2X stock options. If they take the first offer, you pull it.

Spend enough time recruiting someone, and eventually the dynamics of the hiring will foretell what it will be like to work with them. Be particularly careful of people whose actions and words are not congruent in the process—for example they want to join your company because they are ready for a start-up, but are also interviewing at larger enterprises. Why? I have learned to listen to what people do, not what they say. For this reason I believe interviews can obscure reality as much as provide insight into it, that the purpose of an interview is to generate questions more so than answers, and that off-list references are the holy grail way to get to the answer and the truth. Not only are off-list references fun because you get to play private investigator for two weeks, you won’t believe what you will find out about the people who you don’t end up hiring.

At the end of the process, I try to talk someone out of coming, and to make sure its their passion over our salesmanship that is winning the day. I tell them all the reasons not to join, and all the harsh realities of marriage around the corner once the romance ends. For all my talk of culture, Bonobos Inc. is still a hard place to work with a lot to be desired. If I can’t talk em out of it, they’re in. If they don’t join, I don’t sweat it. If they had fire in their soul for what we are doing, if this had been right for them, they would have come.

Sometimes on the question the decision is the answer.

Now we’re done, right? Wrong. We’ve got fish, but no water. The other part of culture is the context in which people operate, which is influenced by myriad things: goals, feedback, promotions, compensation, physical space, how people organize outside of work, social norms, how people talk, whether debate is promoted or squelched, how conflict happens, how hard people work, what’s celebrated and what’s left unsaid. Any of these are an essay in themselves, so here’s my belief on the most important things to consider.

Context

You catch more flies with honey

There are two basic ways to motivate people: fear and joy. I think the former is easier in the short term, and the latter is harder but more sustainable for the long term.

I once thought that holding up a high bar for our team and withholding praise was a way to get the best out of people. I was wrong. From Joel Peterson I’ve learned that there are no diminishing returns to specific positive feedback.

We’ve made company-wide recognition a core part of every team meeting, and honor stars across both core virtues (e.g. self-awareness) and core values (e.g. make fit happen). More important than periodic public recognition is the day-to-day practice: the back-channel conversations, the hand-written notes, the email one-liners. It is paramount to be specific about what people have done well, as you get what you praise. Recognizing others actually makes me happier: a worthwhile pursuit not just on behalf of the recipient, but for the giver. Most important is building a leadership team that observes the John Gottman principle, that the healthiest relationships of any kind have a 5:1 ratio of positive to constructive feedback. The best way to teach your leaders that is to model it with them. Do as I do, not as I say.

You have to develop a well of goodwill to be able to criticize someone. They need to feel they are in safe place to be able to see the “ugly truths” with you, to hear your feedback. With enough honey in the jar, the real work begins which is being candid with people about where they need to get better. It is a paradox then, that the most critical of leaders are enabled by also being the most positive.

Give the company away

The balance sheets of most clothing companies are structured to assume that their owners are geniuses, that their leaders are the only other ones who deserve equity, and that everyone else is a peon. This can’t be true. At Bonobos Inc. we are structured more like a Silicon Valley technology company than a clothing company, and I believe this is a source of competitive and cultural advantage for the long-term. The best way to have a child behave like an adult is for them, over time, to become one. If you want an employee to act like an owner, why not simply make them one?

Someone once told me that people require three things to be happy: autonomy, mastery, and purpose. Someone else once told me that the best compensation framework, in ascending order of importance, is cash, equity, and decision-making.

I synthesize thusly: you slowly give your company away to the people who are in it, sharing more ownership and giving away more and more decisions until you are presiding over something which could survive your own departure. A good leader builds a company which requires them, a great leader builds a company which eventually will not. Mark Leslie puts it this way:

Even though you are the entrepreneur you need to make a gift of the company to those who are in it.

In an amazing presentation on leadership that Mark gives, he quotes Lao-Tzu:

A leader is best when people barely know that he exists. When his work is done, his aim fulfilled, they will all say, ‘We did it ourselves.’

The issue is nuanced. You don’t want to fully check out, as Ben Horowitz observes:

The only thing that will wreck a company faster than the product CEO being highly engaged in the product is the product CEO disengaging from the product.

Ben is right: you will remain visionary on the product, carrier of the culture, and protector of the mission for as long as you are CEO. Nevertheless, the arc is foretold—if you want to build a great culture, you will come to live the magical axiom: the more power you give away, the more you have.

Context Evolves

Tribalism is your best enemy and your worst friend

We once opened a California office for our NYC-based company. That was a mistake. By creating a second office at this early stage in our company’s history, people couldn’t see who they were working with, and they certainly couldn’t trust them. We ended up with two cultures, a costly travel budget, and a HipChat account that while active was woefully shy of the in-person collaboration required between groups to build a high-performing company.

For all the benefits of jet travel and Skype, trust and tribalism are still powerful forces of human nature which create in-groups and out-groups in no time. In 2011 Crain’s named us one of the top places to work in NYC. We fell off in 2012 the year we had a California office. After closing it in early 2013 we came back on. This might all be a coincidence, but I doubt it.

Even if you are not dumb enough to open a second office in the early years, one of the hardest things to contend with as your company scales is the development of in-groups and out-groups. You will find it a true labor of love to find the right mixture of federal vs. state culture. As Nassim Talebwrites, scale itself is a problem:

Great size in itself, when it exceeds a certain threshold, produces fragility and can eradicate all the gains from economies of scale. To see how large things can be fragile, consider the difference between an elephant and a mouse: The former breaks a leg at the slightest fall, while the latter is unharmed by a drop several multiples of its height. This explains why we have so many more mice than elephants.

The analogy here is imperfect, but the moral is this: you want to invent ways to keep your company small as you scale. This is something pertinent to us at Bonobos Inc. as we cross over 200 employees and sail by the (somewhat over-hyped but there is something to it) Dunbar number. What we are trying to do is create mini-cultures that are strong on their own, and that sum up to a larger Voltron-like commonality of aligned purpose. We invest our energy in tribal identities like the Ninjas, our e-commerce service team, and the Guides, our in-person retail showroom team. It’s why it’s we are developing other brands as new tribes, like our women’s brand AYR . Not only does this enable AYR, as an example, to be its own independent spirit, but it keeps our Bonobos smaller and tighter.

While we talk about how much the world is changing in the digital age, it’s worth observing some ways in which it is not. Unlocking the good of tribalism while taming its bad is a riddle written by a cruel god, and it is not only humanity’s greatest challenge on a macro-level (we killed 200 million of our own in the 20th century), it will be the biggest threat to your culture as you scale.

You learn far more from winning than from losing

There is a saying:

That which doesn’t kill me only makes me stronger.

I disagree. It might make you stronger. It might also make you weaker.

Similarly I think the idea that you learn as much by losing as you do from winning is dangerous. Who do you think has more insightful learnings about the game of baseball over the past fifteen years — the Chicago Cubs, or the Boston Red Sox? I’ve been a Cubs fan for thirty-five years, my dad has for nearly seventy years, and we can tell you you have nothing to learn from us. That’s why we just hired a new boss. From Boston. C’mon Theo.

In 2011, our site fell over on Cyber Monday. We recovered impressively due to the amazing work by our customer service team, the Ninjas. Two years later, in 2013, we had our most aggressive Cyber Monday plan at Bonobos. The goal was nearly $2 million in web sales. We hit it. I think hitting our plan in 2013 as a function of the whole company coming together was a greater cultural moment and learning than was reacting to the crisis in 2011. Coming together when you are losing is required to build a great team, but winning more often than you lose is required to build a great culture.

When it comes to culture, your work is never done. Today’s success sows the seeds of tomorrow’s demise.

“Remember when this was such a fun place to work?”

We’re a gallant species, and we don’t like being subordinate to anyone. Hence the conventional wisdom that most people don’t like their jobs and hate their boss.
For this reason I say creating a company that is loved by its employees is the most elegant challenge in business. You could also argue it’s the most important challenge in business for two reasons—one logical and one moral.

The logical reason: if your employees love the company, your customers will as well—because no one really loves their job if customers don’t love the product. This means if you get culture right, everything else will take care of itself. Employees who love the company beget customers who love the company which begets shareholders who love the company. Yet we usually talk of employees third.

The moral reason: your shareholders think about the company intensively for maybe once a month. Your customer interacts with your product, and this is if it’s a great product, maybe every day for an hour. Your team is immersed an order of magnitude beyond that.
It’s therefore worth asking yourself: is building great culture the single most important thing you do as a leader?

And—if that’s the case—then why does the literature and conversation around it typically amount to platitudes about perks?

At Last: The Recipe

1 part remembering this is the most elegant challenge in leadership
1 teaspoon of relaxation in knowing it is an iterative process
1 meaningful dollop of courage to fire people with grace and dignity
1 crystal clear realization that fit and passion trump experience in hiring
1 amazing mentor who reminds you to lead not from fear but from joy
1 jar of honey
1 board willing to share ownership
1 leader willing to gift the company to the people who are in it
1 World Series for the Cubs please god at some point

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