Can Your Organization Sustain Your Culture as You Scale?

The great challenge for healthy, growing organizations, especially those moving from startup to scale, is staying true to their founders' vision while adapting to change. Expanding the real estate footprint, tech capacity, sales teams' reach and human resources is daunting, but leaders know the heart of the challenge is organizational culture. The ability to create and grow a culture is what makes your organization truly unique -- and enhances its chances for long-term sustainability and success.

Gallup defines culture as "the way we do things around here," and we've found that the more aligned employees are with the organizational culture, the better they perform. Alignment is simple in the early days, when the founders and managers work in lockstep to advance the founders' values, attitudes and vision -- the unwritten rules for "how we do things" -- that inform every aspect of the culture.

But as companies expand, layers of leadership form and you start losing direct influence over people's behavior, social expectations and decision-making. It's the natural result of handing the reins of culture over to local -- and in many cases, newly hired -- managers, as leaders must as an organization grows.

Managers become the key transmitters of culture. They connect your aspirations to the day-to-day experience of employees. And Gallup's work with clients -- including and especially those in rapid growth phase -- shows those managers are rarely equipped to catalyze organizational culture.

That's how companies become a collection of mini-cultures. When they do, the culture the company was founded on gets lost in the noise.

Noisy Managers

"Noise," in this case, means unwanted variability. Coined by Gallup senior scientist and Nobel laureate Daniel Kahneman, Olivier Sibony and Cass Sunstein in their book, Noise: A Flaw in Human Judgment, a company becomes noisy when people's decisions and behaviors don't align with each other, the leaders' strategy -- or the culture.

Leaders may not even know it's happening. When the authors did a "noise audit" of a financial asset management firm, the authors found 41% variation in senior managers' stock valuations.

In a noise audit among insurance underwriters, their execs figured underwriters' decisions would vary by about 10%. In reality, it was 55%, and one CEO estimated the noise level cost his company hundreds of millions of dollars. And the book's authors say that the costs of the cumulative decisions don't cancel each other out -- they add up.

Managers are vulnerable to noisiness because they're human, and humans react to their environment, are motivated by their unique CliftonStrengths and are reflexively subjective. And "there can be a large amount of noise even in the judgments of competent and well-trained professionals," Kahneman, Sibony and Sunstein wrote.

It's important to note that variability isn't always a bad thing. It can be a source of innovation, and even conflict can support business results if the disagreement is handled right. However, your managers hold the reins of your culture as you grow -- and noise fractures your culture.

So to keep your culture consistent as you scale, managers must be developed to be effective cultural conduits. They'll run more successful teams -- but they'll also sand down the jagged edges of team variance and reduce overall organizational noise.

The Answer: Develop Managers First

The best place to start is by developing your managers as cultural ambassadors. At a minimum, they must know how to:

• communicate, demonstrate and prioritize organizational culture and make it relevant, day to day
• help team members understand how their daily contributions connect with the organizational culture
• recognize and reward performance in cultural context
• help team members know that they are integral to building and maintaining organizational culture

This is real work. Organizational values and culture are actualized differently from person to person, from team to team and across different business functions, and managers are rarely taught how to coach culture.

That's a huge problem when companies are scaling fast, which is when they need cultural consistency the most -- but development can position companies to succeed on all the metrics that matter. Managers who develop their teams' engagement levels, for example, achieve up to 23% higher profitability, 18% greater productivity and 18% to 43% lower turnover, depending on the organization.

Moreover, companies that use Gallup's management development programs have increased employee engagement by 16%, on average. As Jim Harter, Gallup's chief scientist of workplace management and wellbeing, said, "When a company raises employee engagement levels consistently across every business unit, everything gets better."

This is because quality development is tailored development -- it teaches managers to use their own strengths to coach individiual employees' performance in their company's cultural context, toward leaders' objectives. Everyone uses their unique voices, but they're singing from the same songbook.

Ultimately, in a fast-growing company where culture is evolving beyond leaders' reach, there's no more effective way to create cultural consistency than developing managers as culture coaches capable of driving performance and scaling culture.

Saving Organizational Culture -- and Expanding It

Leaders can help by describing their cultural expectations clearly -- speak the unspoken; write the unwritten. For instance, if a culture is one of aggressive competition, collaborative innovation or positive energy, leaders should describe what aggressive competition acts like, the ways collaborative innovation is practiced or how positive energy sounds.

Employees and managers also need to understand the "why" behind the organization's unique culture. Does collaborative innovation differentiate you to important customers? Do clients appreciate -- and pay a premium -- for uniquely positive interactions with all your employees? Those attributes need to be explained to be actualized.

At the same time, drag negative cultural practices into the light. The bad has just as much effect on culture as the good, and it can slow your growth. So if a manager has a proximity bias, or if transactional relationships between locations grease the wheels of productivity, or if a handful of high performers are carrying their teams, address it.

Ugly cultural practices torpedo performance and coaching relationships and can even undermine diversity and inclusion initiatives.

An Opportunity Leaders Only Get Once

If the process seems overwhelming, get an objective third party to look at the state of your culture. Gallup conducts culture audits frequently (Kahneman et al. can conduct "noise audits" as well) because companies with a collection of mini-cultures can easily succumb to noise and lose leaders' vision. It happens whether an organization is hybrid, in-person or totally remote. In fact, it happens all the time, when a company gets big enough.

But it's not a law of nature. The behaviors, values and social patterns that shape a culture can be transmitted no matter how big a company gets. Leaders must communicate and role model the cultural attributes they want -- and name the behaviors they don't -- while developing managers properly.

All leaders should be intentional about culture. But leaders of companies scaling fast have a once-in-a-lifetime opportunity that no other leader does: to stay true to their founders' vision before it gets lost in the noise.