Values

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The best time to start building a culture is by identifying your values. Let me start with an example: HubSpot. It was one of the first companies in Boston to break into marketing with a new approach now called inbound marketing. Brian Halligan came to this classroom and explained why inbound marketing is so important (you can find it on the Harvard i-lab YouTube channel, in the go-to-market Startup Secrets session). But what they do isn’t as important as how they’ve done it: they’re famous for building a very strong culture. Dharmesh Shah, co-founder and CTO, helped codify their culture. (Mahesh asked earlier whether you should codify culture: yes. It’s very important to figure out how to codify it so it gets reinforced and operationalized going forward.) HubSpot literally created a deck that at one stage was sixty, seventy, eighty pages long, then realized that’s too long to read and remember every day, and got it down to five things.

The one I love to pick out is: “We believe our best perk is amazing peers.” When I first read it I thought, that’s different. If you were going to work there, you might hope your best perk is health care, or foosball. But no, it’s amazing peers. As Victor pointed out, your peers are the number one reason people leave a company; if you have interesting peers to brainstorm with and rely on, then everything else (culture, impact, autonomy, accountability, transparency) goes back to what kind of people you work with every day. Every business is ultimately reliant on its people. If you have amazing peers, two things follow: you’re attracted to stay, and you’re more likely to succeed than the next company that doesn’t care about its people. And I said it to you earlier: you’re all amazing people; if you could peer with each other and help each other, amazing things happen. That’s a differentiated culture that feels actionable.

So, what is one value your company needs, and why? Before you answer, some clues. First, there are hard times you’ll live through where you’ll need a particular value; what do you need when you really get in a difficult situation, on that winding path? Second, something you share with family and friends, so that whenever you tell the story of your venture they say, “It seems like you valued this” (making a difference, improving health, building). It has to be authentic to you. Third, the no-brainer: there is something non-negotiable to you. Mine is honesty. It’s so fundamental that without honesty in my relationships, zero good comes of them. I’ve even refined it: I like proactive honesty. I don’t want people to wait; I encourage them to come forward and say, “Michael, you talk too much.” (Which someone did.)

When the room did this exercise, the boards filled up fast: grit and serve, passion, dignity, mental health, ownership, empathy, networking, EQ, integrity, money, care, optimism, honesty, fairness, growth mindset, open-mindedness, boldness, resilience, credibility. In a few moments you came up with values you all care about. The hard part: they all sound great, but how do you pick the one or two that are actually critical? People can’t remember thirty; you need a few.

Let me show how tough that was for me starting a new venture firm. I had one vision and mission that still hasn’t changed: I want to change venture for good. There’s a double entendre in that, and it’s intentional. The way we do it is with a community model that brings the very best people at the right time for a venture, depending on the domain, stage or function you need, which I learned from open source. But how do you reduce that to a value you constantly play to? We started with many and now have only four. One is “actively evolve.” Why? Because I realized that if we get up every day and actively evolve to listen to what our founders and entrepreneurs need (and their world is constantly evolving: their stage, their market, how it’s shifted), and we can actively evolve with them, we might change venture for good.

So take the values on your board and think about how they’ll evolve to support your vision and mission. Then one key test: if you had only one, which one will you need when it’s really hard going, when things have gone wrong, when you’re in the trough of disillusionment? Circle one on your board.

The teams did great work. One took two values and coined “empathetic resilience.” Two teams landed on integrity, and one member explained: doing the right thing even when it’s hard, especially when a team relies on you, because taking shortcuts or doing something unethical has trickle-down effects on their lives and their families’ lives. If a team can genuinely say “we have deep integrity,” you can rely on everyone; you don’t worry about trusting a person, you get straight to solving the problem. Another team landed on grit, because it takes grit, persistence and many other things to get through all these steps. And passion: if I’m not embodying passion right now, telling you what I really care about (you, the innovators and entrepreneurs breaking through), I don’t deserve to be up here.

I have a bit of a joke I use, especially at MIT, where engineers in the room won’t let up: “These are all soft words. What do they mean? How does this work in practice?” So I say: culture is like establishing an operating system for your company, to empower your people rather than run your apps. If you have a crappy operating system, no apps run on it. Same with a crappy culture: if nobody understands it, can’t relate to it, and you don’t live it, you won’t empower your people.

A framework for values. You need shared values. They don’t all have to be identical; we’re all different, and I actually think it’s really important to have diversity in your culture. The more different opinions and backgrounds around the table, the more likely you are to represent the world at large, which is incredibly diverse. So we’re not saying normalize to one thing. We’re saying the values need to be shared, and you need some guiding principles among you. You may come from different parts of the world, with different religions and creeds, but one guiding principle might be, as HubSpot and many others know: solve for the customer, put the customer first.

Then the behavioral test: what is one behavior you’d model in your venture, such that if someone didn’t model it, you wouldn’t want them on your team? Interestingly, some answers were completely different from the aspirational values people had listed before. Joseph, on the “aligned” team, picked honesty, which wasn’t on any of the boards: we want to make the environment transparent and share our values in that kind of environment, so if someone isn’t honest, we’d feel a bit away from our value. That value was not on their other board, which is exactly why this exercise matters: at some point you have to say what is so critical that you cannot work with someone unless they have it. Kavita picked respect, and explained it beautifully: a company goes through many highs and lows, and at the pressure points it’s important each of us respects one another. From the culture she came from in India, where caste can play a role, respecting each other without carrying that baggage gives a highly productive environment. I’ve felt that in India: I’d go to dinner and there’d be three or four generations serving dinner with tremendous respect for each other, whether you were 80 or 8. Bring that to a company (respect for what we’re doing, for our customers, for each other) and it’s so enabling. Bridget picked “navigation”: we’ll all be in new, unfamiliar waters, and being able to navigate those (which requires honesty, respect and EQ) and stay cohesive as a team is what she meant. That’s the journey you’re going to go on, and if you can navigate all the twists and turns with empathy and resilience, what a great value.

Salsify gave a real-world take on values, and Jason was honest: “I hate this section.” His reaction was that you should put every value up on the chart, because if you limit yourself to a few, does that mean you’re not honest, not authentic? He struggled with it. But it turned out to be a really important part of the culture. One of the reasons they started the company was to be around folks who shared the same values, and those values often get formed by past experiences at other companies; you want to make sure you don’t repeat the mistakes of the past. He admitted every one of their values sounds cliche, “yes, I want that feature,” but they genuinely drive how the team operates day to day: open and constant communication; celebrating small victories (they force themselves to have small victories, creating programs to deliver value to a customer in discrete enough chunks to celebrate); measurable, achievable goals not just in product but in how they run marketing and sales (they picked the wrong metrics all the time, moving from measuring calls to measuring demos per week until they found something that worked); and, most important to Jason, empowerment. If a decision can be pushed down to someone else in the organization, it must be, across the board. They don’t have a chief architect vetting every decision; if an individual engineer can make it, they make it, because they trust that person, and if it’s wrong, it’s not the end of the world, they’ll fix it. Half the time Jason doesn’t know what’s going on in marketing because Rob is pushing decisions down to Emily and Steve. If a decision can be pushed down, do it and don’t look back.

Even a simple value word needs to be defined. Take trust: I love trusting people, but there’s a point where you must ask how far you can trust someone if they don’t have the experience, knowledge or credentials to do the job. You don’t want to set them up for failure (for example, sending them into a government institution without clearance). But if you establish what they can be successful at and give them full trust in those things, you set them up for success. Salsify used another word with me: diversity. What does diversity mean? The room offered a range of experience and people, a range of ideas, and age diversity (youth and experience combined). All excellent. But notice: nobody mentioned geography, race or religion, which is usually what people mean by diversity. So when you decide a value or important quality for your organization, get really explicit about it. It turned out Salsify meant they’d been very successful at Endeca and didn’t want to just hire Endeca people; they wanted different backgrounds, different ideas, more in the shared experience. How effective will a team be at breakthroughs if everyone thinks the same way? Zero, because there’s no creativity. As you see in command-and-control cultures where a manager delegates both the task and the process, you get no divergence of thought; you get lemmings, automatons, not human beings. If your challenge is scoping a brand-new market where nothing like this has been done, you’ll need different perspectives, and the more you have, the more likely you’ll challenge each other into something that makes an impact. Salsify immediately identified this as a strength (they’d worked together before) and a potential weakness, and did something about it. That’s what I mean by thinking about your culture early and being smart about how it can make a difference.

Ethics and values: what’s the difference? Maybe none. You might decide your ethics need to be part of your culture statement. And a warning: culture doesn’t happen automatically, and if you kick this can down the road (too soft, too hard to measure, too many other priorities like raising money and building the product), the good news is you’ll probably be fine in the short term and nobody will tell you you’re doing anything wrong. But what won’t happen is that you won’t develop best practices, you won’t institutionalize the good things, and bad habits will just perpetuate until one day they trip you up. For example, if you never explicitly told anyone you want customers put first, to the point of doing whatever it takes, then when a customer hits a problem that feels outside someone’s jurisdiction, they don’t escalate it because they feel it’s not their job, and the next thing you know you have an unhappy customer that propagates.

I’ll give you an anti-example, too. This company put up as a value statement: “Results are everything.” What happens? It negates everything that goes into creating a result; it ignores culture. Taken to “results at all costs,” it caused really weird behaviors. The CEO was successful before and has been more successful since, but here’s what happened. Will you sacrifice profit? Maybe, startups often start with unprofitable customer relationships. Sacrifice profit for market share? Maybe, if that’s the trade you want. But what about burning out your people to win and serve customers while making no money? Now it gets tricky. And what about shipping a product at the end of the quarter that you didn’t actually have, because you needed to make the quarter to pay salaries? Now you’re crossing into ethics, never mind legals. That’s exactly what happened: people felt empowered to do whatever it took, and ended up shipping effectively an empty box to a customer to book some revenue, promising to make it up after quarter-end. You can’t recover from that. The company did not make it, and it was purely a cultural issue: they never sat back and decided what they really meant, whether they truly meant “results at all costs” or whether there were real trade-offs they were willing to make.

The bottom line on values: they have to be authentic to you, authentic enough that you can live them every day. You cannot borrow mine. I love Jim Collins (Good to Great, Built to Last), and I’d sit in his lectures and soak it up, but I’d only take away what I believe in, because otherwise I can’t live it. So think about what really means something to you and bring that to your culture. If it comes from the heart, you’ll be able to live it, and culture is all about what you live, not what you say.