Classic Mistakes, Part 2: Ignoring Your Company's Culture

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For an entrepreneur consumed with the countless tasks of start-up, it can be tempting to ignore culture--to allow, in other words, the new enterprise to organically develop its own culture without deliberate attention. But that can be a big mistake. Developing a culture of engagement and excellence, while notoriously difficult, is critical for organizational performance in the long run.

Entrepreneurs are not immune from the war for talent that has been raging in our economy for decades. Today's leading organizations make bold investments to attract, develop, and retain the best and brightest, recognizing the link between culture and talent--and how they drive performance.

Take Zappos.com, the leading online shoe retailer recently featured in a Harvard Business blog by Bill Taylor. There, all new corporate employees receive a month of customer loyalty training before starting their actual job. Afterward, they are offered $2,000 to leave the company, no questions asked. This "quit now" bonus, which started at $100 and was gradually increased to raise the stakes, is designed to ensure that employees are there for the right reasons. Amazingly, about 97% of trainees decline "The Offer."

Zappos.com also offers an array of community engagements for employees and publishes a "Culture Book" annually, with employees documenting what the company culture means to them. Among the company's ten core values: "create fun and a little weirdness" (#3), "be adventurous, creative, and open-minded" (#4), and "build a positive team and family spirit" (#7).

According to 34 year-old CEO Tony Hsieh, "our number one focus is our company culture." And that culture translates into great service. The company runs its warehouse around the clock, offers a 365-day return policy, and operates a call center with no scripts or time limits. In other words, employees are empowered to use their judgment to delight the customer.

The results? Zappos.com grew from almost nothing in gross merchandise in 1999 to $840 million in 2007--and it's projecting more than $1 billion this year.

At Google, all engineers may devote 20 percent of their time to any project they choose. According to company spokesperson Claire Stapleton, "people are more productive when they're working on projects that really excite them. It's the same idea with our perks--organic cafes, lecture series, yoga classes--great things are more likely to happen in the right culture and environment." Many high-profile products have origins in the 20 percent rule, including Google News, Gmail, Orkut, Google Sky, and Google Grants. The company famously outlined the "Top Ten Reasons to Work at Google," making its culture transparent.

Culture matters. Entrepreneurs must create a dynamic culture to gain a beachhead in the war for talent. Of course, you can take this too far and focus so much on culture that you neglect the bottom line. But more often than not, entrepreneurs neglect culture--and then pay the price later as they watch their best people leave.