Creating a ‘Cultural Premium’ – A 10 POINT CHECKLIST

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by John O’Connell Executive Chairman ScaleUp Group

Introduction

At a recent CEO Forum* ‘Company Culture’ was discussed in the context of staff retention. The latter is very topical as a tight labour market in Tech has resulted in salary inflation, plus the continuing adoption of remote working has eroded the advantage of localisation/quality of life compared to alternative employers, previously commutable only.

The consequence is a ‘perfect storm’ where small but high growth companies are either losing key staff or finding hiring extremely difficult or both. Longer-term, more enlightened immigration policies and a focus on training/induction of raw recruits may well help, but in the meantime is acceptance of paying higher salaries and greater staff turnover inevitable?

Smaller businesses – the ones who are our clients – can mitigate these effects by playing to their individuality and flexibility – ‘Personality’ – so long as they are followed through with actions- ‘Substance’.  This is based upon my personal experience of founding/leading a growing business, Staffware, from a handful of people to 500+ in multiple locations worldwide and which became a listed public company.

So instead of being on the back foot/defensive, this approach could help to create for your company a ‘Cultural Premium’ – justifying why you do not need to pay top remuneration rates and/or why you consistently hit the high spots in your Outcomes or better still both!

However here are the three overriding fundamentals, essential to never forget:-

1. People work for People – i.e. not for companies. This is even more so in smaller businesses where personalities, especially of the Leaders/Founders are so prominent.

2. A successful business, as measured in a number of ways and not simply financial, is a major factor in people wanting to work for it. The reverse is also true.

3. Purpose. Making the owners wealthier is not a compelling motive for many especially a younger generation. It is no longer enough to focus on business outcomes if they do not enhance society, i.e. have ‘Soul’ such as to progress to ‘Net Zero’; ease our hard-pressed Health and Social Care services; address other social issues, such as unmanageable consumer debt and so on. At the very least facilitate your people to select their own good causes (although this might be regarded as a ‘cop out’ in some quarters). At Staffware we had a ‘Run the Sun’ annual event starting off in Australia and moving west where each local business nominated their own charity.

In other words, it is incumbent on you as a Leader to ensure.

  1. Your Personality shines through to all staff (not diluted by management layers).
  2. Your business is successful – where your people are proud to work and to tell others.
  3. Your company is making a noteworthy difference to society.

Culture

On their own none of the factors listed below are unique. The key point is that they form a package that together helps to shape the culture of your business.  (Each item justifies more coverage than is available here. ScaleUp Group has published various Papers in its CEO Handbook, on Remuneration; Share Options etc which are relevant, for instance.)

The outcome for me was that even my most hardened of executives, board members and the like, remarked on the ‘family’ atmosphere which existed in all of our worldwide locations and that how many individuals were performing above their ‘natural’ ability it seemed.

Outcomes

I’m not big on the touchy-feely aspects of culture – or to be more specific, I know they are valuable and real but being difficult to measure they are hard to measure, objectively.

Wherever possible I measured our performance by comparing it with external reports on e.g.

  • revenue per head
  • staff turnover
  • customer attrition rates
  • client satisfaction levels
  • profitability
  • growth
  • cash generation
  • r&d spend ratios
  • share price (when we became a public company)  

Doing this regularly ensured we did not settle either into a comfort zone or were satisfying one criterion to the detriment of other key ones, such as shortchanging development headcount to up our revenue per head figure.

Checklist

So please regard the following as a checklist which you should consider for its applicability to your company. (Bear in mind that ‘one size does not fit all’ (people) e.g. conventionally sales type people prioritise financial rewards whereas development staff do not (although I have found this to be an over-simplification).

Here they are, though not necessarily in priority order:-

  1. Remuneration
  2. Incentives
  3. Rewards
  4. Equity
  5. Recognition
  6. Reviews
  7. Career Progression
  8. Stretching
  9. Communications
  10. Personalisation

Remuneration

The starting point – not the end game as some leaders still think. In tight labour markets, this is a hygiene factor not a differentiator as good people (do you employ any other types?) are able to find another job and for higher pay. So, it is only a factor to build on. Ensure you are aware of what are the current rates, for each of the functions in your business. That way you are less likely to be blindsided by unexpected resignations, at least because of pay alone – which can easily precipitate a trend if unchecked.

The optimum scenario is not to have to constantly pay top rates, yes competitive of course, but not necessarily the highest. This a part of the payback for your ‘Cultural Premium’.

Incentives

The next most obvious item covering

  • Commissions &
  • Bonuses

There are industry standard publications on this subject, and it is relatively easy to find out what is the current norm so there is no excuse for not taking these into account in your compensation packages. The key thing is how achievable are the stated on target earnings? For instance, how many of the quota carrying sales people are hitting or better still exceeding their quotas? Ditto with other functions.

Rewards

It is important to appreciate the difference between ‘Incentives’ and ‘Rewards’. The former are expected if performance achieves a certain level whereas the latter may well be given without any prior expectation, often for one-off achievements during the year and/or at the discretion of management. Whilst avoiding the business having to carry such bonuses as a liability until declared, being so discretionary makes them harder to take into account by staff from one period to the next, so their incentive effect may not last very long as a result.

Equity

For me, this is a central plank of a ‘Cultural Premium’.

Not everyone agrees but my experience is that communicated properly to the right people – the ones who are the bedrock of your business – that sense of co-ownership is a vital ingredient in a ‘Cultural Premium’ but is what so many businesses fail to instil in their employees. In fact, they go out of their way to restrict the equity to a privileged few – fostering a ‘them and us’ atmosphere. Surely the reverse of what should be created?

Be it a private or a listed company, your equity is worth something – now or in due course – otherwise, why do you cherish it so much? Convincing your people of that is a litmus test of their belief in the longer term. So, granting them either equity or an option to acquire equity should be a reward for their loyalty and performance, which others should aspire to also.

If your team do not ‘get it’ that either means they are essentially short-term players and/or entirely income-focused, or you are failing to explain why one day such shares may well be worth something. Having a process by which ‘shares’ are allocated/earned makes them even more important converting them from a Reward to an Incentive. From an employer’s perspective, I kept a schedule of the potential values of Shares/Options to gauge their lock-in value i.e. what multiple of an employee’s annual earnings they represented, which as time went on represented a major deterrent to leaving (options/employee shares were ‘lost’ on departure). Tax is always a consideration in such schemes as is managing expectations through both good and not so good times. (Don’t mention the dot comm 95% club!)

Recognition

Important to differentiate between financial rewards such as commission/bonuses etc and ‘Recognition’, which may or may not carry any monetary value. The esteem you are held in by your colleagues and the respect they have for your performance is often a tremendous buzz for people, be it ‘Employee of the Month’ or the like. This is so long as the recognition is seen to be deserved and fair-minded.

Many employees – often sales people – want both i.e. be universally recognised by everyone for their performance, as well as getting paid a handsome commission.

Getting on the ‘President’s Club’ or its equivalent – we had the Achievers Trips – became a badge of honour, with staff organising babysitters a long way ahead and then busting a gut to ensure they qualified for the Trip – meaning parents/in-laws were being lined up a long way ahead – making staff even more determined to go on it.

We had two conditions apart from setting the performance criteria well in advance to make sure it was part of the Incentive system – not the Rewards one – which were:-

1. Other halves-husbands/wives /boyfriends /girlfriends etc. came on it too.

This ensured the impact was beyond the narrow boundaries of our business; and

2. Every qualifying sales person, earned a place for a non-sales person.
This had the effect of making the whole of the company support sales people in hitting their numbers – rather than, as is often the case, being resentful of them getting both financial rewards as well as the glory, alone.
I should add management reserved the right to decide finally who should be the non-sales people, ensuring this was both fair and as widespread as possible.

We also had regular more low key sessions – typically monthly when outstanding performances were recognised, companywide.

Reviews

Every six months, formal reviews of individuals took place. The format was the staff member being reviewed, their immediate superior – the reviewer – and that superior’s boss- the observer (to ensure fair play and avoid undue personal bias). This meant I personally sat in on many, many, review sessions – dominating much of my January and July – which gave me an invaluable insight into how the company’s employees were feeling about us and their contributions. An important by-product of this process was a check on the capabilities of my management team. most of whom had come up through the ranks, having had no previous experience of team leadership/management.

The format was deliberately kept at a simple level, so as to stimulate open communications and to avoid it becoming overly formulaic. All performance figures had to be verifiable in advance to avoid the session degenerating into a debate about the ‘facts’. Forms were circulated ahead of time. The sessions were not directly linked to pay reviews – to avoid discussions about say market rates dominating the subject matter of performance – but the opportunity was taken to either do some lobbying/sounding out, which was very helpful too.

It opened with the interviewee declaring what they thought were the key aspects of their role and how they should be assessed, which immediately set the tone of the dialogue – positive, or negative or neutral – these were the only optional conclusions available btw. Any significant misunderstandings came out – often highlighting differences in priorities.

The session then went on to discuss the specific achievements in that period and to identify issues/then obstacles. This became the key output for working on before the next review some six months later (or sooner where appropriate) – often highlighting training needs; resource shortfalls and sometimes significant issues of relationships. (In fact, I made some public company board changes as a direct consequence of sitting in on such sessions.)
The last part of the session was a) to agree/confirm the next objectives and b) identify the ambitions of individuals, which was an early indicator of rising stars and/or potential issues if there was a misalignment of goals.

The integrity of this process; participation by management at all levels from CEO downwards plus ensuring ‘actions’ were followed up, were vital to it being a positive part of our ‘Cultural Premium’ – not merely a box-ticking, impersonal obligation.

Career Progression

Closely aligned to Reviews, above and Stretching below, we identified who might be the people who could help us scale up the organisation, with extra investment by us if required.

So we used such sessions to try to match our company plans with individuals’ ambitions, setting the right expectations whenever possible. If that were not possible then at least it triggered an ‘adult conversation’ about how such difference could be managed, with timescales.

Staff became managers; managers became directors and so forth out of these open dialogues, as did, less dramatically, people going on courses; buddying up etc.

Less positively, we managed out of the organisation those whose career ambitions were drastically out of step – either absolutely or timewise – with ours as a business.

Stretching

Naturally following on from Career Progression, ‘Stretching,’ was so much second nature to a high growth business that I nearly overlooked it.

Everyone in the business was conditioned to having their job change either in scale or function or location or all three.

Hiring ambitious people and never letting them rest on their laurels was in our DNA. Of course, this is a two-way street and at times we could not deliver our end of the bargain – such as when we reduced our headcount from 500+ to 350 ‘overnight’ – but our philosophy did not change, even if its execution faltered very occasionally.

Examples included the person I hired as a junior hotline support engineer who 15 years later turned around my ‘sick’ US business; ditto the technician, who then ran our early reseller channel before heading up our 70+ development centre in three continents and the ‘naïve’ entrepreneurs who founded their own country-specific Staffware branches, which I acquired and expanded when we went public.  All are prime examples of ‘Stretching’ in a way that few large businesses could ever match.

Communications

We did our best to ensure everyone in the company knew and bought into our ‘direction of travel’ and more importantly where they fitted in it.

In a fast-moving business, increasingly international – we grew 12 fold in eight years averaging 40% compound growth – keeping everyone ‘onside’ became my joint number 1 role – along with customer management and also shareholder relations, after listing.

(Having the kudos of being on the stock market was offset in part by the restrictions placed on the timing and methodology of how we communicated, although we became more and more ‘professional’ on this point, which was ever more important as we had to cover Australasia; EMEA and the Americas as promptly as was humanly possible, after releasing our results to the Market – adding personal touches wherever it was possible without divulging market-sensitive data.

Setting aside the public company aspects, the point here is that as the company grew and internationally the word of mouth dissemination of information was no longer enough, nor was ‘hoping for the best’ that my direct reports, of varying experience and differing periods having worked with us, could be relied upon to pass on the subtleties of what was being said about our future – nor what we had achieved or not achieved in the past.

So companywide monthly ‘town hall’ updates were standard, usually followed by social events. Wherever possible line managers were enlisted to report on their area of responsibility, giving them extra companywide exposure, which was most welcomed as part of their personal development.

Personalisation

This is both the toughest and easiest item to talk about. Small, growth businesses where you are the leader, often the Founder, should be the easiest ones on which you stamp your personality? On the other hand, for some letting their team into their personal lives is uncomfortable. To my mind making the business personal was one of our major distinguishing factors, creating an atmosphere of openness; ‘no bullshit’ ; honesty and above all else mutual Trust.

Our demanding, transparent culture did not suit everyone, so we had our ‘casualties’ along the way. This was the price we accepted to not diluting our culture, however. So, wherever we could we enjoined families also, enhancing that family atmosphere.

On top of this I would have side challenges with various people around the world re what they had committed to, say a Forecast and the napkin culture of ‘notes scribbled and signed off by us both’ were everywhere. Fortunately, I won as many as I lost! (It struck me that some sales people especially were more focused on winning a case of fine wine off me than getting their commission cheque, even though that was a multiple of the value of the wine!)

I am reminded that the competitive spirit was endemic throughout our business, laced with good humour, naturally.

I don’t doubt larger companies have these traits too, but with Staffware being such an entrepreneurial business and our belief in our motto to be ‘The Global Champion’ in our field made ‘Personalisation’ that much more achievable. Using technologies developed by larger tech businesses for employee relationship management carries the risk of your business appearing no different to any other,  whereas we enjoyed being different – that was our ‘Personality’.

Conclusion

Staffware was not faultless. Arguably we founded Workflow Automation, which morphed into Business Process Management, way too early struggling for a number of years, as a result.

However out of this emerged a ‘never say die’ attitude which graduated to a ‘we shall overcome’ one, before we became the acknowledged leader in our field. We attracted a certain ‘can do, will do’ character, underpinned by our range of values and processes, as described here, which ran through all of the 15+ countries where we had direct operations.

I hope this ‘Check List’ built on the pillars of Personality’ and ‘Substance’ can help in creating your Cultural Premium’, so that you are on the front foot when retaining and hiring staff and delivering world class Outcomes’.

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