For all the talk about corporate culture, we businesses know relatively little about how to create a successful one.
Management coaches will tell you it’s all about getting the company’s values, purpose, and incentives right. Still, few concrete steps can be taken that go beyond post-hoc rationalizations of what worked for other firms.
We know even less about how to grow companies with great cultures without losing what made them unique in the process. Starbucks’ new CEO, Brian Niccol, is just one CEO who is grappling with this fact at this very moment.
Scaling fast is almost antithetical to maintaining a stable corporate culture, as it turns out. So why have some companies, like Zappos, Netflix, and Fogo de Chão, succeeded?
Ingredients scale, chefs don’t
University of Chicago economist John List has a stark reminder about scaling for readers of his book The Voltage Effect: what works on a small scale often fails miserably when we extend and expand it.
In a powerful analogy, List compares scaling businesses to scaling recipes, using the collapse of Jamie Oliver’s restaurant chain as an example. While you can replicate the ingredients—be it in business processes or actual ingredients—there’s no way of replicating the chef.
Corporate culture operates in a very similar manner.
In most instances, what we identify as culture is simply an amalgamation of the behaviors and dynamics that naturally emerge among the individuals involved. While leaders can define what they want out of their culture, it’s ultimately up to the team dynamics to decide what comes out on the other end.
This is why plastering ‘don’t be evil’ on your walls won’t work, particularly if you’re adding tens of thousands of people to your payroll each year.
For culture to scale, it has to be deliberately nourished. The best way to go about this is to identify the ingredients that make your corporate culture special and to build your expansion around scaling them instead of headcounts or metrics.
Although culture will forever be more art than science, it never hurts to see what others have done in an attempt to get it right.
Netflix: Independence in Action
Netflix is often lauded for its culture of independence and empowerment.
Reed Hastings once noted that “culture isn’t something you can build up and then ignore,” and it’s safe to attribute Netflix’s parade of successes from DVD rentals to streaming to its focus on evolving its culture as it grew.
Hastings has likened the company’s early approach to culture to improv jazz rather than a symphonic orchestra playing off a set score, and the company’s dedication to hiring and empowering driven and self-disciplined staffers has clearly paid off.
Netflix’s approach to empowerment is something many others have also integrated and scaled successfully.
“You can’t scale a high-performance culture without attracting the right people around you and then giving them the confidence and tools they need to pave their own way to what works,” Lane Bess, CEO of Deep Instinct and former CEO of Palo Alto Networks and COO of Zscaler, among many others, noted in our recent discussion on scale, repeatability and predictability which he sees as the major keys to success.
“I’m very cognizant of the fact that whether it’s startups or large conglomerates, success depends on the ability to scale and repeat what works, including the corporate culture which is essential for keeping your talent at their best,” Lane added.
Zappos: Customer Service as a Cultural Touchstone
Zappos has built its brand on legendary customer service; something which has not yielded or changed even as the company has grown.
Founder Tony Hsieh famously asked himself “what kind of company can we create where we all want to be there, including me,” before boldly proceeding to answer his own question by building Zappos.
Happiness might come in a box for its customers, but for Zappos creating a culture that is lauded year after year has required dedication to nourishing the right values and processes that work as well as they scale.
The key to Zappos’ success lies in its ten core values, which have been deeply embedded into every facet of the company. What matters most is that Zappos’ values aren’t just words on a wall, they are that the CEO and everyone in the company is held accountable to.
Values that are backed with implementation count as List’s ‘ingredients’, and scaling them requires integrating them deeply into hiring, training, and performance management.
Fogo de Chão: Scaling the Brazilian Steakhouse Tradition
Fogo de Chão represents a much more tangible model for scaling culture; one that clients can sense and taste in the form of the Brazilian churrasco.
For restaurants like Outback Steakhouse, and Fogo de Chão the business model is built around culture, which is why it’s no surprise that Barry McGowan, Fogo de Chão’s CEO, so strongly emphasized it in our recent discussion on what has helped keep the chain going strong for four decades.
“We’re preserving a unique craft, and there’s no craft without the craftsmen. We’re incredibly deliberate about setting up each new restaurant to succeed just like the ones before, particularly when it comes to our staff. We prioritize investing in our staff and making sure they have a sense of ownership over what we are doing together,” Barry added.
Over the past four decades, the company has grown both at home and abroad, and the CEO attributes much of the chain’s success to one particular ingredient: people.
“The chefs and staff members in each of our restaurants are the most important parts of the puzzle,” Barry explained as our chat ventured into the chain’s approach to culture; both corporate and the craftsmanship of churrasco aspects of it.
“We’re obsessed with people on both sides of the equation. Clients need to feel like they’re a part of something unique, and our staff has to be equipped to deliver a special experience each and every time. This is why our metrics aren’t about the P&L but about behaviors, and train everyone to excel in reaching them,” Barry continued.
If you’re scaling an organization and hope to take its culture along for the ride, remember that companies are ultimately nothing else except the people that they comprise of.
Netflix, Zappos, Fogo de Chão are by no means the only companies that have identified the right ingredients for scaling their culture. The path to success follows a simple set of rules: you must be deliberate, intentional, and proactive in creating the right conditions for culture to flourish among the people you’ve employed.
The context you provide as a leader—communication, values, trust, and inclusivity—allows culture to grow into something sustainable at scale, but it is the people who ultimately make the culture what it is.