A startup culture is not a scaleup culture

The small group that starts a business will be a very tight unit with its in-jokes and common practices that build a culture of intimacy, notes Sarah Underwood, director of executive and professional education at Leeds University Business School and also the University of Leeds academic director of the Goldman Sachs 10,000 Small Businesses UK programme. But that culture can’t be maintained as business grows. “Trying to keep that original culture will limit the growth mindset of the founding team – the culture should mature with the business. As companies scale, leaders have to recognise that different kinds of people – with different motivations – will come to work for them.” 

Document and codify

Writing down and documenting practices makes a big difference. If they are written down, it’s very clear. It makes leaders sit down and think about what they actually really care about in terms of maintaining a culture.

For Philip Ross and Martin Izod, co-founders of fast-growing specialist door company Safehinge Primera, the very first session of the Scale-up Scotland programme immediately addressed one of their big challenges. It was about people and company culture. “We had had real headaches in this area,” says Philip Ross. 

Eleven years after starting the business, the programme led them to codify the company’s culture. “We recorded our purpose, vision and values and then started to use that actively within the business to inform recruitment and to evaluate our decision-making processes about what we do and don’t do, about the behaviours that we rewarded. We found it totally transformative in terms of our success rate with people. Now we only bring people into the business if they’re passionate about our purpose, which is to help protect people through vulnerable times. We tend to find that we attract people with an affinity for what we do. Now people are absolutely not one of our challenges – they are one of our major strengths.”

Consolidate and reassess

Growth is tiring, observes Professor Eleanor Shaw Associate Principal at the University of Strathclyde with responsibility for the University’s entrepreneurship strategy ‘Strathclyde Inspire’. “It is not just about scaling the next peak; you can make progress but you also need to have a plateau when you assemble the resources to capitalise and leverage on the growth that you have secured.” These periods of consolidation are necessary; fast-growing businesses suffer if they don’t consolidate.

Purpose matters

“The P word – purpose – is becoming the norm among our cohort companies,” says Professor John Anderson, programme director of the Growth Advantage Programme at the University of Strathclyde. “Scaleups recognise that they need to articulate their purpose so that their people understand why they’re there and what their just cause is. Growth for the sake of growth leads to bad behaviour because founders are no longer focused on their purpose. Growth can’t come at the cost of personal values and the purpose of why the organisation was founded in the first place.”

Consider culture when taking on external investment 

External investment can affect the culture of a business, says Sarah Underwood. “This does need to be considered as part of the investment process. There are different motivations and expectations and you can start to get culture clash.”

When Simon Hirst, founder and CEO of Nottingham-based drug discovery company Sygnature Discovery, first looked at taking external investment some 13 years after starting the business, he felt strongly Sygnature’s culture was critical to its success. “We wanted a private equity partner who recognised the importance of that culture.” It was one reason why the company chose Phoenix Equity as their eventual partner: “they spoke well to that point during the selection process, and after the investment that was the reality of dealing with them. They were very focused on achieving growth in a sustainable way that allowed us to keep our culture.”

Use tools to measure your progress

“There are platforms available to measure the extent of employee engagement in an effective manner – and which can be reported to the board,” says Strathclyde’s Eleanor Shaw. So you can measure whether behaviour is slipping against the values. “What are your Glassdoor reviews telling you?” Scaleups should aim to be included in rankings such as the UK’s Best Workplaces to benchmark themselves.

Don’t just hire because there’s work that needs to be done 

This is where culture falls apart, says Strathclyde’s John Anderson. Hiring people just because you need to hire people leads to compromises. “All the good work that a scaleup has put in – communicating, recruiting, rewarding, measuring – can go out the window if people are simply hired as bodies to do the work. One company had a near-death experience because it went from 32 to 65 people – and the last 15 people just shouldn’t have been there.” 

It comes down to behaviour

“Culture is not about value statements written on the wall, it’s how people behave,” says Sarah Underwood. “It’s not what you say you do – it’s what you actually do that is your culture. How comfortable is the leadership about challenging behaviours and practices that are going against the culture? You have to ensure that where behaviours are not a good fit with the culture they are pulled out and addressed. If they aren’t, then you get culture drift.”