Are you building a new company? Have you decided to change the job and join a new organization? The question of culture will undoubtedly come up. What type of culture do we want to build? What kind of culture will I thrive in? What type of culture will help us achieve our goals?
Over a period of seven years, the Stanford Project on Emerging Companies tracked many of the technology start-ups in Silicon Valley. The project’s focus was on examining how the founders approached recruitment and other human resources, organizational and cultural challenges. The researches James N. Baron and Michael T. Hannan came up with five blueprints and analyzed the impact of each of them on the long-term success of the company.
Baron and Hannan talk about three dimensions of employment blueprints.
Basis of attachment and retention – Compensation (when loyalty to the company lasts as long as the pay is good), Qualities of work (when the loyalty is not really to the company but to the project, to be able to work on cutting edge technologies), and Workgroup as community (when the loyalty is not to the company but the team)
Criterion for selection – Skills (when you select employees based on their skills and ability to accomplish a specific immediate task as quickly and as cheaply as possible), Exceptional talent or potential (when you select employees who are able to grow with the company as it evolves, you focus a bit more long-term than just immediate needs), and Fit with the team or organization (when you select employees who would work well with the rest of the team and connect to the organization)
Means of control and coordination – Direct monitoring (when the boss is very hands-on and decides everything), Peer and cultural control (when there is a strong sense of teamwork and common goal), Reliance on professional standards (when it is given that employees are committed to professional excellence and are proud of their work, it is about independence and autonomy), and Formal processes and procedures (when everything is documented, and people follow processes to get things done)
There are thirty-six possible combinations, but observations lead Baron and Hannan to combine the three dimensions into five organizational blueprints, as shown in the picture below.
To make it easier to understand the different blueprints consider these statements that can be associated with each type.
Star Model – We hire only the best, and we are willing to pay them top salaries. Employees are then given challenging work and autonomy to get the job done. We expect flexibility and the ability to take on new projects. Employees don’t need training and are motivated by their professional pride. They will leave when they don’t have interesting work or get frustrated by not getting the resources to do the job right.
Companies using this model often exhibit fast growth in the market capitalization post IPO, though they may struggle to get to the IPO in the first place. They can be fragile due to the difficulties of retaining top tier talent. The problem with retention is sort of build-in due to hiring only the top talent. There is always lots of work that the top talent considers uninteresting. As the company matures, these stars may find themselves less challenged, technology gets obsolete, and they may flee.
Engineering Model – We hire experienced and skilled employees who want to work on cutting edge technologies and are result-oriented. We don’t expect to invest much in training. Our people work as a team towards a common goal, figure out workarounds for any problem they encounter without the need for much supervision, and with creativity to get work done with limited resources. They will leave when the work is not attractive enough, or the atmosphere in the team gets bad.
This is a model that is closest to the environment you may experience at top engineering schools. It generally has lower turnover rates than star model as people are not so attached to the pride in the quality of their work. They just want to get the job done.
Commitment Model – We hire people we would love to work with and who are a good fit for the team. They have the same values as us and are committed to the same ideals. We invest in their education and growth, and we treat everyone as a family. Our people see this job as employment for life. They leave when the culture gets toxic.
This model is heavily focused on stability, harmony, and retention. Once employees identify with the organization, they create emotional attachment and tend to stay long-term. Companies using this model were fastest to get to IPO though they didn’t perform that well as they got bigger. The problem lies in the lack of diversity and low creativity this model leads to. Because of the need to fit in, the model is less inclusive and may lead to the inability to hire and retain people who are different and who may bring a new or different perspective. This then leads to problems with scaling.
Bureaucracy Model – We hire people who want stability and clearly defined roles and responsibilities. We don’t look for long-term potential but for the ability to do the work that needs to be done today. Everything we do is documented, people have job descriptions, and we follow good project management practices. We have predictability, and everyone knows that by following a given procedure, they will be able to get things done. People expect professional and personal development and clearly formulated career paths. They will leave when the environment becomes too chaotic, when the processes are no longer effective or when they see no career progress.
This model is often seen as anachronistic and not fit for the 21st century. However, it still has its uses as it scales and gives opportunities to junior employees.
Autocracy Model – We hire people with the right skills for the job at hand, and we motivate by compensation. We don’t spend too much time on employee development and expect them to do what needs to be done. We don’t provide much autonomy, and the manager has detailed control over what tasks the employee works on. We pay employees for their service and therefore expect them to do their best. Employees leave when the pay no longer satisfies their needs, when they get higher offers from outside, or when their manager is abusive.
Researchers have shown that this model is the least likely to succeed, having the lowest scores across most metrics around productivity and financial measures. Not to mention, it is very unattractive to many potential employees.
Which model is the best for you depends on your needs and the business strategy of the company? For example, if you perform a state of the art research, you may be better off with the Star model. If you plan to rely on superior marketing and customer relationships, you may go for the Commitment model.
The role of HR in each type of company varies greatly. In a Star company, HR focuses on hiring the top talent. In an Engineering type company, it is about getting the perks for the technical talent and keeping them caffeinated and fed. For a Commitment company, HR focuses on fostering a strong culture and hires for fit. In a Bureaucracy model, HR is to setup procedures. And in an Autocracy model, HR is seen as irrelevant.
For modern high-tech companies, the Bureaucracy and Autocracy models are generally frowned upon by employees. They have the unpleasant feel of huge tired conglomerates and are not particularly attractive to the type of people who would join a start-up. When the company, at some point, shifts its model to one of these two, it leads to an exodus of those who expect a more independent environment.
As it turns out, companies who had the commitment model were most likely to survive and be successful. The reason behind this is that skills or stars can be fleeting while the commitment lasts. The one problem with the commitment model is that it is more challenging to ensure diversity. When you focus too much on hiring only those who match your values, you weed out anyone whose opinions, thoughts, and values differ. You build a very homogeneous organization that may have a hard time innovating.
Putting it all together
It is worth mentioning that many companies don’t fit any individual category and focus on a combination of several models either on purpose or by chance. In those that don’t follow any specific type, you often see internal misalignment and friction. The founder or the management team have a different expectation than the employees. The type of people who are hired doesn’t fit the strategic needs of the company. The motivation approach selected by HR and management doesn’t match what would genuinely motivate the type of employees that were hired.
You can prevent a lot of internal confusion, misalignment, and friction, to clearly formulate what type of company you are trying to build. What are the things you collectively value? How do you approach customers, partners, and employees? What are the key criteria during the hiring process, is it skills, potential, or cultural fit? Understand the differences and be clear in which of these three is a must and which are less important. Be clear in how you then motivate, direct, and retain the type of employees who will fit the particular model you have selected. As a company, as a management team, as an individual employee, be honest with yourself about who you want to be, and more importantly, who you are today.
What are your thoughts on the topic? Which blueprint is the best? Have you ever worked in a company that would follow one of these blueprints? How important it is to have a blueprint or guidelines on how to build a team that supports your business strategy?
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