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Why most start-ups fail without a distinct corporate culture

12/04/2022 2022/04

Everyone is familiar with the term culture, but what about corporate culture in start-ups? What defines a company? What are the unspoken rules that everyone follows? Especially at the beginning, many companies are still in the discovery phase. But it is precisely there that it is important to create cohesion so that the company can meet the challenges of the future.

What does corporate culture actually mean?

Hardly any other topic has gained as much momentum and importance as the values that bind a company together. This is already the first factor that describes this concept: the shared values. But corporate culture is not only that, but also shared social norms, symbols and traditions. For only those who can also identify with their company can also work together on the corporate vision. 

Cultures take place subconsciously, they constantly run in the background. This has far-reaching consequences for the ways of working in an organisation. Naming why one does something or reacts in a certain way is difficult for many. After all, not everything can be explained rationally. That is exactly what corporate cultures are about, they are hidden. This makes it all the more important to try to identify the culture and actively shape it. Two questions are crucial here: 

What does the company stand for?

What is important to the company?

Especially new companies that are just starting out benefit immensely from defining a culture. Especially for them, it is not yet clear what the future will look like. It is not for nothing that start-ups are usually a little chaotic, but immensely creative and flexible. At the same time, they need people who share their vision and thus give them the necessary support to master the challenges of the future. 

What makes a good corporate culture?

The definition of good has changed again and again over the years. While stringent hierarchies used to be perceived as the optimum, agility is the current trend. Along with this, organisational cultures have also had to change. Open communication, continuous knowledge exchange and trust are just a few values that agility demands and must be anchored in the corporate culture.

In a good organisational culture, every employee can answer the above questions. They know why their organisation does what it does, have a common understanding of how conflicts should be resolved and how mistakes should be dealt with. 

However, this is only a small part of the scope that the term corporate culture describes. One of the best-known models that attempts to depict the full scope of culture is the iceberg model. Originally developed by the psychologist Edward T. Hall, it describes that the largest part of a culture is below the surface, i.e. not visible. 

Starting with the visible elements, also called the factual level, lie the vision, mission, guiding principles, strategy and external presentation. All of these can be easily communicated to the outside world. On the other hand, the non-visible level, the relationship level, is much more complex. Rules, status, relationships, values and norms, attitudes and feelings and people's basic needs are all part of this level. 

These develop automatically over time and can take both a positive and negative direction. A good corporate culture has a positive influence on people, motivates them and makes it easier to work together. It can provide support in times of crisis and strengthens a company when it is confronted with challenges. This is especially crucial for start-ups that have to overcome some hurdles at the beginning.

The importance of shared values

As already touched on above, culture runs through the entire company. No area is not influenced by it, as it is also anchored in the employees. It is therefore all the more important that there is a common understanding of what the rules, values and norms are in an organisation. This understanding not only affects the employees, but also the financial success of a company. To be precise, the Federal Ministry of Labour found in a study that approximately ⅓ of all profits can be traced back to corporate culture. 

Ignoring this could therefore mean financial loss. Consider what it could mean if a culture is in place, but it is counterproductive to everyday business. The culture of error is a critical component of how comfortable employees feel. Are mistakes accepted and seen as an opportunity to improve, or do they even have to fear a warning. This can quickly manifest into undesirable cultures, such as either the "blame culture" or the "denial culture". In the first case, the staff member in question:in would accuse another person in the college of having made the mistake or cite it as the reason why the mistake was made on his/her part. In the second case, the person would simply not admit to the mistake or report it at all. Both cases are extremely counterproductive and in the worst case can even endanger the company. Especially in a young company that is still in its infancy, such cases can be devastating.

Consequences of a lack of culture

Cultures usually form independently, as they are shaped by the individuals in a company themselves. The biggest driver here is the superiors, who influence 72% of what the corporate culture looks like. Especially in start-ups, they have a decisive influence on what behaviour is considered acceptable and what is not. If this is not actively shaped, e.g. by example, undesirable excesses can develop, such as bullying, the formation of groups or slander. Especially in such a fragile initial phase, this can doom the company to failure. The side-effects that can develop are disloyalty and high fluctuation, which in turn cost money and nerves. After all, no one wants to work in a company where they don't feel comfortable. 

How do you actively build a corporate culture?

There are many steps that should be taken to achieve the desired culture. But before anything can be done in this direction, it must first be clear what the desired organisational culture should look like in the first place. Not only brainstorming is suitable for this, but also looking at other companies and their values, structures and rules. What lessons can be learned from their time as a start-up? However, the external circumstances of these companies should be taken into account. Just like the factor of what suits one's own company, because a standard solution does not exist here either. That's where consulting can help, as they know the hurdles that have to be overcome to create a strong corporate culture.

Once you have finally decided what the values of the corporate culture should be. These must be recorded and, above all, clearly defined. This can be done by formulating the corporate vision, which defines both the goal of the company and its values. The vision should never be too long, but concise and easy to understand. Here again, one can take other companies as a model. 

A vision should be generally imaginable and desirable. This means that it should be feasible, but also arouse ambition in the employees. This is particularly important to increase motivation. At the same time, a vision must be focused and flexible. With the current rapid pace of change in the business world, it is important to note that circumstances can always change. Therefore, there should be a focus, i.e. a direction in which the company should move, while at the same time keeping in mind that changes can occur. Finally, communicability is crucial, as only then can it be communicated to the employees. In the start-up stage, this vision and thus also the corporate culture can be developed directly with the employees. This can set an example for the successful functioning of this culture.

Implementing a corporate culture

Implementing a culture can be approached in several ways. On the one hand, it is crucial to introduce it to the employees; in a start-up this is still quite easy, as the culture is not yet entrenched as in larger organisations. Despite this, there should at least be meetings and possibly workshops where the culture, i.e. the values and the desired manners, are presented. Workshops can help to consolidate what has just been learned and apply it directly. These can also take the form of team events and do not necessarily have to be very formal. The most important thing here is to convey the corporate culture and then, above all, to live it. 

However, it is not only important to work with existing employees, but also to change the recruitment process. Only those who live the values of the company will fit in with the company. This makes it much easier to communicate the shared values and rules. Since this person also likes to fulfil what is expected of him and does not have to pretend himself, which in turn generates motivation. In addition to recruiting, onboarding is of course also crucial. This is exactly where the values and the vision can be conveyed again, so that the new employee once again gets the feeling that he or she is in good hands. After all, it is said that "like goes with like". Of course, none of this is a hundred percent guarantee that everything will go smoothly from then on. After all, changes may occur that were not foreseen or new challenges may arise. But with the help of a strong corporate culture, there is a belief that this too can be overcome.

Anchoring the culture

In order to guarantee that the corporate culture lasts in the long term, the steps mentioned above also include anchoring. In concrete terms, this means that not only the cultural fit and onboarding are crucial for implementing the culture in start-ups, but also for consolidating it. This is because it brings in people who see this culture as a matter of course and don't know the organisation any differently. This ensures that the values are already anchored in the employees. All that said, it should be noted that a corporate culture will probably have to change more than once in the life of the company. Start-ups in particular need this certain flexibility, as a lot of things are still based on trial-and-error, especially at the beginning. This flexibility will play a decisive role in the coming years when it comes to changeability. In concrete terms, this means being aware that the optimal culture does not exist and that change is natural. This includes questioning what is currently considered the status quo. This makes it easier to make changes that may be necessary in the future.

Conclusion

Corporate culture is a complex phenomenon that affects every organisation. But start-ups in particular need a solid culture to overcome the hurdles they face in their early stages. From employee motivation to financial success, organisational culture has a huge impact on how employees behave and how comfortable they feel. At ARTS, we therefore recommend that they take the time to actively shape their culture. Even if they are just in the early stages of their business. Not only to avoid the consequences of a negative culture, but also to have a strong team behind you that can overcome any obstacle. 

About the Author
Maria Kießling
Working Student Marketing

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