CEO GROWTH SERIES
For Busy CEOs of Fast-Growing Companies:
The 9 Essential
Elements of a
Powerful Company
Culture
The Hidden Secret to Spectacular Growth
By Allan Bacon, PhD
allan@allanbacon.com
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W
hat’s invisible, everywhere
and influences the most
important parts of your
business? What makes one company
offer $2,000 to get new employees to
quit and makes another company hire
only people with autism?
It’s your culture: the collection of
shared beliefs, values, and practices
that define how work gets done at
your company.
Every company has a culture. In
most companies it stays invisible and
unexplored. That’s really a shame,
because the potential upside is huge:
The 2007 book Firms of Endearment
found that companies with strong,
positive, coordinated cultures gave
investors a return eight times that of
the S&P 500.
When you actively shape your
culture, it can be a powerful tool for
attracting, motivating, and developing
the talent on your team. It can be the
unifying force that aligns all of your
company efforts and it can create
a sustainable advantage over your
competitors.
Here’s how to build your uniquely
powerful culture.
What Can Your Culture Do
For You?
To understand the power of a focused
culture, consider this analogy from the
physics of light.
© 2014 Allan Bacon. All Rights Reserved.
CEO GROWTH SERIES
The light that comes from a
lightbulb and a laser is made up of the
same particles—called photons. There
is no difference in these individual
photons. But the resulting beams are
vastly different. Lightbulbs put a warm
glow in your table lamp and power
your daughter’s Easy-Bake Oven. Lasers
cut steel and do surgery.
The amazing difference in
performance comes from the
environment used to create the
photons. In a lightbulb, the filament
generates photons that go off in all
directions with no coordination; in a
laser, the photons are directed multiple
times through an amplifier (the “A” in
LASER) before they leave to create the
In coherent
company cultures,
there is a tie to a
larger purpose
An effective company culture
creates alignment just like the amplifier
in a laser. It’s a coherent force that sets
a direction for the entire company and
helps each individual understand how
his or her work supports the greater
mission of the company.
beam. The amplifier coordinates the
individual photons every time they pass
through it—the photons literally get in
sync and on the same wavelength—and
any photons that don’t match fall out of
the beam and are no longer amplified.
Because of that synchronization
of the photons, laser light is called
coherent. Light from a lightbulb
is incoherent.
What Does a Coherent
Culture Look Like?
At its heart, any company culture
creates expectations regarding who
gets hired, promoted, and rewarded.
All employees want to understand
this part of the company culture and
are very sensitive to figuring it out,
regardless of whether it matches
official policy.
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CEO GROWTH SERIES
A coherent culture makes those
expectations explicit and goes beyond
to tie each employee’s efforts to a
larger vision of company success that’s
reinforced consistently.
The most effective cultures contain
nine essential elements:
1 An accessible culture document.
The structure of the atoms in a laser
amplifier defines which photons get
included in the beam. In a company,
the equivalent is a culture document.
The format doesn’t matter: Netflix has
a 126-slide PowerPoint deck; Valve
Software has an illustrated book.
The important part is that it is clear,
consistent, and shared regularly.
2 Connection to a bigger vision.
In a laser, the purpose of the amplifier
and focused input energy is to produce
that coherent, powerful, intense
output beam. Likewise, in coherent
company cultures, there is a tie to
a larger purpose. At WaterFilters.
net—an online retailer of water filters
(just like it sounds)—the bigger vision
is “Improving Water and the World.”
The founder was inspired by the work
of the nonprofit organization charity:
water. That vision guides the strategy
at WaterFilters.net, including forgoing
marketing expense and instead
donating a portion of its profits to
water charities.
People follow
their own laws of
human “physics”
3 Alignment of company culture
with your purpose. Each kind of
laser has a specific wavelength,
depending on its purpose. A surgery
laser, for example, is different from a
laser pointer. Your culture will likewise
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be tailored to your customers, your
industry, and your strategy.
If you operate nuclear power plants,
zero defects and safety are likely to be
high on your list. If you have a fastgrowing software company, speed
and experimentation might be higher
priorities.
The Container Store has found that
great employees are three times as
productive as good employees. So they
can pay 50 to 100 percent over other
companies and still remain profitable.
They explain this to their employees to
help them understand the importance
of their rigorous selection process and
emphasis on training.
Specialisterne hires mostly
employees with a diagnosis on the
autism spectrum. The company focuses
on software testing and programming
in areas where the traits of autistic
individuals provide a competitive
advantage.
4 Clearly expressed values. In a
laser, the amplified photons share
a wavelength and a rhythm. In a
coherent company culture, individuals
share a set of common values—the
expectations regarding what is most
important and how employees treat
each other. At Zappos, the first value is
“Deliver WOW through service.” This
captures the essence of the company’s
emotional and unconventional
approach to selling shoes.
5 Emotional and rational
resonance. Resonance in lasers is
set by the atomic structure of the
amplifier. In people, it’s set by emotions.
Emotions lead; intellect follows. If you
aren’t feeling moved by your culture
document, it needs more work. At the
same time, it must make sense.
Container Store CEO Kip Tindell
explains this duality in talking about his
corporate values:
So we have what we call foundation
principles. They are talked about and
emphasized around here constantly.
They’re all almost corny, a little bit
Golden Rule-ish, but it causes two
things. It causes everybody to act
as a unit. Even though we’re sort of
liberating everybody to choose the
means to the ends, we all agree on the
ends, and the foundation principles are
what cause us to agree on the ends.
As a result, we have people unshackled
to choose any means to those ends,
but it’s not mayhem because our
foundation principles kind of tie us
together.
If you aren’t
feeling moved
by your culture
document, it
needs more work
6 Alignment with universal
human needs. Even though laser
beams seem magical, they aren’t
made with magic. They follow the
laws of physics. People follow their
own laws of human “physics”: Great
employees want their work to make a
difference, they want to grow in their
work and have new opportunities
as a result, they want to work with
other great people, they want to
know that they’ll be acknowledged
and compensated fairly for their
contributions, and they want the tools
they need to do their work. Make
sure that your culture supports these
universal goals, and you’ll begin to
attract better and better employees.
Valve Software covers these topics
directly in its handbook. The handbook
covers how to learn, how to get better,
what choices employees can make,
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and what to do when something
doesn’t make sense. Employees start
with this information on day one.
7 Explicit choices and
consequences. In a laser, photons
that aren’t aligned decay and fall out
of the beam. In a coherent culture,
you’re making choices not to accept
some behaviors and activities. Make
these choices and consequences
explicit. Talk about the trade-offs you
have made.
Be ready to enforce fit: Find ways
to demonstrate that you are going
to NOT do some things—even if the
choice feels difficult in the moment.
Netflix acknowledges that its highperformance culture isn’t a fit for
everyone. Some people will not be
comfortable there. The company gives
these people a generous payout so
that they can leave and find a better
opportunity (and open up a spot for
someone who does fit).
Zappos offers new hires $2,000
to quit after their first week of
orientation. To the company, it’s
worth it not to have people who
won’t follow through. Zappos doesn’t
want people who won’t share its
commitment to customer delight.
Find ways to
demonstrate that
you are going
to NOT do
some things
8 Sharing of tangible examples of
the culture. You can see when a laser
starts to “lase”—it looks like a spark
that suddenly appears in the air. It
seems magical, but it’s also right there
where you can see it. What does your
company look like when it’s coherently
aligned? Pick surprising examples to
show how serious you are. One of the
Container Store’s values is uncovering
customers’ complete needs. The
company illustrates this with a story
of a man in the desert looking for a
glass of water. The story points out
the many things that that man would
need in addition to the water (shelter,
a phone to call home).
Related to this are the company
legends. Collect and share these:
Stories are powerful teachers and
memory aids. Nordstrom’s focus on
customer service is made all the more
real by stories like the member of the
cleaning staff who found a customer’s
bags and flight itinerary in a restroom
and drove all the way to the airport
and had the customer paged so that
she could get her bags for the flight.
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Photo by Trois Tetes (TT) / CC-BY-NC-2.0
CEO GROWTH SERIES
The leadership
focus on the
culture must be
consistent, or it
will fade away
9 Focus on improvement and
evolution. If the focus of the input
energy drifts, the laser will stop lasing.
In a company, the leadership focus
on the culture must be consistent, or
it will fade away. As your company
and market evolve, you may need to
upgrade your culture or drop parts of it
that no longer make sense.
Focus on making the culture a part
of your management processes, not
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a dusty binder on a shelf. The final
slide of Netflix’s culture document
acknowledges this directly: “We keep
improving our culture as we grow. We
try to get better at seeking excellence.”
“Where Do I Start?”
Start from the core—and don’t try to
be perfect. It’s more important to capture
what’s working in your current culture
and begin to reinforce it than to create
a grand vision that you can’t or won’t
follow through on. Start with what you
know and build on it—make that part
tangible, and learn from the effort.
Be aware that your existing culture
will be a reflection of you and the key
people who formed the company.
There may be some uncomfortable
realizations as you look at how you
behave as a group now. Don’t shy away
from them. Be honest about what’s
helping and what can be left behind.
Again, you don’t have to be perfect
(sometimes how you recover from
mistakes makes the culture stick even
more and gives you a chance to show
how you learn), but you do have to
be consistent. The Valve employee
handbook has a section on areas the
company is not particularly good at
(and that they are trying to improve)
plus one on what to do when the
things in the guidebook don’t work.
Plan to reach threshold energy.
In a laser, there is an initial period where
the input energy is increased with no
commensurate lasing output. But once
the threshold energy is reached, the
laser beam suddenly appears and then
quickly and efficiently grows in intensity
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with added input energy. Likewise, you
should expect reaching your “threshold
energy” to take an initial investment of
time and energy, plus sustained focus
by management to bring along the
staff. But once the culture begins to
catch on, you’ll see the team begin to
support one another.
Make integrity non-negotiable.
If there is a risk in implementing
a coherent culture, it’s leaders not
following through in demonstrating
and enforcing the values of the culture.
Failure to follow through means that,
at a minimum, your culture work
won’t improve your results. And in the
worst case, failure to follow through
demoralizes your team and undercuts
your credibility as a leader.
Northwestern University and the
University of Chicago recently conducted
research that backs this up. They studied
the performance of companies who
claim integrity as one of their corporate
values. They obtained employee survey
data that showed whether employees
thought that management actually
exhibited integrity.
The research found no correlation
with success for companies who
claimed integrity on their website
but high correlation with success for
companies whose employees rated
actual integrity as high.
Use communication to create
coherence. If the focus of the input
energy drops, the lasing can stop—it
takes a continuous focus to keep the
amplifier stimulated. In a company, the
equivalent is communication as well as
incorporation of company values in the
daily workings of the company.
Freedom and responsibility are core
to the Netflix culture. Employees don’t
have to track their hours, and there
is no vacation policy. Employees are
free to take as much time off as they
need as long as they’re getting results.
The management believes that its
employees need to take that time off
to refresh. To show how important this
is, Netflix’s CEO Reed Hastings takes 4
weeks off every year and completely
disconnects from the company.
Zappos has a training team to teach
its core values to all employees.
Consider hiring as your chance
to amp up the culture. Like the
particular atoms that make up a laser
amplifier, it’s hard to change a culture
without changing the people. If you
have a productive culture, it’s best to
capture it, nurture it, reinforce it, make
You don’t have
to be perfect but
you do have
to be consistent
it tangible, and recruit and reward so
as to keep the company stocked with
people who align with the culture—as
with photons, you have to amplify the
ones in sync and let the others go.
Zappos has a separate cultural
fit interview and treats its hiring
process more like a courtship than an
interview. This interview counts for
50 percent of the evaluation, and if a
prospective employee doesn’t pass the
cultural fit, he or she is not invited to
the traditional interview phase.
Which Way Will You Go?
Company culture work is not some
soft feel-good exercise. There are hard
results when you create a coherent
productive culture. The Container Store
has a 10 percent annual employee
turnover in an industry that averages
100 percent. Netflix started as a DVDby-mail company and beat Blockbuster
and everyone else to reinvent the movie
business—and now has a market cap
over $20 billion. Valve has a higher profit
per employee than Google or Amazon.
What about your company?
You’ve worked hard to get your
business where it is today. Your
culture exists, invisibly guiding your
employees every day.
You have a choice: Leave your
culture invisible, or bring it to light
and use it to shape your growth.
Which way will you go?
Want to see some great examples
of Culture Documents? Check
out the links on my website at
http://allanbacon.com/culture/
After earning his PhD in quantum
physics, Allan Bacon took an
engineering job at a laser component
manufacturer—but he got so bored
that he started hanging out with the
marketing and sales teams.
Allan soon realized he was way
more excited about creating quantum
leaps in businesses than in laser labs.
And his physics thinking and people
skills made him good at it.
These days, Allan delivers his
unconventional insights and
experimental energy to business
leaders who want to uncover hidden
opportunities and accelerate growth.
For more information,
visit www.allanbacon.com
or email allan@allanbacon.com.
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