Jul 26, 2022

Culture: An Early-Stage Startup’s Competitive Advantage

Nick Lombardo

Co-Founder & President

Speed. Team. Technology. These are just a few of the competitive advantages startups tout. I’d propose adding another one to the top of the list—culture. Culture isn’t the free food, happy hours, or Yeti mugs—it’s the set of common values that the team shares and the secret sauce that helps propel the business higher. In the famous words of Peter Drucker: "Culture eats strategy for breakfast.”

The culture of an organization is established in its infancy, when the team is small. The first key hires are instrumental in informing that culture. They bring fresh and complementary perspectives to the organization. Many founders then let culture evolve on its own, without a clear plan, and are often surprised when the company looks nothing like the business they set out to build. By contrast, I believe in building culture methodically and deliberately, which starts with setting up a strong cultural foundation from which the team can grow.

At Arc, we’ve put culture at the center of how we build the business. Culture is always a work in progress, and while there’s always room to improve, we’ve learned a lot along the way. Below I’ve outlined some of the takeaways we’ve had around defining company values, creating an inclusive culture, and how those efforts have helped us create a stronger team.

Defining your company values

One of the aspects of the business Don, Raven and I agreed upon early was the need for all-encompassing values—values that represented not only who we were then and how we wanted to work together, but also what was important in future hires and the types of companies and investors we would partner with.

We’ve taken our initial company values and revisited and redrafted them three times over the past year—at 5 employees, 10 employees, and most recently at 20 employees. While it’s taken iterations and a fair amount of time, these efforts have helped pave the way for the well-defined values every Arc-itect shares today.

A few of the learnings we’ve had defining our values:

Benchmark the best — Research the values of the companies and leaders that you look up to. Don’t copy them. Instead, explore and question them as a starting point to inform your initial set of ideas.
Brainstorm first, discuss later — Inclusion and open- mindedness is culture. Rather than narrowing in on ideas out of the gate, capture them all—no matter how broad or trivial. When you’ve reached 12-15 ideas, discuss them as a group. Try to find patterns and themes across the list that resemble overarching values.
Be specific and concise — The ultimate values you land on should be specific and concise. They should represent your beliefs and your principles. Examples of general values that might need further defining: “Fairness”, “Consideration”, “Hard Work”.

By focusing heavily on defining your values, you’ll ensure that you have a north star from which to build your cultural tenets.

Building your team

The early employees of an organization set the tone for the future—they are your cultural guardians. As such, it’s critical in the early days to solve for individuals who can both execute and foster an inclusive culture.

At Arc, we’ve spent an outsized amount of time assessing potential hires from a cultural perspective. Our dedicated “culture interviews” are geared towards understanding how a candidate works with others and makes difficult decisions as well as their motivations, goals, and the “why” behind their experiences and interest in Arc.

Our cultural assessor is never the hiring manager or a peer on the same team, but rather a rotating cast of non-manager employees focused on protecting and enhancing the company values.

A few of the learnings we’ve had building our early team:

Don’t compromise on culture – Some candidates may seem like the perfect fit: they have the right experience and they can complete the duties of the role. But perhaps they aren’t a team player or maybe they’re just a jerk. Cultural detractors take away from culture much more quickly than builders add to it. We’ve interviewed these candidates and our view is it’s never worth it.
Backchannel, backchannel, backchannel — While many candidates say all of the right things, it’s often difficult to assess “ability to execute” and “cultural fit” in an interview setting. To avoid hiring those who only look great on paper, complete formal reference checks and backchannel through mutual connections. You should not be looking to confirm suspicions, but rather ask open-ended questions framed in an unbiased manner to understand whether the candidate has acted in a way that fits your culture. Don’t be afraid to walk away from someone who doesn’t score well with references.
Leverage your network — As the saying goes, “good people know good people”, so leverage your network, and the network of your early employees. Not only will the candidates be warm referrals and move faster, but they’ll also likely be some of the easiest and best vetted candidates that you’ll ever close. Just make sure to properly vet referrals the same way you would with other candidates to ensure they’re cultural additions.

Creating an inclusive culture

Creating a culture that prioritizes diversity, inclusion, and belonging is the foundation of a strong team. Execution and resilience are the result of diversity of perspective: different people looking at the same problem from various vantage points creates a better solution together. Diversity is also a flywheel: the more you focus on bringing in different perspectives, the more naturally you will be able to recruit a diverse team.

At Arc, we intentionally seek candidates who have a unique point of view and common desire to win. They may not fit the traditional mold or have the traditional background, but they bring experience and perspective in spades. To ensure that we thrive together, we consciously take action to foster an inclusive and diverse workplace.

It starts with our hiring practices, and continues with our evolving benefits package. We support our teammates through internal affinity-groups and partnerships with local organizations, are committed to being a Conscious Company, and offer benefits that attract people from different walks of life.

A few of the learnings we’ve had building an inclusive culture:

It takes time and there is no silver bullet – Creating an inclusive conscious culture is not something that happens overnight, it takes time and continued effort, and requires using every tool: hiring, communication, benefits, etc. There’s no playbook for inclusivity, as every business is different. Listen to your team and remain committed because it will pay dividends over time. For instance, the right set of benefits will attract a range of backgrounds, from working parents to young professionals.
Inclusivity is not just surface level — Inclusivity includes cognitive diversity (e.g., systems thinkers and design thinkers who have varied styles of problem-solving) as well. Teams that are cognitively diverse outperform non-diverse teams, so keep that in mind when you’re bringing on your first and hundredth teammate.
Inclusivity evolves over time — Inclusivity is not one of those “set it and forget it” concepts, it requires constant attention. As new team members are brought in, the inclusivity needs of your organization will change, so be prepared to evolve your culture alongside that change.

By creating an inclusive-first culture, you’ll ensure that your teammates feel supported and empowered to fully express their authentic selves.

The importance of feedback on culture

Feedback is a gift. It’s also an integral part of a company’s culture. Good feedback helps teammates trust each other and helps them grow together. Feedback isn’t about platitudes and niceties. Rather, good feedback is actionable, honest, and specific. Above all, feedback needs to come from a place of care and empathy. The process of giving and receiving feedback is not negative. Employees at feedback receptive companies recognize that this is an opportunity to receive insights on what they are doing right, what skills they can improve on, and how this can translate to long term growth.

At Arc, we’ve built a hyper-feedback loop that takes place at both the business level as well as the personal level. Feedback is provided by both managers to their direct reports, and vice-versa. It’s also provided to senior leadership through anonymous surveys and skip-level meetings. In this way, everyone is empowered to share their perspective through psychologically safe channels.

As part of the feedback loop, we’ve also instilled a culture that embraces taking calculated risks. Our teammates are encouraged to swing for the fences. Building a standout company sometimes requires us to deviate from the norm. Thinking differently and acting differently will undoubtedly attract some degree of risk and we have to push past our personal comfort zones. We recognize that at times we may not have the perfect solution, but we lean heavily on experimenting instead of getting caught up theorizing the right answer.

Note: our philosophy on feedback was directly inspired by the Conscious Culture playbook.

A few of the learnings we’ve had regarding feedback and culture:

The golden rule for feedback — Aim to provide 2-3x pieces of positive feedback for every piece of constructive feedback. Lead with the positive feedback, then go over the pieces of constructive feedback, followed by an uplifting summary. By balancing the types of feedback, your teammates will feel much better about the interaction—resulting in them feeling more comfortable giving and receiving feedback.
Be consistent — Give feedback regularly and promptly. I.e., when you see something that warrants feedback or when the feedback is top of mind. Consider carving out at least 5 minutes during bi-weekly 1:1 meetings to share feedback with one another.
Document, read, discuss — Rather than providing feedback verbally right out of the gate, consider writing it down for one and digesting it prior to the meeting. This step will help avoid misunderstandings and ensure that there are no live gut reactions.
Leverage the X, Y, Z format for providing feedback — X: describe the situation; Y: describe the impact; X: ask for clarity and suggest 2-3 paths to move forward.
- Example of poor feedback: Missing deadlines is not acceptable, fix it.
- Example of good feedback: I noticed that you’ve recently missed a deadline on projects A and B. When you miss deadlines, it causes issues downstream because we can’t move forward without your input. Could you help me understand what’s been going on? If it's a bandwidth issue, I’d be happy to help you prioritize deliverables. If it’s a visibility/tracking issue, I’d be happy to help you set up a tracking/ticketing system.

By creating a top-down and bottom-up feedback loop, you’ll improve the trust and bond between your teammates—ultimately strengthening your culture.

Company benefits as a culture driver

Creating an inclusive benefits package directly impacts your culture and the caliber of teammates that you are able to attract—offering a competitive salary is only the baseline.

At Arc, we prioritize the health, safety and wellbeing of our teammates. We believe that we perform our best when we are feeling our best, which is why we take a holistic approach to ensure that we provide necessary support when and where our employees need it most.

Outside of the traditional benefits provided by high-growth startups — e.g., healthcare coverage: including medical, dental, and vision; unlimited PTO; paid parental leave; flexible remote work options; competitive salaries; and access to 401k plans — we also provide:

Annual retreats and local team get-togethers throughout the year to celebrate successes, foster more profound and personal bonds, and volunteer in the local community
Annual WFH equipment stipends to be used on whatever makes employees feel happier and healthier
Dedicated funding for our affinity groups and their hosted events

A few of the learnings we’ve had while creating our benefits package:

Ask for input – If you’re in the process of expanding or revamping your benefits package, ask your teammates for their perspective. Ask them what benefits they would like to have, and how they would prioritize the various benefits that you are considering. Then act on their feedback by crafting a comprehensive benefits package.
Optimize for impact – We acknowledge that providing new benefits to employees may not be possible depending on your situation and stage. We’d suggest prioritizing items that have the largest impact on morale with a price point that you can afford. Examples include: hosting a quarterly company offsite at a local park or hosting a monthly volunteering event at a local charity.
Make adjustments on the fly – Occasionally benefits that you release are not utilized or are no longer feasible. In those cases, communicate why you made the decision to remove/replace the perk and your action plan going forward.
Prepare for the future — As you mature as an organization, continue to build out your suite of perks and benefits. Some of the common benefits offered by large organizations include 401k matches, access to mental health resources, learning & development stipends, and more.

By going above and beyond to ensure that your teammates feel supported in all aspects of their life, you can help ensure that they’ll deliver a larger-than-expected impact.

Tying it all together

Building a successful startup is not easy but you can improve your odds of success by building a strong culture. Consider adding team members that are cultural additions (rather than cultural fits) with diverse perspectives, creating benefits packages that are all encompassing, and instilling a feedback-centric operating model that prioritizes transparency, trust, and honesty at its core.