Nesheim Online

How to Manage a Real Startup: Nr 45 in a series

Chapter 12: Layoff

(Draft of John's new book: Your comments are welcome)

Sometimes you have to get off the bicycle if you are to survive and get over the  very steep hill you are now facing.

Every startup hits the wall sometime and has to cut its burn rate in order to survive. No new enterprise is immune. Bad things happen, even to good startups. Then is the time to face reality: to survive you have to reduce the cash burn rate by a large amount. That means you must dismiss a lot of good employees, people you worked very hard to recruit and train, great contributors and innovators. That produces a lot of psychological pain in a lot of people, you included. But it has to be done. So prepare for it.

 

Serial entrepreneurs march with the same layoff mantra: “When the time comes for the layoff, be bold before it is too late.” They act swiftly, without undue haste. They remain professional through it all. They get it over as soon as possible.

 

The remaining company will be able to survive after it recovers from the deep surgery. It is your job to stabilize the patient, get it re-energized and back on the road to recovery as quickly as possible. That will ensure productive work returns and the company goes on.

 

The reason for the layoff is not critical. Recessions happen. Key customers stop ordering. Competitors sue the startup. And a thousand other bad things can trigger the layoff. Your job is not to linger on the reason for the reduction in the burn rate, instead you must focus on getting a swift layoff done well, as quickly as possible.

Doing a Layoff

There is a good way and a poor way to do a layoff in a new enterprise. Here are some tips from veterans of the startup battlefield:

 

·         You never cut headcount too early. You will always be late. Entrepreneurs are genetically overly optimistic. It is in the genes. They believe they will figure out a way to avoid the painful cuts of employees. So they are always late for the layoff.

·         You never cut headcount too deeply. You will always cut not deeply enough. The cuts will seem to produce a company impossible to manage, unable to compete. So you "save" the best of the best and you end up with more than you should have.

·         You will react to pressure from your board. Your investors will especially be quicker than you to tell you to get going with the cuts. They have seen this before. One reason they are on the board is to give you perspective and wisdom. Listen to them, even if you don't want to.

·         You will end up with a different company to manage. It will seem strange to you. The surviving set of employees will behave differently, will be able to do less and will respond to you in different ways. Their psychology will be changed because of the layoff. It may be good ("At last we got rid of the deadwood!"). Or it may be bad ("We are so lean I can't see us surviving for much longer.").

·         You will need twice as many months to turn the corner. Your expectations for a return to the good days will be too optimistic. So use The Rule of Two: double the number of months you expect to need to get to the upward turning point. Plan on that and you'll not be disappointed.

·         Your process is as important as the act. You must proceed to tell all the stakeholders and do so in a concerted, planned process that is very professionally managed. How you treat those laid off will be as important as how you treat those that are not. You cannot avoid the pain but you can reduce it. Everyone needs to know about the layoff at the right time. Plan it in detail. Execute it with precision. An experienced HR professional can be an invaluable asset in dark times of a layoff.

·         Your personal support group is important for success. It is lonely at the top. You are not excluded from the human race, believe it or not. You will feel depressed, disappointed and defeated during the process. To avoid dangerous compensation behavior (alcohol, drugs, co-dependency sex, rage outbursts at people you love, or other acts of foolishness), gather family and friends around you. It is a good time to check in with your religious leader. Tell all of them to assist you during the layoff process. They must meet with you, be brutally honest and available on short notice. You are not Superman, you do not walk on water, nor are you expected to.

·         You must be realistic. Your planned layoff may not succeed. You may end up having to shut down the startup. If you look at your modified company plan and think it will not work, then it may be time to skip the layoff. Just shut the business down, now. Avoid the pain of six more months of agony and the inevitable funeral.

·         Your character will emerge during the process. The pain of a layoff will show you who you really are. The real you will show up, loud and clear. That will be who you are deep down inside. Your core values and beliefs will be what you reach for while you do the layoff. What you see may surprise you. Or even scare you. That is one reason for gathering your support group around you while you go through the layoff.

·         Beware of dangerous people. The true character of employees will be triggered by the layoff. Some people go home, get guns and return to shoot CEOs. Others less violent will be out to get you into deep trouble. That includes sabotage of software and websites, theft of strategic plans and equipment, and much more. It can happen in any company. That is why you must wisely plan the security aspects of your layoff.

·         Talk to CEOs who have done layoffs before. They are the best sources of the how-to part of this painful process. Listen, digest, plan and act, using their tips to do a better layoff. Their experiences are priceless.

All startups face sudden moments of rude confrontation that signal that a layoff will be needed, ASAP. It never comes at a good time. It is always very painful to a lot of people, including the CEO and core team of a new enterprise. It is deeply psychological, testing your character to its core. It can determine the life or death of your startup (and your position as its leader). Yes, your objective is to be so successful at planning and executing that plan that you'll never have to arrive at a moment of layoff. But you are not going to get there. That is magical thinking. So get ready. Get the people you need to assist you lined up, ready to act. When you can do a great layoff, you'll have added a powerful element to your personal unfair competitive advantage.

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More tomorrow.

How to Manage a Real Startup: Nr44 in a series

Chapter 10: Balance

(Draft of John's new book: Your comments are welcome)

Balancing life is fundamental to the startup bicycle rider. In fact it spells the difference between winning and losing.

 

Life on Hold

“I solved that problem, I told my girl friend goodbye” said the founder. He was in Hong Kong when the Internet was nearing its peak. He had little financing and a lot of ambition. So to get more time at the startup, he tried to put his life on hold. Three years later he had neither a business nor girlfriend and suffered a hard lesson about why a startup is a marathon.

Serial entrepreneurs go on with their lives. First-timers try to put their lives on hold. The veterans continue the lifestyle that has given them satisfaction and reward, including the events and people that contributed to success. Others think they can pause in life, do the startup and after it is an established success, return to normal life. But life goes on while the startup is formed, launched and managed. The attempted pause with life turns into a new lifestyle that can change forever important stages in the life of a human: waited too long to have babies, never did the romantic trip to Paris, got a nice car but lost the nicer guy, skipped our anniversary and birthdays of parents, and so on.

When recruiting employees, think about what you want to brag about: Do you want to say how proud you are that you have put your life on hold to do a startup, or that you have a rewarding life at home as well as work, with family and friends that you delight in being with while you do the startup?

Employees are thinking about what sacrifices you will require of them. Other companies are competing for the same people. A brutal life-given-up style is not going to attract the best talent. But a complete lifestyle will. It is what humans look for in their job choices. By your example the candidates will make their decisions. They will look for the leader to set the lifestyle. If it is attractive, you have a good chance of their accepting your job offer.

One good test is to ask this question: “As I go to work each day, am I looking forward to it and to returning home in the evening?” If not, then it is time to rethink your lifestyle. Have you tried to put life on hold? Even if you have, you have time to change, to return to a quality lifestyle, one more attractive to both you and potential employees.

Startups are marathons. Life is not put on hold by successful entrepreneurs. The veterans continue with the lifestyle that has made them successful. Sprinters do not understand that and end up with a very empty basket at the end of the road.

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More tomorrow.

How to Manage a Real Startup: Nr 43 in a series

Chapter 10: Balance

(Draft of John's new book: Your comments are welcome)

Balancing life is fundamental to the startup bicycle rider. In fact it spells the difference between winning and losing.

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Marathon

Startups are marathons. If you try to run the race as a sprint, you will die. In person. That is the cold reality of a new enterprise.

First time entrepreneurs do not understand that. The kid out of school expects do all nighters and triumph. The first time founder thinks he will climb Mount Everest in tennis shoes and claim victory. The experienced corporate executive plans to work harder than ever and thus succeed. They will learn the hard way.

Yes, startups are a lot of work. And yes, they do demand enormous amounts of energy. They are very intense and stressful. It takes fire in the belly to do them. Serial entrepreneurs understand that because they have been there before. Even veterans do not avoid such burdens. But experienced startup leaders behave differently and lift the burdens in a special way. Understanding their methods will help you succeed where others fail.

·         Marathoners get sleep. Sprinters skip sleep. The long term runners know they are much sharper with enough sleep. They are more innovative and creative. They negotiate better deals. They are a lot more fun to work with. They see tomorrow with delight, not dread. I find startup veterans getting six to eight hours a night of sleep. Life science sleep doctors have found we burn brain cells as we problem solve intensely each day. Synapses fire and zap living grey cells. We grow brain cells only when we sleep. And only in the deepest sleep, the fourth level known as REM (random eyeball movement). REM sleep occurs at the end of an eight hour night. So sleep deprived sprinters are tired by Friday night and try to “get caught up” during the weekend, sleeping deeply for the first time in the week. The quality of their decisions drops daily during the work week.

·         Marathoners are realistic. Sprinter try heroics. Veterans set realistic goals but first-timers blurt out “Sure, we can do it!” without regard for what can be done in a hurry by a very tiny company. You can spot this behavior quickly by monitoring the actual delivery of short term projects: they are constantly late, yet the people do not acknowledge that. They simply say they have to work harder. And around the cage they run, again and again. They take great pride in not sleeping and in doing 100 hour work weeks, week after week. They love to be suffering heros. But soon the dragon catches up with the knight in shining armor. And the knight gets fried to a crisp by the dragon. In fact, veterans know they can call on their employees for only a single heroic 100 hour work week. After the people recover, they burn into their memory banks “Never again” and update their resumes, just in case it does.

·         Marathoners are courageous. Sprinters are driven by fear. It takes courage to leave the office at 4:00 p.m. to be on time for your son’s birthday party when the rest of your people are up to their ears in work and troubles, expecting to go home late that night. Yet that is what veterans of startups do. They take vacations in the middle of big projects and return energized and creative. I remember well how a founder and chief technology officer did that and told me when he returned “That was the best thing I have ever done!” Sprinters fear the worst will happen if they are not in the office. They do not trust themselves or their people to accomplish the great things they are working on. So they intensify their work and increase their stress as a result.

·         Marathoners adjust. Sprinters cling. When things happen that were not planned, bad or good, the experienced marathoner accepts it and adjusts. This includes events such as your key engineer suddenly leaving the company, a stealth startup pops up with a press announcement that shows they are six months ahead of you, or a big customer wants ten times as much as you can produce on a month. The sprinter clings to his plan and tries to undo the hard news in an attempt to force the company into delivering the impossible.

Burnout is the result of sprinting a marathon. No one is immune to it. Burnout catches up with the naïve leader. It is powerful. It can kill people and companies. So respecting how to run the startup race will avoid the dangers of burnout. Serial entrepreneurs lived to run another startup because they respected their human limitations. They know how to run the race as a marathon, not as a sprint.

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More tomorrow.

How to Manage a Real Startup: Nr 42 in a series

Chapter 10: Balance

(Draft of John's new book: Your comments are welcome)

Balancing life is fundamental to the startup bicycle rider. In fact it spells the difference between winning and losing.

 

Balancing your life leads to winning in startups. Learning to balance life is a special skill of the serial entrepreneur. The battle-scarred veterans wisely understand a start-up is a marathon, not a sprint. Life cannot be put on hold. That dulls innovation and makes recruiting talented employees impossible.

Aristotle’s Triangle

The ancient Greek philosopher Aristotle concluded humans are made of three elements: physical, material and spiritual. Startups are about a lot of material gain if all goes well. That is the business part of our lives, the career and related things such as wealth. The physical part is about health, sleep, food and exercise. And the spiritual part is about friends and family, morals and ethics, God and religion, the good and bad things that happen to us in life, in a nutshell, about life and death.

Serial entrepreneurs treat their physical health seriously and deliberately. They exercise regularly, like brushing their teeth every day. They eat deliberately, choosing quality food not in excess. They get sleep. Six to eight hours a day. They consider it unwise to do all nighters. They pause to smell the roses.

Veterans know that life happens in startups and thus their spiritual lives are impacted. I have had two vice presidents of engineering get heart attacks. A CEO went through the windshield of his rental care in London. One rolled his care on the freeway as he dodged a chunk of pipe. Vice presidents have had children get leukemia. Divorce and drugs happen. Doing a startup does not avoid life’s issues. In fact, it accentuates them.

CEOs and founders find trouble finds them in their startups. That’s when startup leaders experience how lonely it is at the top. It is when they appreciate family and friends who can be trusted and supportive. Those dark days are going to come to every entrepreneur. Serial entrepreneurs cultivate family and friends in anticipation of the times when they can in private share their feelings and doubts and fears and cry a bit. And when the sun starts shining once again, the same people join in celebrating how the leaders made it through to victory.

Keeping the three elements in balance requires a lot of discipline and sacrifice. That starts with recognition that balancing life is important to victory in the startup. Then it calls for an internal determination that keeps the life balancing going when the pressures and stress rise to painful levels.

Balancing life is not an option for serial entrepreneurs. They commit to it and do it. Period, end of message. That is how they got to be successively successful.

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More tomorrow.

How to Manage a Real Startup: Nr 41 in a series

Chapter 9: Agility

(Draft of John's new book: Your comments are welcome)

Agility keeps the rider on the startup bicycle out of critical danger and ahead of the competing pack.

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Agile Organizations

The neat boxes and lines on an organization chart fall far short of describing how an agile startup is organized.

It would be better to think of how the organization of a startup looks as if it is what you see when you open up a bee hive to peer inside. At first you see a lot of what appears to be chaos. There are many bees crawling all around, up and down, over and under each other (apparently without complaining), while others are flying out of the hive and others arriving with legs covered with life giving pollen. As you study the hive your observant mind will soon find the queen bee, central to the action, as well as specialized worker bees hard at work finishing a lot of different tasks. Organized chaos? Well not really, but to the naïve bee observing mind that is how it appears upon first glance.

Startups are organized much like that bee hive. The culture sets the implied policies (how we work under generally expected conditions) and the workers operate within the established guidelines. Individuals have specific responsibilities (product manager) yet are also expected to do whatever is needed to be done at the time (hop on a plane to Japan and use Japanese language and culture skills to calm down a corporate customer angry that the three prototypes just caught on fire). A lot of agility is at work. Here are a few more examples:

·         Startup people swap jobs weekly. The vice president of business development is speaking at a conference so the chief technologist drives to Google to present the next product and continue the process of engaging the giant as a strategic partner.

·         Innovators spring surprises (e.g. a clever feature for a social networking game) that move them and their inventions into new job titles and responsibilities (from individual contributor as Member of the Technical Staff to promotion as the new Project XYZ Manager Lead).

·         Likewise, new product managers come from former engineers eager for their creation to reach the market and be sold eagerly. Their enthusiasm can win the day and get the sales order. And so on go the changes in the startup organization.

·         Cautious accountants are asked to join in presentations with the core team as they talk to aggressive venture capitalists during periods of raising the next rounds of capital. The confidence by the accountants in the financial forecasts adds credibility to the presentations done in concert with the rest of the core team of the startup.

Serial entrepreneurs use agile organizations to motivate ambitious employees. Titles are one way to reward performance. Some people seek them aggressively. Solo contributors may be looking for their first managing experience, while managers are seeking to be responsible for an entire product line. The Controller is seeking the position of Vice President of Finance. And so on.

By giving agility to the organization, the CEO gives more hope to employees and at the same time keeps the company responding to rapidly changing events that affect the company’s competitive advantage.

Over time the agility will slow down, will become more rigid. But it will still be much faster than the giant public corporations. And when done well, it will make your startup a standout compared with other new enterprises.

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More tomorrow.

How to Manage a Real Startup: Nr 40 in a series

Chapter 9: Agility

(Draft of John's new book: Your comments are welcome)

Agility keeps the rider on the startup bicycle out of critical danger and ahead of the competing pack.

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Agile Plans

Startup plans are what the founder intends to do. It is spelled out on paper. It contains vision and specific tasks and time lines. The good plans are well prepared by deep thinking entrepreneurs. Yet as soon as the first employee goes to work, that plan begins to be altered by founders with agility. They respond to a lot of bumps along the road while they are building their bicycle:

·         Key employees fail to show up to work. The employer make a counter offer so attractive the people (that accepted your job offer) could not turn it down. (Some startups are exploited in that way. They are deliberately used as a foil to get a delayed promotion or salary raise in the large, slow-moving corporation.)

·         Technical staff discovers it can make the product run twice as fast if it is allowed to consume thirty percent more power. That calls for a change in the plan: to shift focus away from the energy sensitive market segment and onto the speed-sensitive segment.

·         Large corporations yawn and say “maybe” to sales presentations. So the startup shifts from time-consuming, large installations in giant organizations and moves on to self-provisioning methods for small to medium companies that are excited and make quick decisions.

·         Giant Corp. announces at the industry conference nearly the identical software platform. The CEO immediately cancels the launch (in the middle of the conference) and takes the next plane back to Los Angeles. The identical management team goes IPO three years later with an entirely different consumer software product family. I watched this happen.

And so it goes with core teams of startups. The list of what could significantly alter the plan is very long. The people that respond are very agile. They keep on riding, progressing toward the goal of success.

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More tomorrow.

How to Manage a Real Startup: Nr 39 in a series

Chapter 9: Agility

(Draft of John's new book: Your comments are welcome)

Agility keeps the rider on the startup bicycle out of critical danger and ahead of the competing pack.

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I was talking to Eric Long, managing partner of the venture capital firm Canaan Partners,  about outstanding characteristics he sees in the winning serial entrepreneurs. “It all boils down to agility, that something special in the entrepreneur that triggers quick action, instantaneous change and creative risk taking.”

He went on to say the sports figure closest to that in his mind is the defensive linebacker in American football. The defender anticipates a play by the offense, but as soon as the ball is snapped, the defender adjusts, instantaneously altering his planned moves in response to the unfolding moves of the offensive team. That is what agility is all about.

Agility is certainly what Lance Armstrong is about. Racing with supporting teammates, he begins a race with a plan that begins to be altered as soon as the riders start out on the day’s competitive ride. As weather and competing teams combine, the situation changes and so do Armstrong’s responses. As the pack (peloton) works to stay within reach of the inevitable breakaway riders, its pace changes Armstrong’s plan. When mountains stress the breakaway group, the peleton modifies its plan once again. As the final miles arrive, Armstrong prepares to make his move but so do the other world-class competitors from other teams that move up to the head of the peleton. Finally one of the champions of a team makes a move and breaks out as the peleton catches up and passes the exhausted breakaway riders. Then Armstrong responds, once again altering his plan. As the final half dozen riders press as hard as they can for the finish line, each begins a series of tactical moves designed to fake, trick, depress and defeat the others. It appears chaotic. To the mind of Armstrong, it is agility in action. On a good day, he is confident that with his agile mind can win and he executes accordingly.

Armstrong may have planned that day on conserving energy and simply recording the time of the peleton. But his keen senses might spot an opening or weakness that leads him instead to push hard to win the day’s ride. It’s a long race, days long, and he knows he has time to respond each day so the results add up to the yellow jersey on the awards stand on the final day of the race. His agility enables him to do that. It is part of what makes him the world’s most winning professional cyclist of our time.

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More tomorrow.

How to Manage a Real Startup: Nr 38 in a series

Chapter 8: Culture

(Draft of John's new book: Your comments are welcome)

Culture is the organism that grows or inhibits people building the startup bicycle.

Managing

Managing a startup culture demands time and concerted effort of the core management team. They will be looked to for initiating and participating in company events, celebrations and crying sessions as well as all the working meetings. Their behavior sets the example day-to-day for how others should emulate behavior. They are pro-active about managing company culture.

“Management by walking around” is a way of life in startups. Leaders spend a lot of time at the work stations of employees, talking and listening. They communicate news, changes in direction, challenges and much more as they make the rounds, chair by chair. And they are great at listening. This keeps communications on a personal basis and is one luxury that managers in giant corporations will never be able to do. The culture of a startup expects the core team to be seen talking and listening a lot in the hallways, break room and where employees are working.

The agendas of monthly board meetings include a declaration by the CEO of how the morale of the company is standing, which employees “are at risk” (which may be thinking of leaving) and how cooperation is working between departments. Experienced board members drill the CEO on those topics. From time to time, they will independently speak to employees in order to check on the realism of the statements by the CEO that impact the culture. Large corporate officers are very uncomfortable with that. Serial entrepreneurs expect it.

Recruiting is also used to manage the culture. During the process of reviewing candidates, the culture of the company is re-assessed, even challenged. Strong candidates will ask tough questions about the culture, possibly about things that need to be addressed or answered (e.g. “How do you reward innovation? Disagreement with your boss?”). Quick follow-up will include decisions that provide both answers and shape to the growing culture.

“How are we doing? How well are we working together?” is a regular part of staff meetings and employee (“all hands”) gatherings. Open dialogue is used to alter the culture. Sometimes talks with employees remind the company to return to lost values. Other times a fresh aspect will be suggested as missing and worthy of being added to the culture.

As you can see, all this takes precious time in a rapidly moving new enterprise. Yet it is so valuable that serial entrepreneurs are eager to spend the necessary time to manage their company cultures. They know that when they do a superb job growing the culture, the rest will be a lot easier. The success of the company will be closer to attainment.

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More tomorrow.

How to Manage a Real Startup: Nr 37 in a series

Chapter 8: Culture

(Draft of John's new book: Your comments are welcome)

Culture is the organism that grows or inhibits people building the startup bicycle.
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How

Serial entrepreneurs start building company culture the day they decide to do a fresh startup. It is that important to them and fundamental to their success.

Large public companies already have established cultures. Leaders need simply enforce each culture. They do not experience building one from nothing. The large corporation’s values are posted on a rigid, cold, bronze plaque in the lobby of world headquarters. That is one reason such managers stumble when doing their first startup. They assume the culture will take care of itself. Serial entrepreneurs know differently – that leaders must pro-actively build the new culture of the new startup.

Picking the core team is the first major step in building company culture. The values of the three or four first employees will establish the foundation. Then you start adding fresh employees. Think of them like the yeast in dough. They start the culture and give it the first characteristics that mark it. That is why serial entrepreneurs do the next startup with the same core team. Leading a startup with strangers makes building startup cultures more difficult. The core team will intensely contribute to shaping the culture as it grows. Each person puts pressure on the culture, challenges it, absorbs it, uses it and returns to further shape it. It is a living organism.

Recruiting the early employees, the first twenty or so, is done with extraordinary care about how they will fit the company culture. Recruiting should not begin until the CEO is able to describe what values the people will have that he is going to recruit. I have spent days with a serial entrepreneur discussing only the elements describing the culture of his company-to-be. Culture was that important to him. Crisp articulation is needed to be able to explain what to look for in future employees. Left brained thinkers have difficulty describing a culture. They are more comfortable with schedules and numbers than with people and emotions. Right brained thinkers often have operated on gut feel and never had to articulate what a culture look like. It is challenging to communicate what the company culture is about.

In bicycle terms, culture is what is inside the people who are building and riding the bicycle while it is being built. Culture is on-going, practical and useful because the people use it to guide behavior – theirs and the people working with them. Their shared values shortcut rules and regulations, thus making it easy to perform quick actions and reaction with alacrity to opportunities and problems encountered along the bumpy, winding road. Startup managers use culture to guide action. Large corporate managers use regulations and written documents.

The Department of Fun is the first organization formed by serial entrepreneurs. Its leaders are a couple of employees who are quick to celebrate, party and cheer for people. They bring life to moments of accomplishment and are quick to crown major achievers with accolades and a fresh cake. They schedule birthday celebrations, remember anniversaries (company and personal) and anticipate Friday unwinding hours. Their balloons and signs point to people appreciated and remembered for more than work done. Such people are priceless in startups. Serial entrepreneurs know that and look for them when recruiting. They will be in charge of the fun events of the company, as well as do the other tasks they were recruited to perform.

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More tomorrow.

How to Manage a Real Startup: Nr 36 in a series

Chapter 8: Culture

(Draft of John's new book: Your comments are welcome)

Culture is the organism that grows or inhibits people building the startup bicycle.

New enterprises are living organisms, each distinguished by its unique company culture. Each is unlike others, no two are the same. Each embodies the values of the company’s people, especially the founders and early employees. Serial entrepreneurs pay close attention to the crafting, construction and nurturing of the culture of their startups. Culture comes from the Latin cultura stemming from colere, meaning "to cultivate". Experienced startup people see culture as needing constant time and attention so it can be cultivated as they scramble each day to continue building the startup bicycle they are riding.

Why

Culture distinguishes your startup. “Google is not a business, it is a culture” is what I was told by an early employee. “We are unique” was proclaimed by AOL people. I had heard the same pronouncement by people in Apple and Cisco. It is so pronounced that it has become a mantra for entrepreneurs.

Culture attracts the right people and rejects others. It makes recruiting more productive. Startups use team interviews to screen for culture. “She fits, but he does not” is what is decided at the end of the day’s interviews. “He has the right chemistry” is a declaration of cultural acceptance. The rest are rejected. Rejects can be well equipped with the skills needed, but are not offered jobs because they do not fit that company’s culture. They look for a better cultural fit at other companies. Finding people that fit your company culture is a serious part of interviewing that is mandatory for your recruiting process.

Culture sets the scoreboard for praise and admonition. The cheers and jeers are determined by what the culture values. It may be cold logic or hot intuition. Or innovation may supersede administrative excellence. Delivery on time may be ignored while breakthroughs are revered. The first time CEO that misses those criteria will suffer badly as the culture turns on him or mutinies.

Culture motivates people. They are eager to “go to work on Monday morning.” In fact, they may have continued working all day Saturday at home because they were having so much fun or wanted to see if they were up to the impossible challenge that popped up last Friday. Inherent in culture is the emotional stimulation that drives people to do amazing things. Pride and humility are defined by the culture. So is defeat.

Culture makes clear what is safe and dangerous. People quickly learn when to take large risks and when to be more cautious. Culture signals how to attempt something dangerous. It warns when to throttle back and cruise for a while. It tells people what to say in meetings when superiors and customers are present.

Culture defines ethics. Honesty and integrity are emphasized by some cultures. In others it is assumed. Clever tricks are revered by some. Others despise such acts. Openness is required by some groups. Discretion about sensitive subjects marks others. Employees need to know ethical boundaries in order to adjust their behavior.

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More tomorrow.