Culture for Breakfast #19 - The Culture Framework Summarized | New Beginnings
Quotes of the Week
“If a person puts even one measure of effort into following ritual and the standards of righteousness, he will get back twice as much.” - Xunzi
“If you find something very difficult to achieve yourself, don’t imagine it impossible—for anything possible and proper for another person can be achieved as easily by you.” - Marcus Aurelius
Both sourced from Ryan Holiday’s books on stoicism.
At home the past few weeks, we had 5th and 8th-grade graduations and the start to summer. As a parent, new beginnings in junior and high school are exciting (and daunting!) chapters. With ends and beginnings, it felt like a fine time for a refresh on the culture framework. We tech company folks love returning to frameworks and first principles, so here’s a refresher on Culture 101 and the framework we continually explore in C4B.
This is an edited piece written for Azlin Software, the wonderful, new vertical software investment platform founded by Annalise Dragic & Zoe Zhao. Culture is incorporated into their investment thesis.
Culture and Long-Term Outperformance
Culture. It became the surprising answer to a question I’d asked myself across a career in investment finance and scaling tech companies. The question: What tying thread drives real, decade-plus, long-term outperformance?
It was also the answer to a second question I asked myself: How do you create positive social impact through for-profit businesses?
The one-word answer is Culture. It sounds too good to be true to be that simple. Naturally, as a finance skeptic, I needed to prove the conclusion with data. And the data provides overwhelmingly conclusive evidence to both questions.
Here’s data from the most iconic longitudinal studies of the last 20 years—data that demonstrates culture doesn’t just achieve modest, correlative, garden-variety outperformance. No, it drives real, substantial, undeniable results.
The Great Places to Work Top 100 Companies have outperformed the market by nearly 4x over 24 years
Jim Collins’ Good to Great companies delivered 7x market returns over 15 years
Will Thorndike’s The Outsiders achieved 20x market returns over 20 years
There’s also plenty of data showing that employees are happier and more productive in great cultures (the answer to the impact question):
Retention: High-retention companies perform 30% better than the average public company
Diversity: Companies with greater gender and ethnic diversity grow revenue 3-5x faster and have 25-36% higher profitability
Innovation: If you’re driving stronger revenue growth, profitability, and market returns, you’re innovating and winning with customers. Companies that master innovation in a people-driven economy produce 2.4x higher profits
Those are mic drop numbers. Culture is THE key to driving exceptional long-term outperformance for businesses, for organizations, and for teams in virtually any domain.
The Culture Playbook
OK, great, culture works and is important. The follow-up questions I hear are: “How the heck do you create and sustain a great culture, especially in a multi-thousand-person company?!,” And…”It can’t really be the solution, the idea of culture is so vague and warm and fuzzy, what do I actually do to connect culture to operations?”
After a decade of exploring third-party research and experimenting within my own teams, I’m convinced that culture drives outperformance and that there’s a repeatable playbook. Scour the research, and you see three pillars emerge as to how to practically build and sustain great cultures:
Support individual motivation
Create shared purpose and belonging within teams & organizations
Build a flywheel to do both consistently
In the next few posts, we’ll look at how culture produces real-world results and discuss some practical plays you can run in teams and organizations.
Let’s bring it back to this week’s quotes. A group of people gets twice as much out of doing the right thing consistently through ritual and process, and when done well, individuals and teams can achieve the impossible. The timeless wisdom backs up the data.
Great Content This Week
Buena Vista Social Club (free on Max) blew my mind when I saw it in college, and I caught the BVSC on tour in Europe while studying abroad. The music has anchored my weekly routine for over 25 years and offers a wonderful window into culture. These connections between people run deep—in the case of these Cuban musicians, spanning 5-6 decades. The BVSC reunited in the late '90s for the first time, reconnecting loose social threads that social upheaval, war, communism, urban development, and intergenerational passion for music had scattered. As it relates to culture, it’s evidence that when you unite people with shared passion, diverse talent, and joy, magic happens. When you watch until the end, you'll witness band members experiencing NYC and Carnegie Hall for the first time in their 80s & 90s—it's awesome.