Killing the mood - Company culture damaged in one easy step


One of the startups I worked for made a mistake that damaged company culture. This mistake happened over 20 minutes, was unnecessary, and took months to recover from.
What was the mistake? They created an org chart for the company.
We were a typical startup with a typical loose management and reporting structure. The culture was work hard, play hard. People worked long hours and were committed to what we were doing. We had unrestricted access to the company founders and felt that it was our company. Most people had come from large companies (including me), so the change was invigorating and highly motivating. I really felt that my voice was heard.
The company was growing. Once we got to about 80 people, a decision was taken that a more formal reporting structure was needed. So the HR person created a reporting structure for the company. People reported to people who reported to people. The people at the top of the chain were told. The people at the bottom of the chain weren't told.
The org chart was revealed for the first time at a company meeting. The complete org chart was taped to a wall, and after an announcement about why the change was being made, we were invited to wander over and see where we were in the hierarchy.
Bad move.
The people at the bottom of the chain were very upset. They correctly realized that this was going to limit their ability to influence decisions. Despite having a senior title, people found themselves at the bottom of the reporting structure. People also compared where they were with their colleagues. Some parts of the chain were very short, so I might only be two steps removed from the CEO and CTO. Other parts of the chain were longer, so you might be three steps away. If I'm two steps away and you're three steps away, am I more senior to you? This kind of calculation unfolded in minutes, and in public.
The discontent was loud and was voiced immediately. Normally, we would celebrate as a group after a company meeting. But not this time.
To their credit, the founders realized pretty quickly that they had made a serious error. They couldn't back-track completely, so they just went quiet on the issue. This was the last time the org chart was shown in public. But the damage was done.
You can argue that we should have had a more formal reporting structure right from the start, but that's not the point of the story. The point is, a dramatic change was poorly executed.
The senior management team viewed this a purely logical change, but it was received by the employees as an emotional and cultural change. The fact that this was done without consultation hurt too. It felt like we were making a change to a big company, with all the negatives that implies. Looking back on all this, it suggests to me that the management team had allowed themselves to get out of touch with employees.
As any company grows up, there will be crunch points like this. If it's not the first org chart, it'll be the cancellation of birthday pizza because there are too many employees, or the founders no longer inviting people to dinner after work, or something else. At some point, a change will be made that seems insignificant, but isn't really. Something will happen that marks that transition from being a small startup to something else.
Employees are acutely aware of these changes and it does matter to them. These kinds of changes need to be handled well and with respect for people's feelings. A few years later I saw another example. A startup made a formal split between development and sales engineering. Engineers were given a blunt choice of where to go and were told to make up their minds quickly. Some chose to leave. Again the transition was handled crudely. Any change that affects people's perceived status must be handled with care.

What's the solution? How do you make changes without effecting the company culture?
A good way to handle this might be to chat to the social leaders within the company. These people aren't necessarily managers, but they are the kind of people who organize baby showers, meals together, or other social activities. They can do this because they have deep social connections in the organization. Have a quiet word with them and get their opinion about what you want to do. Look for objections and problems and try and deal with them when you roll out your change.
Company culture is everything in a start-up. What do you think? If you're in a leadership role at your company how do you maintain your company culture? If you've ever worked in startups, do you have examples of company culture going awry?
By John Harthorne. John Harthorne is the CEO and Founder of MassChallenge.