Wharton@Work

September 2023 | Strategy

Maintaining Culture as You Scale: Decisions that Matter

You’re scaling your business, and are concerned about sustaining your culture. Numerous studies confirm that your concern is well-placed, including one global survey of employees that revealed 75 percent would look for another job if their current work culture were to decline. Culture is valued more highly than salary and other perks, and is a top consideration among job applicants. That said, should your top priority be:

1. more frequently discussing company values?
2. providing company swag to all new hires?
3. prominently displaying your mission statement around the workplace?

Wharton professor Gad Allon says the correct answer is none of the above. “Culture can easily weaken as firms grow and add people, and because it plays a huge role in a firm’s success, leaders do many things to try to maintain it. They spend a lot of time on the physical space and how the office looks. They spend a lot of time on their mission statement’s language. But these kinds of efforts are not what shape culture.”

What really works? According to Allon, it’s about a few key decisions: who you hire, who you promote, and who you fire. Why? Because those decisions show people what matters and what you prioritize. “You can say one hundred times that you care about how good your managers are,” he explains, “but if people see that you promote based on outcomes alone, they will understand that it’s only about the numbers. It doesn't matter how good a manager they are, or how much their employees like them, or how collaborative they are. When you promote based on what you say really matters, people see that you mean what you say, and so you both reinforce and multiply your message.”

A Leader Tested

That insight came at just the right time for Michael Weekley, CEO of Eagle Point Solutions and HT Building Products. The Wharton MBA grad was attending Scaling Business for Profitable Growth, a week-long program led by Professor Allon. “I'm constantly struggling with maintaining our culture while scaling personnel at a rapid clip. The program appealed to me because Gad spends a whole day on that topic. As he started talking about culture, I was thinking, do we need to give more free swag, or adjust perks and benefits, or should we constantly communicate our message across about what we want to focus on through more signs on the wall? Then he went through a framework describing different influences on culture. One of them is artifacts, which are the methods I was thinking about. Gad said that's the easy stuff; you can put more signs up, you can say whatever you want, but it won’t really have a huge impact on culture. The biggest impact you can possibly have on your culture is through who you hire and fire.”

During the session, Weekley got an email from his director of operations. He, along with Weekley’s HR director, were writing up one of the company’s top performers who had just been caught stealing. “It was a gray area,” says Weekley, “because he had one of our construction crews return product to him that should have been brought back to us from the job site. He easily could have made an excuse that would make it sound less meaningful than stealing.”

The situation was further complicated by the fact that the employee in question was someone Weekley liked personally, and who he planned to promote to general manager of one of their offices. “It might look like an easy decision from the outside, but when you're doubling your sales and personnel, you're under pressure from every customer in the market, and you’re talking about one of the most knowledgeable guys we have, it's a very challenging decision to make.”

But the company “has a huge focus on high integrity,” he continues. “I realized this is the clearest example I can possibly set of how important that value is. I had to decide if I was going to show my whole team that this is a boundary that you can't cross, no matter who you are.”

Sending a Clear Message

“Scaling culture, just like scaling in general, is very hard to get right,” says Allon. “And what exacerbates the pressure is success. When you're very successful, there is usually a small number of people who have a lot of impact on your growth, so you are afraid to let them go. That’s Michael's story. You have a high-talent employee who is doing something that they should not do. I told Michael at the time that if this was a mediocre performer, it would be less of an issue. But when it’s a top performer, everybody's looking at your reaction. If you say, ‘We’ll keep him because we can’t jeopardize our success,’ the message will be clear.”

During Allon’s lesson on scaling culture, Weekley made the decision to terminate the employee, effective immediately. “If I hadn’t been in the program, and had that epiphany at the exact right moment, I might not have made the same decision. When the session ended, I told Gad what happened and asked him how he viewed it.  He said at a personal level I could have let it go, but as a company that is something that you cannot let slide. Then he asked me that question about whether I would have struggled to make the decision if the person had been an underperformer or an average performer. I said, ‘Absolutely not; it would be an immediate fire.’ That question made it all very clear.”

“You can put more signs on the wall about how integrity is a core value,” says Weekley, “but it's not going to have a huge impact on culture. Your actions, including who you hire and who you fire, speak much more loudly. Gad told our class that that’s what people are paying attention to — that is what shapes your culture. It’s something I will never forget.”