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November 11, 2016
Why Trusting Your Gut Isn’t Enough to Build a Great Company

This post originally appeared on Fortune Insiders network, an online community where people in the startup ecosystem contribute answers to questions about entrepreneurship and careers. This post, written by Michael Litt, co-founder and CEO of Vidyard*, is in response to the question “What important lesson can transform every entrepreneur’s business for the better?” 

When you’re in hyper-growth mode, scaling as we have from five to 150 employees in the span of a few years, it’s a challenge to stay true to your roots. The company you love and the coworkers you would do anything for can morph into something entirely different almost overnight. The truth is that while culture might emerge organically, it needs structure to survive and thrive.

Two years ago, I was concerned that our corporate culture at Vidyard, a video marketing platform, was slipping away. Like any ambitious startup, we had a list of values, but they were the same handful of buzzwords — integrity, honesty, etc. — that every other company had. Employees couldn’t remember the values, let alone explain to themselves or others what we stood for.

I’m an engineer by training. To me, it made sense to take a quasi-analytical approach to the challenge at hand:

You can’t measure what you haven’t defined

Culture is all too often treated as an amorphous thing: a “feeling” or “vibe.” That may work when your company is small, but as you begin to scale, it’s critical that you understand and share exactly what sets you apart. Many of the tech world’s most innovative companies in recent years — including Netflix, HubSpot and Hootsuite — have manifestos for this very reason.

I decided to come up with our own “Vidyardian” manifesto. Its four pages spell out everything from the kind of people we want to work with (those who can get sh*t done and have fun) to the importance of being uncomfortably transparent when it comes to hard conversations. I told employees if they believed it, they should sign it. If not, that was okay, but I’d like to know why. Fast-forward two years: It’s a ratty old document now, signed by all 150 employees.

Your gut isn’t enough — put a system in place

Spelling out your culture is just step one, however. You need to have a matrix to quickly assess who’s aligned and who isn’t. When you’re hiring a dozen people a month, you simply can’t afford to take an ad-hoc approach and feel applicants out as you go.

I’m highly visual, so for me, the most powerful tool turned out to be a simple chart. Taking a cue from former General Electric CEO Jack Welch, we laid out a graph where the Y-axis represents “performance,” or how well people execute on their concrete key performance indicators in the workplace, from sales quotas to customer service calls. Meanwhile, the X-axis represents “values,” or how closely people align with those core Vidyardian tenets. Optimal team members land in the upper right quadrant: They’re high performers and highly aligned with our values. People who land in the lower left quadrant, on the other hand, aren’t a fit and are easy to weed out early on.

That leaves two possible combinations — and some powerful insights. Time and time again, we’ve seen that high performers who score low on values are ultimately a liability. Despite their killer credentials, they hold the team back. Meanwhile, people with great values who, for whatever reason, aren’t performing often have huge potential. They represent a coaching opportunity and have grown to become some of our biggest contributors.

Test and repeat

Every successful startup I know embraces this philosophy when it comes to product. You’re not going to launch a new app and then not track downloads, time spent on the app, or other key metrics. But too many companies fail to embrace this same spirit internally when it comes to culture.

To that end, we’ve developed several discrete measures for gauging where employees score on that performance-values matrix outlined above. To assess the “performance” variable, for instance, we look at the employee’s top-three priorities for the quarter and how well he or she is executing on them.

Testing “values” proves a little more challenging. In the past, I’ve been wowed by some of the managers who reported up to me, for instance. They seemed driven, dedicated to the customer, insightful, and resourceful — everything I could ask for in a leader. But after meeting with their own team members, I got a very different story. A picture emerged of bosses who hijacked meetings, micromanaged, and showed indifference to other employees. These “skip-level” meetings, I’ve realized, offer the truest measure of values.

This may all sound rigorous and cut and dry. In truth, it’s not quite that precise. But I do feel that culture is too important to be left to take care of itself. It’s the thing that separates you from your competitors. Doesn’t it deserve a little analytical thinking?

*For a full list of all Battery investments and exits, please click here.

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