Employee Engagement

Work cultures in start-ups: Lessons from Silicon Valley

3 June 2016|

Updated on 6 March 2019

While comparing different kinds of work cultures in the Silicon Valley, researchers stumble upon a startling revelation.

In the year 1994, two Stanford faculty members, James N. Baron, and Micheal T. Hannan launched a project called “The Stanford Project on Emerging Companies (SPEC)” – it studied 200 young Silicon valley companies and their founders with the aim of understanding how the founders approached key organizational and HR challenges in their early days – they also studied whether such activities had enduring effects on the companies over the course of seven years.

In the course of their research, they found that founders embraced very different ‘mental models’ of the ideal organizational form. Their findings were organized under three main dimensions: 1) Attachment – which was geared at understanding the basis of employee attachment –love (sense of belonging and identification), work and money. 2) The basis of coordination and control and 3) selection – the primary method of selecting employees. This exercise formed an “HR blueprint”, which in turn led them to typologize five types of work cultures:

Star model: This workplace culture emphasized on selecting employees from elite institutions. Employees work on challenging assignments and there is a reliance on autonomy and professional control. The key HR imperative for star firms is the ability to recruit and select star employees.

Engineering model: The engineering work culture was the most pervasive in the Silicon Valley. Firms that fall into this category have a combination of challenging work and peer group control. And employees were selected for their specific task abilities. In this kind of work culture, HR had to ensure that the hard-working techies are plied with enough caffeine and sugar to keep them energized. In fact, according to the researchers, entrepreneurs of these firms seemed “to view the HR department as the people who buy the beer, chips, and dips”.

Commitment model: Often considered traditional and passé, this work culture entails reliance on emotional or familial ties to the organization. And employee selection is based on cultural fit and peer-group control. Key HR imperatives involve fostering a strong culture and ensuring that the new hires fit that culture.

Bureaucracy model: In this work culture, attachment to the work is based on challenging work assignments and/or opportunities for development. Employees are selected based on their qualifications for a particular role and formalized control. Here HR serves as the administrative apparatus intended to promulgate rules and procedures.

Autocratic model: Employment is based on monetary motivations. There is control and coordination through personal oversight and employees are selected to perform pre-specified tasks. In this case, firms tend to do away with HR altogether.

Baron and Hannan found that even in the fast paced high technology world, the founder’s employment models exert powerful and enduring effects on the how companies evolve and perform. After comparing the multiple models of work culture, they found a clear differentiator. It wasn’t companies with star, engineering or even bureaucratic work cultures that consistently succeeded in the long-term; it was firms with the commitment culture. They found that firms with commitment cultures were the least likely to fail. None of the firms they studied had failed. They were also the fastest to go public and had significantly leaner administrative overheads – measured in terms number of managers and administrative heads.

Reflecting on the research Charles Duhigg in his book “Smarter, Faster, Better” notes that “Employees in commitment firms wasted less time on internal rivalries… Commitment companies tended to know their customers better than other kinds of firms, and as a result, could detect shifts in the market faster...One of the reasons commitment cultures were successful, it seemed, was because a sense of trust emerged among workers, managers, and customers that enticed everyone to work harder and stick together through the setbacks that are inevitable in any industry. Most commitment companies avoided layoffs unless there was no other alternative. They invested heavily in training. There were higher levels of teamwork and psychological safety.” The correlation between a long-term association with employees and customers was vital to their success.

However, all was not rosy for commitment firms; they had difficulty scaling-up in some respects because of their emphasis on cultural fit and had other peculiar issues. The Study certainly turns on its head the conventional wisdom about workplace cultures. Read the full paper here.

Author

Jerry Moses