“I believe that a strong culture is critical to companies that hope to scale…a winning company culture emerges when every employee feels they personally own the culture.”
— Reid Hoffman, Co-founder of LinkedIn, PayPal, Partner at Greylock Ventures
In 2017, WeWork raised a $760 Million Series G. The tech company, which offers coworking spaces as a subscription service to startups, contractors and other free agents of the proverbial gig economy, is considered one of the most promising tech startups of this decade. With a $20 Billion valuation, WeWork is often bracketed into the elite league of industry disruptors like AirBnB, Uber, Spotify — the top tier of tech investments which, in the eyes of most venture capitalists, would make for extraordinarily profitable exits.
Its recent victory laps aside, things weren’t always as buoyant as they now seem. And it would be unreasonable to expect otherwise. Events — be they minor irritants or major upheavals — can hold any company hostage. In navigating such events, a startup may go through (often painful) convulsions of change. And it is such change that can chafe against its culture, and throw into question the ethos, the common set of ideals, principles, and the shared sense of purpose binding the startup together. Indeed, Change is also a crucible for evolving companies — a difficult litmus test that gauges the strength of its culture or lack thereof.
In 2016, Change came knocking on the doors of WeWork. The company reportedly cut its profit projection by 78% — a glaring number, which, no doubt, must have piqued its board of investors, but also merited some uncharitable attention in the press. As the company shifted gears into damage control mode, CEO Adam Neumann tried to do some explaining. What needed correction was the company’s “spending culture.”
Here’s what Bloomberg reported (paywall) as the news broke out:
“We did not use to be this way. We used to fight for every dollar. We did not spend.”
— Adam Neumann, CEO & Founder, WeWork
Neumann’s diagnosis was that his company was clearly overspending — on things that weren’t entirely necessary. For good measure, Neumann also announced some new rules and changes like cancelling the $350 salmon and bagel breakfast for the firm’s executives, and asking his team to make sure they turned off the lights before checking out for the night. It’s hard to contest Neumann’s suggestions for they do seem reasonable and fairly commonsensical. Having said that, they are also, at best, paternalistic cliches about the virtues of thriftiness.
That’s not just concerning because it demonstrates that the company had no clear roadmap to curb what it perceived as excessive spending; it’s something that should be worrisome to investors because Neumann appears to have unilaterally decided what his company’s Spend Culture should be. And, in doing so, he also seems to have made an even more important decision on behalf of the company: What WeWork’s larger company culture is, and what it isn’t. What if the $350 salmon and bagel, or any of the other expenses, were, in fact, markers of WeWork’s culture? What if WeWork’s team believed that such ostensibly lavish expenses were entirely compatible with WeWork’s culture, or at least with what team members conceived of as being WeWork’s culture?
After all, it can be argued that had the team not considered expensive breakfasts as being an integral part of their culture, why would it order them in the first place? Indeed if culture had to be dictated top down, it wouldn’t be culture — it would be an exercise in managing company-wide behavior. A culture that’s swiftly upended in response to external events, or changing perceptions about the company, is built on pillars of sand — at that point, it isn’t culture, it’s the lack thereof.
Perhaps Neumann’s ideas of what constituted WeWork’s culture differed from the ideas espoused by his team; perhaps different team members would describe their company culture differently; perhaps each team member interpreted its culture in altogether different and irreconcilable ways. There are all manner of permutations and combinations that can explain the implicit differences in how every member of WeWork conceived of its culture.
As it happens, none of this is particularly surprising. As companies scale (particularly tech startups, which can take quantum leaps in scale and spending), they often lose sight of their culture — this,
despite doing their best to articulate and encode their culture into the DNA of their work life. One of the great markers of difference between, on the one hand, great companies that have stood the test of time, and on the other hand, rising upstarts galloping in their first flush of success, is essentially cultural in nature.
Consider Amazon or Netflix — both seasoned and enduring companies that have been put through the wringer and have come out not altogether unscathed, but with the furrows and cracks that are the markers of experience. We can’t ascribe the phenomenal success of companies like Netflix or Amazon to their culture alone.
Their enduring genius, vitality and prowess is really a measure of how closely the lived experience of their team hews to the values enshrined in their culture deck. At Netflix, for example, culture is not a set of values and empty descriptors gathering dust on the office walls. It has, through years of conscious and deliberate action, been seeded into every aspect of what it means to work at Netflix.
What this means is that Netflix takes constant and proactive steps to institute policies and practices to apply and reinforce its culture across departments and offices. And this is why Netflix’ Spend Culture is so instrumental to the success of its culture. With the starting point of Netflix’ culture being that its team “is not like a family, but a sports team”, the company built a Spend Culture that befits its corporate culture. CEO Reed Hastings does not need to offer prescriptions on how Netflix’ teams should manage their spending or expense accounts. Instead, team members, who are treated on a par with high performing NBA athletes, do not have to observe rules on expense accounts or travel; neither do they have to deal with spending ceilings on contract signings.
In contrast, Amazon embraces a different philosophy. The defining principle of Amazon’s culture is relentless experimentation in the service of maximizing customer satisfaction. What this effectively means is that Amazon reinvests much of its revenue back into new products and services — experiments driven by extreme customercentricity.
It follows that Amazon’s Spend Culture is most elegantly expressed as: “We try not to spend money on things that don’t matter to customers.” What this means is that Amazon only pays for economy air travel, not business class travel — regardless of a its team members’ seniority or role. “If you’re flying everyone Business and First Class to meet customers, it’s a pretty substantial expense, and none of that benefits customers,” says Andy Jassy, CEO of Amazon Web Services.
Spend Culture is thus an instrument to both support and reinforce company culture; it’s not only informed by the larger company culture, indeed a company cannot rely on its cultural tenets alone unless it first builds a Spend Culture that can support its larger company culture.
As they scale and embark on successive stages of growth, companies ought to closely examine their Spend Culture. Because it’s essentially a cultural experience, Spend Culture is a much more effective approach to control spending than Spend Management. Weather you’re a Finance, Operations, HR or Culture Leader, Spend Culture should matter a great deal to you. It’s hard to get Growth right because it is a process of great change — both internally and externally. By articulating your Spend Culture to your team, you will be in a position to not only dispel the inevitable problems that Growth brings, but also lay down the foundation of the enduring practices, thinking and mindset that not only have your team’s buy-in, but also help your team members do their jobs better