The Family Culture: Is it a good thing?

Episode #180 The Family Culture: Is it a good thing?

Last week, I looked at the high performance culture in one of the most competitive and cutthroat businesses in the world: Formula 1 motor racing. This week, I thought it might be appropriate to take a full swing of the pendulum back the other way to talk about the family culture. I’ve heard many leaders in my time making statements about their team being more like a family than anything else – as if that was something to be proud of! This was genuinely the culture they aspired to create.

Recently, one company CEO has emphatically railed against the concept of a family culture and sent a lengthy email to his employees explaining exactly why. Of course, this leaked email has created a little bit of a stir over here in the U.S. where the barometer on political correctness has been pushed to new levels in recent years. In this week’s episode, we’re going to unpick the mystique of family culture. We’re going to look at the good and bad elements of it and whether or not you’re likely to get high performance anywhere near a family culture.

• I’ll start with a summary of the offending CEO’s note.

• I’m going to take quite a detailed look at some of the nuances of a family culture.

• I’ll look at how some seemingly benign cultural attributes can be highly detrimental to team morale and performance.

So let’s get into it.

Shopify co-founder, Tobias Lütke, has become a controversial figure. As the CEO of one of Canada’s largest publicly traded companies, he deals with every type of issue that this type of profile brings to a fast-growth tech unicorn: short-sellers, swings in share market valuation, and rapid employee growth. He recently came under fire from his own staff – and of course, this made a great media story – for making some unpopular decisions in an attempt to reduce the amount of time his people spent indulging in the divisive debate of social issues. For example, Lütke decreed that the Slack channel #belonging should be read-only in an effort to reduce polarisation within the company. He also wrote an email to Shopify’s leaders, reinforcing some of the cultural principles that he was trying to develop. After the email leaked, of course, Shopify created a PR statement to clarify its position. Specifically, that although the company welcomes debate on current events, in the spirit of positive collaboration, they’re reinforcing their focus on building teams that unite people not divide them – that is some awesome PR right there.

Well, I just want to give you a flavour for what Lütke was trying to convey by quoting some specific parts of his leaked email. It’s worth mentioning that the communication appears to have been crafted for Shopify’s leaders, which would seem appropriate. Your very first lesson here as a leader: assume that anything you communicate in an email will be leaked into the public domain. If someone in your team really doesn’t like something, as many people – even the leaders below you – won’t, they’ll try anything to derail it. This sometimes extends to breaching the confidentiality of their contract  – anonymously, of course, and with a sense of self-righteousness to boot.

WHAT’S IN AN EMAIL?

Lütke said in his communication that management hadn’t been clear about expectations, and this was creating management debt that is ballooning out of control. This is a really good insight that he’s had, so he’s looking to clear up a few misunderstandings.

He reminds his staff that Shopify is not the government. Kind of obvious, but he puts this in a very simple manner. I quote: “We cannot solve every societal problem here. We are part of an ecosystem: of economies, of culture, and of actual countries.”

He makes comments on people’s individual expectations:

“We can’t take care of all your needs. We will try our best to take care of the ones that ensure you can support our mission. Shopify’s worldview is well-documented. We believe in liberal values and equality of opportunity. Sometimes we see opportunities to help nudge these causes forward, but we do this because this directly helps our business and our merchants. And not because of some moralistic overage.”

Moralistic overage, I like that. I’ll probably come back to that in another episode.

He reminds people of the actual purpose of the business:

“We want to build one of the best companies in the world. We want to make and keep Shopify, the product, world class, or die trying. The only way to do this is through having incredible people. Some of them, we hire on future potential and we help them – but expect them to grow into their potential. Some of them, we bring in further down their careers, but we all have to requalify for our jobs every year. The Red Queen Race of Shopify’s historic 40% or better growth is that everyone has to show up at least 40% better every year to qualify for our current jobs. I expect you to hold yourself and your teams to this standard. Judge this improvement based on having a growth mindset, deepening the craft, taking risks, making better decisions and doing what it takes to better support our mission and our merchants.”

Now, this bit’s really interesting. The Red Queen Race is a reference to the classic book, Alice’s Adventures in Wonderland, by Lewis Carroll. The Red Queen effect, referencing corporate strategy, describes the phenomenon that you have to keep running faster and faster just to stay in the same place. But expecting your employees to justify their fitness to remain in the company by showing a 40% performance improvement each year is pretty unrealistic – unless, of course, Shopify’s intending to increase everyone’s remuneration by 40% each year. Some people are going to do this anyway, because that’s who they are. But even in the best organisations, the majority of your good people are happy to come in, work hard, contribute something meaningful to the business, then go home to whatever interests lie outside their work.

Importantly, Lütke reminds his leaders in this email in no uncertain terms, that Shopify is actually a business, not a family – now, this quote’s a classic:

“The very idea that Shopify is a family is preposterous. You are born into a family, you never choose it – and they can’t un-family you. It should be massively obvious that Shopify is not a family. But I see people, even leaders casually use terms like ‘shopi-fam’. Which will cause the members of our teams – especially junior ones that have never worked anywhere else – to get the wrong impressions. The dangers of family-thinking are that it becomes incredibly hard to let poor performers go. Shopify is a team, not a family. We literally only want the best people in the world. The reason you joined Shopify is because, I hope, all the other people you met during the interview process were really smart, caring, and committed. This is magic and it creates a virtuous magnetism on talented people because very few people in the world have this in themselves. People who don’t should not be part of this team. This magic and magnetism is a product of tight performance management that I expect all of us to get back to.”

Hallelujah, Tobias.

THE PROS AND CONS OF FAMILY CULTURE

Now that we’ve heard the email, let’s take a look at some of the pros and cons of family culture. I produced an episode some time ago about founder-led companies. It was Episode 76: The Family Affair, which looked at the evolution and growth of family-owned businesses, specifically examining some of the trials and tribulations that you may encounter if you work for a business of this type. If you do work for one, I think you’ll definitely find it useful to listen to that episode. In this episode, I didn’t really give any attention to the actual family culture that many leaders mistakenly believe will give them the best outcomes for their teams. So now we’re going to take a really good look at the pros and cons of a family culture.

The Pros:

• Loyalty

• Acceptance,

• Identification and belonging

• Unconditional support

The Cons:

• Loyalty

• Acceptance

• Identification and belonging

• Unconditional support

Each of these cultural attributes is a double-edged sword that, when applying the lens of a family culture, can allow a very dark set of norms to develop. If we want to foster the positive elements of each of these, we need to work out how to mitigate the negative consequences. We need to be incredibly strong as leaders to put boundaries and parameters around these otherwise quite useful cultural norms.

LOYALTY

This is a super interesting concept. Loyalty is a faithful adherence to someone or something: another person, a government, a company – even a cause of some sort. But loyalty can be seen quite differently by different people. We see many examples of a misguided understanding of what loyalty truly means in an employer-employee context. In my head, loyalty when exercised by an employee towards a company would include behaviours like this:

• Always acting in the best interests of the company.

• Being honest and open about the things that are working and not working

• A preparedness to challenge more senior people when you see something that you believe is in the company’s best interests

• Representing the company’s strategy and directives faithfully to other employees

• Putting your best foot forward when representing the company with external stakeholders like customers, investors, and suppliers

• Observing both the letter and spirit of your employment conditions

I’ll tell you what loyalty doesn’t mean. It doesn’t mean:

• Staying at the company when you’ve been mistreated

• Remaining silent in the face of illegal, immoral or unjust actions by the company

• It certainly doesn’t mean blindly doing what you are told

What does loyalty look like when exercised by a company towards its employees?

• Being fair and even-handed with every individual

• Being honest in your dealings with every employee and not seeking to take advantage of them

• Paying them fairly and recognising their efforts and performance

• Supporting people’s growth and development

• Being honest about each individual’s performance and future prospects

• Communicating as openly as possible (notwithstanding the bounds of commercial confidences and privacy constraints)

What it absolutely doesn’t mean is that the company is loyal to every employee by giving them a job for life, no matter what they choose to do in terms of their performance. I think this was a point that Toby looked to be making.

Now this isn’t an exhaustive list, but rather just a few of the main attributes that would be representative of loyalty when expressed in a healthy and appropriate manner. But some people interpret loyalty very differently. For example, some employees interpret loyalty to mean that the company owes them a living: “I demonstrate my loyalty to the company by not seeking employment elsewhere. So the company should be loyal to me by providing me with a job for life.” In case you haven’t already worked this out, people with this attitude are typically not your high performers.

But some companies create a very unhealthy and destructive culture under the guise of loyalty as well. For example: “Being loyal to this company means that you do what you are told. You support every statement the CEO makes whether true, false or in between. Any attempt to question what the company tells you, regardless of whether it’s illegal, immoral or unethical, is disloyal and will be punished.” Remind you of anything? It sounds suspiciously like the culture of fear and repression created at the disgraced tech company, Theranos, whose founder and CEO has recently been convicted on several fraud related charges.

Having said all of that, in the family culture, loyalty tends to resemble the second scenario a lot more closely than the first. People rely on the fact that the perceived sense of loyalty will produce a safe and secure work environment. At its ugliest, it harvests an expectation that people have a job for life and will always have a place regardless of how they choose to behave and perform – and families demanding loyalty insist that you toe the family line and you don’t step beyond it. Just do as you are told, if you have any misunderstanding about how sick a family culture can become, just go and watch the HBO series Succession.

ACCEPTANCE

Acceptance is really important in families. Why? Because you can’t change your family! You are stuck with it, so you better accept it the way it is and make the most of it. We see all sorts of mayhem when someone who’s introduced to a family – a husband, wife, or other non-blood relative – doesn’t achieve acceptance with the family they’ve become part of. The mother-in-law/son-in-law relationship is a cliché. In a work environment, it has to be different.

Acceptance must be conditional upon the person’s choice to behave and perform according to the cultural norms that the organisation has established or is trying to create. Unconditional acceptance removes the need for people to make smart choices. It opens a door for anyone to behave in any manner they choose depending on their mood du jour, without fear of repercussions or consequence. Wherever I’ve seen this in organisations, it’s created a highly toxic culture.

The balance to strike here is this: people need to be accepted unconditionally for who they are. That requires you to work incredibly hard as a leader to create a feeling of acceptance for everyone, irrespective of their religion, gender, ethnicity, orientation, or any other descriptive trait. But you cannot under any circumstances accept people’s poor choices. The choice to behave badly, the choice to perform to an inadequate standard, the choice to not treat others with respect and dignity.

Anyone who acts poorly must be called out and held to account for their choices. In a family culture, a lot of that is simply overlooked. Don’t be sucked into that family culture thinking. People make choices every day and your job is to operate the scoreboard, holding them to account for what they choose to do.

IDENTIFICATION AND BELONGING

It’s human nature to identify and affiliate with a group that you’re part of. Identification and belonging strike at the heart of our need for affiliation and acceptance. We feel safe and secure when we have the approval of the group. In a family culture, this is often endemic but it’s not as desirable as it sounds.

The need to identify with and belong to any particular group can push us into group-think. When this happens, we don’t challenge the things we don’t agree with – we silently accept them. When we see opportunities for improvement, we don’t speak out because we’re afraid we might be seen as not part of the core group. We go along with a prevailing wisdom as defined by whichever leader is strongest or whichever voice is loudest. This sense of identification of belonging is a key part of family culture, but it completely stifles innovation and collaboration. And it robs you of any chance you might have had of creating a culture where your accountable people make great decisions.

As a strong leader, you want people to feel the sense of identification of belong with the right things:

• Your company’s purpose

• It’s ethical and moral foundations

• The high performance culture you’re trying to create

• The uncompromising standards you hold

• The need to improve anything you possibly can by fearlessly contributing your unique thoughts and ideas.

This is very different to just having a sense of identification of belonging to some misguided sense of the status quo.

UNCONDITIONAL SUPPORT

In a family culture, leaders are expected to support their people no matter what. This is just dumb – noble, but dumb. The concept of having your back is an important one, there’s no doubt. It’s a crucial element in building a trusting relationship, but you can’t allow it to ignore people’s own agency. It can’t be unconditional. My view was always pretty clear and the way I articulated it to my people was equally clear: “You have my support as long as you’re acting in good faith, and you don’t go outside of any specific direction that you’ve been given. If you do go out of bounds in this way, you’ve forfeited your right to the unconditional support that you probably think I should be providing you with.” In my book, No Bulls!t Leadership, I use a very poignant example of an executive who went out of bounds in a board meeting. Even though his expectation was that he would receive my unconditional support, he didn’t understand that it wasn’t appropriate for me to give it to him in that instance. He didn’t deserve it.

Families offer unconditional support, but organisations shouldn’t. Once again, it takes away the consequences of people’s poor choices and only operates to weaken and disable your company, moving you further away from any semblance of high performance.

So, where does that land us? Although I’d never heard of Shopify’s CEO, Tobias Lütke, before this story broke, I reckon he’s pretty much nailed this. It appears that he wants his leaders to create a culture based on compassion and belonging, but rallied around the common goal of high performance and an uncompromising drive to be the best. Leaders who set out to create a family culture end up becoming weak, and the people who work for them become lazy and entitled. The trick is to take the positive elements of loyalty, acceptance, belonging, and unconditional support, and blend them into a high performance culture that will enhance the outcomes for every stakeholder. Sure, a family culture might seem to be good for your employees – but you’ve got to create a culture that’s good for your employees, customers, investors, suppliers, and the communities in which you operate.