What brown M&Ms can tell you about a company

Small things reveal deeper truths

I was reading an old story on the internet and it struck me that there's something I could learn from it about diagnosing company culture. I'll tell you the story and show you how small things can be very revealing.

The Van Halen story

Here's a quote from David Lee Roth’s autobiography, Crazy from the Heat, that tells the story. 

"Van Halen was the first band to take huge productions into tertiary, third-level markets. We’d pull up with nine eighteen-wheeler trucks, full of gear, where the standard was three trucks, max. And there were many, many technical errors — whether it was the girders couldn’t support the weight, or the flooring would sink in, or the doors weren’t big enough to move the gear through. The contract rider read like a version of the Chinese Yellow Pages because there was so much equipment, and so many human beings to make it function. So just as a little test, in the technical aspect of the rider, it would say “Article 148: There will be fifteen amperage voltage sockets at twenty-foot spaces, evenly, providing nineteen amperes . . .” This kind of thing. And article number 126, in the middle of nowhere, was: “There will be no brown M&M’s in the backstage area, upon pain of forfeiture of the show, with full compensation.”

So, when I would walk backstage, if I saw a brown M&M in that bowl . . . well, line-check the entire production. Guaranteed you’re going to arrive at a technical error. They didn’t read the contract. Guaranteed you’d run into a problem. Sometimes it would threaten to just destroy the whole show. Something like, literally, life-threatening."

In other words, the no brown M&Ms clause was a simple compliance check that the venue had read the contract and taken it seriously. It was an easy test of much deeper problems.

(This would fail the test - there are brown M&Ms! Evan-Amos, Public domain, via Wikimedia Commons)

Tells

The brown M&Ms story shows that something simple can be used to uncover a fundamental and harder-to-check problem. The same idea appears in Poker too - it's the ideas that players have "tells" that reveal something about their hands. It occurred to me that over the years, I'd seen something similar in business. I've seen cases where companies have made sweeping statements about culture but small actions have given the game away. Unlike the Van Halen story, the tells are usually unintentional, but nonetheless, they're there. Here are some examples.

Our onboarding is the best, but we won't pay you

Years ago, I worked for a company that made a big deal of how great its onboarding was; the CEO and other executives claimed it was "industry-leading" and praised the process. 

When I was onboarded, the company messed up its payroll and didn't pay me for a while; way past the legal deadline. I asked when it was going to be resolved and I was told I should "manage my finances better". I later learned this was a common experience and many new employees weren't paid on time, the "manage your finances better" was the stock response. In one extreme case, I know someone who wasn't paid for over two months.

As it turned out, this was a brown M&Ms case. It indicated profound issues at the company and in particular with the executive team; they were too remote from what was going on and they really weren't interested in hearing anything except praise. It took me and others a long time to discover these issues. The brown M&Ms should have warned us very early that something was quite broken. 

I'm too important to talk to you

At another company, a new C-level executive joined the organization and there was a long announcement about how great they were and how they exhibited the company values, one of which was being people-centric. I reported to the new person's organization. 

One day, early on in their tenure, the new C-level person visited the office I was working at. They walked straight by me and my team without stopping to say hello. During the week they were with us, they didn't meet or talk with any of us. They even managed to avoid being in the break room at the same time as the little people (and people tried very hard to meet the new executive). On that visit, the new C-level person didn't meet or say hello to anyone below vice-president level. Later on, they gave a talk to their organization that included a discussion of the necessity of connecting with people and how it was important to them.

I didn't see many of their other actions, but this was very definitely a brown M&M moment for me. I saw trouble ahead and left the company not long after, and I wasn't the only one.

Candies: going, going, gone

My last example is actually about candy. 

I worked for a company that provided candy and snacks. It was very proud that what it provided was top quality, and I agreed; it really did provide great treats. The company presented top-quality candy and snacks as a way of showing how much it valued its employees; we were told that we got the best because we were valued. 

You can probably guess what happened next. The snack and candy brands went from well-known brands to own-label brands, while the company insisted that nothing had changed. After a few months of own-label brands, the candy and snacks stopped altogether, and the company never said a word. A number of other things happened too, including worse terms and conditions for new employees (less leave etc.), more restrictions on travel, and fewer corporate lunches, but these were harder to see. The company started valuing employees less and the treats and candies were only the most visible of several actions that took place at the same time; they were the canary in the coal mine.

What can you do?

Small issues can give you a clue that things are deeply broken in hard-to-detect ways. You should be on the lookout for brown M&M moments that give you advance warning of problems.

As an employee, these moments provide insight into what the company really is. If the M&M moment is serious enough, it's time to think about employment elsewhere, even if you've just started.

As an executive, you need to be aware that you're treated differently from other people. You might not experience the brown M&M moment yourself, but people in your organization might. Listen to people carefully and hear these moments; use them to diagnose deeper issues in your organization and fix the root cause. Be aware that this is one of the few moments in your life you might get to be like David Lee Roth.

Cultural add or fit?

What does cultural fit mean?

At a superficial level, company culture can be presented as free food and drink, table tennis and foosball, and of course company parties. More realistically, it means how people interact with each other, what behavior is encouraged, and crucially what behavior isn't tolerated.  At the most fundamental level, it means who gets hired, fired, or promoted. 

Cultural fit means how well someone can function within a company or team. At best, it means their personality and the company's way of operating are aligned so the person thrives within the company, performs well, and stays a long time. In this case, everyone's a winner.

For a long time, managers have hired for cultural fit because of the benefits of getting it right.

The unintended consequences

Although cultural fit seems like a good thing to hire for, it has several downsides. 

Hiring for cultural fit over the long term means that you can get groupthink. In some situations that's fine, for example, mature or slowly moving industries benefit from a consistent approach over time. But during periods of rapid change, it can be bad because the team doesn't have the diversity of thought to effectively respond to threats; the old ways don't work anymore but the team still fights yesterday's battles.

For poorly performing teams, hiring for cultural fit can mean more of the same, which can be disastrous on two levels: it cements the existing problems and blocks new ways of working.

(Monks in a monastery are a great example of cultural fit. But not everyone wants to join a monastery. Abraham Sobkowski OFM, CC BY-SA 3.0, via Wikimedia Commons)

Cultural add

In contrast to cultural fit that focuses on conformity, cultural add focuses on what new and different things an employee can bring to the team. 

Cultural add is not (entirely) about racial diversity; in fact, I would argue it's a serious error to view cultural add solely in racial terms. I've worked with teams composed of individuals from different races, but they all went to the same universities and all had the same middle-class backgrounds. The team looked and sounded diverse but their thinking was strikingly uniform.

Here are some areas of cultural add you might think about:

• Someone who followed a non-traditional path to get to where they got. This can mean:
• Military experience
• Non-university education
• They transitioned from one discipline to another (e.g. someone who initially majored in law now working in machine learning).
• Single parents. Many young tech teams are full of young single people. A single parent has a radically different set of experiences. They may well bring a much-needed focus on work-life balance.
• Older candidates. Their experience in different markets and different companies may be just what you need.
• Working-class backgrounds. Most people in tech come from middle-class backgrounds (regardless of country of origin). Someone whose parents were very blue-collar may well offer quite a different perspective.

I'm not saying anything new when I say a good hiring process considers the strengths and weaknesses of a team before the hiring process starts. For example, if a team is weak on communication with others, a desirable feature of a new hire is good communications skills. Cultural add takes this one stage further and actively looks for candidates who bring something new to the table, even when that new thing isn't well-defined.

Square pegs in round holes

The cultural add risk is the same as any hiring risk: you get someone who can't work with the team or who can't perform. Even with cultural add, you still need to recruit someone the team can work with. Cultural add can't be the number one hiring criteria, but it should be a key one. 

What all this means in practice

We can boil this down to some don'ts and dos.

Don'ts

• Hire people who went to the same small group of universities.
• Assume racial diversity = cultural add.
• Add people who are exactly the same as the current team.
• Rely on employee referrals (people tend to know people who are like them).

Do:

• Look for people with non-traditional backgrounds.
• Be aware of the hiring channels you use and try and reach out beyond the usual channels. 
• Look for what new thing or characteristic the candidate brings. This means thinking about the interview questions you ask to find the new thing.
• Think about your hiring process and how the process itself filters candidates. If you have a ten-stage process, or a long take-home test, or you do multiple group interviews, this can cause candidates to drop out - maybe even the candidates you most want to attract.

Cultural add goes beyond the hiring process, you have to think about how a person is welcomed. I've seen teams unintentionally (and intentionally) freeze people out because they were a bit different. If you really want to make cultural add work, management has to commit to making it work post-hire. 

An old joke

Two men become monks and join a monastery. One of the men is admitted because he's a cultural fit, the other because he's a cultural add. 

After dinner one evening, the monks are silent for a while, then one monk says "23" and the other monks smile. After a few minutes, another monk very loudly says "82", and the monks laugh. This goes on for a while to the confusion of the two newcomers. The abbot whispers to them: "We've been together so long, we know each other's jokes, so we've numbered them to save time". The new monks decide to join in.

The cultural fit monk says "82" and there's polite laughter - they've just heard the same joke. The cultural add monk thinks for a second and says "189". There's a pause for a second as the monks look at one another in wonder, then they burst out in side-splitting laughing. Some of the monks are crying with laughter and one looks like he might need oxygen. The laughter goes on for a good ten minutes. The abbot turns to the cultural add monk and says: "they've never heard that one before!".

If you want more of the same, go for cultural fit, if you want something new, go for cultural add.

Company culture and the hall of mirrors

Company culture: real and distorted

When I was a child, my parents took me to a funfair and we walked through the hall of mirrors. The mirrors distorted reality, making us look taller or smaller, fatter or thinner than we really were. I've read a number of popular business books that extoll the virtues of company culture, but I couldn't help feeling they were a hall of mirrors; distorting what's really there to achieve higher book sales. 

(Reading about company culture in popular business books is like entering the house of mirrors. Image credit: Wikimedia Commons, License: Creative Commons, Author: SJu)

I was fortunate enough to spend time researching the academic literature on company culture to understand what's really there, and the results surprised me. I took a course at the Harvard Extension School on Organizational Behavior which was taught by the excellent Carmine Gibaldi. Part of this course was a research project and I chose to look at the relationship between company culture and financial performance.

What books claim vs. evidence

Given the long list of popular business books making very definitive claims about company culture, you might expect the research literature to show some clear results. The reality is, the literature doesn't. In fact, when I investigated the support for claims made in books, I couldn't find much in the way of corroborating evidence. Going back to the popular books, I found no references in many cases, in other cases I found evidence based on the author's work alone, and in other cases, the evidence was just unverified anecdotes. What I did find in the research literature was a more complex story than I expected.

Company culture and financial performance

Despite what the popular business books said, it wasn't true that a strong company culture of itself led to financial success, in fact, many companies with strong cultures went bankrupt. It wasn't true that there were a magic set of values that led to company success either, different successful companies had different values and different cultures. It wasn't true that company values are immutable, even a large company like IBM could and did change its values to survive.

What I found is that there are mechanisms by which a strong and unified company culture can lead to better performance; coordination and control, goal alignment, and enhanced employee effort. For these reasons, under stable market conditions, a strong culture does appear to offer competitive advantages. However, under changing market conditions, a strong culture may be a disadvantage because strong cultures don't have the variability necessary to adapt to change. There also seemed to be a link between culture and industry, with some cultures better suited to some industries.

I read about DEC, Arthur Anderson, and Enron. All companies with strong cultures and all companies that had been held up at the time as examples of the benefits of a strong culture. DEC's culture had been studied, extensively written about, and emulated by others. Enron had several glowing case studies written about them by adoring business schools. In all these cases, company culture may well have been a factor in their demise. Would you take DEC or Enron as your role model now? Are the companies you're viewing as your role models now going to be around in five or ten years?

Where's the beef?

Am I falling into the trap of not providing you with references for my assertions? No, because I'm going to go one stage further. I'm going to give you a link to what I wrote that includes all my references and all my arguments in more detail. Here's the report I wrote which lays out my findings - you can judge for yourself.

Popular books are mostly wrong

During my research, I read some detailed critiques of popular business books. I must admit, I was shocked at the extent to which the Emperor really has no clothes and the extent of the post hoc fallacy and survivor bias in the popular books. Many of the great companies touted in these books have fallen from grace, disproving many of the assertions the books made. If you make statements that company culture leads to long-lasting success, and your champions fail while maintaining their values, it kind of looks like your arguments aren't great. Given the lack of research support for many business books' claims, this should come as no surprise.

What to do?

Here's my advice: any popular business book that purports to reveal a new underlying truth about business success is probably wrong. Before you start believing the claims, or extolling the book's virtues, or implementing policy changes based on what you've read, check that the book stands up to scrutiny and ideally, that there's independent corroboration.