239. Why your founder's culture dies at 50 employees (And what to do about it), with Work Futurist, Josh Levine

0:00Josh Levine:Picture this. You've built something special. Your team of 15 feels like family. Everyone knows everyone. The culture just works. But now you're staring down growth, maybe to 50, maybe to 100 employees. And there's this gnawing fear. What if scaling breaks everything we've built?

0:18Leanne Elliott:I got a call from the CEO to say, help. We're at 250 employees. We are getting investment to grow to 400 in the next year. And I just don't understand what's going on. people used to be nice here and now you know we had a no assholes culture or we had an open door policy culture and things are starting to change and i looked up and i realized that it's just not what i want that is josh levine a work futurist author and culture consultant who's helped companies like credit karma navigate exactly this transition growing your team and keeping a great culture is the nightmare which keeps most founders up at night and josh is going to explain There's a magic number where everything changes.

1:07Josh Levine:It's not 100. It's not even 75. According to Josh, your founders' culture starts breaking down at just 50 employees. That's when the physics of culture fundamentally shifts. But here's the thing. Josh says you can scale without losing your soul. It just requires something most founders hate doing. Letting go of control and getting explicit about what actually matters. this is truth lies and work the award-winning podcast where behavioral science meets workplace culture we are brought to you by the hubspot podcast network the audio destination for business professionals my name is leanne i'm a chartered occupational psychologist my name is al i'm a business owner and we are here to help you simplify the science of work after this quick break we'll discover why your beautiful founders culture has an expiration date of exactly 50 employees how to transform implicit behaviours into explicit values that actually scale, and why Gary Ridge's WD-40 approach proves you can grow without becoming soulless.

2:08Oh, and Josh is going to reveal the one mistake that turns values into expensive wallpaper. And also, we'll talk about the recognition trap that destroyed Wells Fargo's culture. See you in just a second. Does your experience with AI sound a little like this? You prompt for 20 minutes. The output is polished, is confident, and is completely flipping useless. Well, that's what happens when AI doesn't know anything about your business.

2:31Josh Levine:But you know what does know something about your business? HubSpot. HubSpot's AI. It works with your actual customer data. Every interaction, every signal your team has generated over time. So instead of prompting and hoping, you ask once and ship it. Check out HubSpot.com, the agentic customer platform for growing businesses.

2:55Leanne Elliott:My name is Josh Levine. I'm a work futurist in North America, focused on the power of company culture to change bottom lines and people's lives. And my job on this earth, I believe, is to convince more businesses about the power of company culture and how it needs to be a rigorous business tool that can be deployed and employed in a way that makes business run even better and people super, super engaged. And I have a book, a podcast, and a company all called Great Mondays. Let's talk about someone who's maybe going and they've got the 15th employee and they're looking to grow maybe to 100 employees in the next few years.

3:51Talk me through what they should be thinking about, what transition they're going to go through.

3:57Leanne Elliott:What happens that the let's call it the physics of culture is when you grow, you start with these, a small group of people and you know all of those people. And it is as mammals, we look to our leaders for what success looks like. And this is the foundational kind of a pixel of culture. And you're going to look to the leaders. And so your founders are the ones that are establishing, you may not even realize it, are establishing how you work. So culture is the cause and effect of every decision that you make. And so I center my definition on choices and decisions. So we're talking about business decisions, big and small.

4:47Leanne Elliott:When you are smaller as an organization, that behavior, those choices are watched very closely by your colleagues and your employees, those individual contributors. now you think about growing as an organization and what happens is the larger the organization the greater the distance between the individual contributor and the leaders and you have additional leaders in between and so there's a few things that are going to happen that distance is creating a little more space. There's less fidelity between what they're saying and what you're doing. And what starts to happen and your listeners, your community will not be surprised to hear is that silos begin to form.

5:52Leanne Elliott:Silos can be within particular functions or in particular locations, groups. In 1992, Robin Dunbar, a scientist, did an experiment, an observational experiment, to test the cognitive limits on stable social relationships. And he went and observed tribes of chimpanzees. And what he found was that the upper limit was 150 individuals. Beyond that, the relationships, the amount of energy it took to build those relationships within that tribe, within that group, was more than the benefit. So if you think about a chimp either nurturing a youth in the group, right, or an adult male going out and hunting or protecting, that all works until about 150.

6:59Leanne Elliott:And when we're talking about chimpanzees, we're talking about life and death. When we're talking about work, even though it can feel like life and death, it's not. And so the amount of energy that we're willing to put into the system to learn who build relationships with all of these people is going to be a lot less because God damn it, I'm busy. I got things to do. And so what I've observed is that number actually comes down. And the number, when we're thinking about silos, the number is a 50 to somewhere between 50 and 100. And so when your organization, you can have a founder's culture up until about 50 employees.

7:49Leanne Elliott:You probably didn't need to pay attention to it if you didn't care about it. then once you start to grow beyond that it becomes a little bit bigger not impossible to to continue to be consistent but it is a moment when that transition happens from a founder's culture to a more organization-wide culture because of that space and that distance between who the employee is and the leaders, you're going to find that other groups that are naturally forming, which aren't bad, by the way, inherently, they're going to establish their own cultures. Also, not bad. That's not a bad thing in and of itself.

8:40Leanne Elliott:But what happens is, and when I get the phone call from a panic founder and this happened uh with the company that there's a a company here in the united states called credit karma and they were acquired by intuit who were in charge of they run that product quickbooks i think everybody knows more about them so they got acquired for a gazillion dollars it was a lot of money credit karma the product is a free credit tracking app, really nice, really well designed, and then they sell you credit cards on top of that. That's how they make their money. Okay. So very valuable to Intuit. Before that, I got a call from the CEO to say, help, we're at 250 employees.

9:27Leanne Elliott:We are getting investment to grow to 400 in the next year. and I just don't understand what's going on. People used to be nice here and now, you know, we had a no assholes culture or we had an open door policy culture and things are starting to change. And I looked up and I realized that it's just not what I want. So can you explain what a founder's culture is compared to someone over 50? And what would you call that? So a founder's culture, and this is going to happen And this is if you don't do anything, this is what's going to happen, which is the leader is the one to set the tone about how decisions are made and what's most important.

10:12Leanne Elliott:If they show up late to meetings, everybody else is showing up late. if they are talking about mistakes that they made in public and how I've learned from them, then everybody's going to see and feel that permission to talk about their mistakes. If there are, if the leader shows up in a suit and tie, everybody else is going to tend to dress more formally. So it's even as practical and tactical as that. So that's going to be a founder's culture. And what you want to do and what many founders are loathe to do is say, I actually aspire to more and I'm going to put our culture down in a formal way and say, here's what we're looking for.

11:08Leanne Elliott:Here's how we're going to do it. And part of the problem is that the founder has to let go of that authority and they have to endow everybody else with more authority. And so you give everybody more of a framework to act and understand, right, the tools to understand how they should be acting. How I am going to deliver on an ownership value is going to be very different than how maybe a sales leader might do it, right? Practically speaking, right? And so by formalizing it, it becomes an organization's culture. So organizational culture. And that is when you can start to scale it just like anything else.

11:53Leanne Elliott:We got to get some software in here to be able to scale our onboarding, to be able to scale our hiring or reviews or whatever it might be, how we collaborate. We need to create a system. We need to systematize this in order to make sure that everybody's going, oh yes, this is what is expected of me, and here's how I'm going to do it, and my manager's always talking about these principles or these values, and they understand how they need to manage or lead or act or decide how to make choices regardless of where they are in the organization and so it becomes the scaling effect and the the problem is that most organizations show up at 200 300 400 500 and it has shifted from a founder's culture to an organizational and an organization culture but nobody knows it and so all of a sudden the founder's like why don't I have the influence anymore?

13:02Leanne Elliott:Why can't, why is this changing? And so that is why it's really important when you're scaling to be able to, to, um, pull out and talk about culture, not just as a subset of HR, HR's job or the cocktail party or the swag or whatever it might be. We need to be thinking about it in a much more rigorous way. And that way we can then, when scaling issues show up and an organization is going off in the wrong direction or the sales team, you know, they're notoriously, you know, you're going to have a high performing asshole in there and you can have that conversation. And it's like, wait, I thought you said you want us to sell more.

13:46Leanne Elliott:Yeah, but not at the cost of denigrating your colleagues. And that's one of our values. That's what we can talk about. So my hope is that everybody listening makes that leap, understands that culture is important, and putting a little bit of effort into identifying, codifying, and communicating early is going to help set that framework. Now those things can change. They should change. Values can change. But putting it up there and making it part and parcel of your organization and how you bring people in and how you reward them and how you talk to them and lead them, that's going to make a big difference once you prep for that hyper growth stage.

14:36So up until 50, the founder kind of sets the culture above 50. Then it's down to I'm guessing you define some values and then the managers are the ones who are to ensure that or the senior leaders, the ones who ensure that those values are upheld.

14:50Leanne Elliott:It depends on the organization, depends how distributed it are, depends how many folks are out there. But you get the point. So whose responsibility is it? I would push back and say it's everybody's responsibility. Everybody's responsibility. But and as a manager, you are implicitly a leader and you need to make sure that your team understands that it is important to be thinking about these values. So I'm sure many people, you and I included, have experienced this where they launch or a company might launch values and then it might be on our computer screens. It might be on our, you know, security tags or whatever it is, but no one ever talks about them again.

15:41Leanne Elliott:And it's that is the common way that folks that that leaders or executives will think about values because they think, well, once I put it up. my job's done. That's, that's not, that is the starting point, not the ending point. And that's my, that's the premise of my whole mission is no, it's not just, you know, the one thing we do two years ago. It's actually something that we have to talk about and invest in. And the rewards, the returns are enormous, but they're not immediate. And so it is a long-term investment and you have to believe it because if you just launch values and then forget it, you're worse off than if you hadn't launched values in the first place.

16:34To get back to you, to answer your question, who's responsible for ensuring these values?

16:40Leanne Elliott:Well, the leaders need to demonstrate and model that they are important. They need to remind people that this is something that's important. They need to talk about it. Because as much as I think that culture is the most important thing that a business can do, most people don't. And they get busy doing the things that a business is supposed to do. This is a fundamental tool that doesn't have a direct, immediate connection. It is not go out and make a hundred phone calls and sell more software and you're going to see the result. It needs to be something that you believe deeply and it needs to be something that is continuous.

17:23Leanne Elliott:It is part and parcel of how you do your work. And if you lead as, if you model that, if you lead it, if you talk about it, if you manage, if you establish a training program to help managers understand what it means, because this isn't easy. You might have three, four or five values, but those things, those values actually have definitions and they have comprehension. You've got to understand what they are. You have to apply them. And changing your behavior is a very hard thing to do because you have an instinct and you have pressure, time pressure, budgetary pressure. It's your fighting against all these sort of normal functions of business.

18:12Leanne Elliott:And that's why it can feel hard. And that's why it can be like, oh, enough already. I'm exhausted. only after you've invested in it for one, two, three, four years, and then you start to see the results of an organization that understands, people who understand that there are rules of the road, there are expectations, And I will act on this, these pieces, these parts and begin to deliver in a way that is more productive, more effective, more efficient because there is clarity. there's a common goal a common understanding and i don't feel like my work is underappreciated i don't feel like i'm moving in this direction and then we shift and go in this direction and we shift and go in this direction you may have new initiatives but those values stay the same how we do it it is something that we are going to do together the science backed

19:29Josh Levine:this up. Somewhere between 50 and 100 employees, those informal cultural norms that just happen naturally will stop working. The distance between leadership and employees becomes too great. And that's when silos form. That's when you get the panic call Josh mentioned. People used to be nice here, what happened? After the break, we'll dive into Josh's solution, values that actually work as business tools, not wall decorations. School might soon be out for summer, but Marketing School is here to stay. And it is brought to you by the HubSpot Podcast Network, the audio destination for business professionals.

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20:34Josh Levine:So if you want real-world marketing tactics from practitioners who are still in the arena building and scaling businesses, this show is perfect for you. And if you're considering using AI, which I think you should, then the latest episode looks into why AI often costs companies more than the employees you replaced. It's, yeah, definitely go and check that one out. Listen to Marketing School wherever you get your podcasts.

21:00Josh Levine:welcome back values is such a buzzword but people rarely do more than come up with some words that they print out and stick on a wall somewhere josh believes that values are the most important thing you should be focusing on when you start to hit that magic 50 mark here's the practical tip the

21:18Leanne Elliott:takeaway tip. When we're thinking about an organization that's starting to hit 50 or hit 100 or hit 200, you want to very quickly think about how do you identify what are the most important things, and we're talking about choices and decisions, most important decisions that are the needle? How do you codify them? How do you make sure that they get written down? And then how do you articulate that? How do you put that out in the world? Now, the tool that I use are values. So when we're thinking about the six components of culture, that's the second component, values. And values are the three to five most important choices or decisions that are going to move the needle for you in the next three to five years.

22:19Leanne Elliott:And that is, and I don't particularly care if you call them values, it can be principles, they can be leadership actions, whatever it might be. But what it does is, and here comes, you know, Josh from Brand Strategy Josh, which is where I kind of cut my teeth, is it is a container, a cognitive container for communicating with everybody. What am I expecting? What am I expecting of you? How are you making choices? The silos in and of themselves aren't bad. The way that they operate, they're going to have their own ways of operating. That's not bad. But what we have to be cognizant of is the expectations that we have around the organization that are the most important, that are the things that are going to make or break, that you want to invest your time, energy, attention into.

23:20Leanne Elliott:That is what is going to be the connective tissue across an organization as you continue to grow. When you're a founder and you're hitting 35, you're hitting 45, you're hitting 55, move from implicit culture, implicit values, implicit behaviors to an explicit values, explicit culture, explicit behaviors. What do I mean by that? I'm just doing what I do and everybody follows along and they're going to do that too. The reason why everybody I'm doing this is because of X, Y, and Z. because it's important for us to own the work. As we grow, for example, I want to make sure that a single person is responsible for this particular, you know, for each particular project so we don't lose that.

24:23I want to make sure that as we grow, no, we don't throw people under the bus.

24:33Leanne Elliott:we don't make choices that are bad for our community we don't have trade-offs that denigrate our peers or our colleagues we hire the best people and that doesn't mean that they happen to have the same same skin tone as you or come from the same university these are all the things that are important when you're scaling and so you need to think about how do you articulate the three to five things that are most important? So one of the components of culture is recognition. Everybody has been part of a recognition or rewards program, so that's not a surprise. That's not a big aha. The problem with most recognition programs is that they reward the wrong thing.

25:28Leanne Elliott:Recognition programs should be built to reward and recognize values-driven behaviors. It is a tool for emphasizing, reprioritizing, and underscoring the choices that people are making. because there are too many examples throughout modern history of organizations that have turned the screws on recognizing and rewarding output, causing poor behavior to get to those. I'm talking about here in the United States, the banking system, Wells Fargo, about a decade ago, they needed to pump their quarterly numbers. And so they essentially were rewarding their personal bankers to open more new accounts. And so you know what they did?

26:27Leanne Elliott:I mean, some of them were able to have that conversation and do that honestly, but there were people were opening fake false accounts because they were being rewarded and worse, maybe even disincentivized with punishment. How come you didn't hit your numbers? And that caused a massive problem within the organization when it was exposed. And of course it was exposed. And they had to, there was a leadership turnover. There were lawsuits. It was awful. And so when we think about rewarding values-driven behaviors, we're talking about rewarding how we get to the outcomes. If we want people to innovate, then we need to reward taking risks, smart risks, and making mistakes.

27:22Leanne Elliott:Because you can't just tell people to do new things louder. You have to go to the cause. You have to allow them to make mistakes, to experiment, to, you know, end up in dead ends. It's just not going to succeed without that. And that's like, that's one of my favorite examples. It's because all the, when innovation became such a big buzzword, all these leaders were looking around, it's like, how come you're not innovating everybody? You need to do more innovate. You need to create more things. But then on the other hand, they were like, oh, failure's no good. Why aren't you doing, creating more new things?

28:05Leanne Elliott:things you're doing it wrong so what we really need is to be we need to define what it means to make good decisions that drive great outcomes right we are talking about bottom line we are talking about making money we are talking about creating value so do the hard work reverse engineer to how am I getting to the three to five things that are the most important ways that we're going to get to do our work better. If a small organization, those three, five things are going to be different than a massive global enterprise. Those things are going to change. You need to make sure that you understand where you are now, re-evaluate what those priorities are and then move forward with that.

28:59Josh Levine:The Wells Fargo scandal is a textbook case of what psychologists call goal displacement. Employees were rewarded for hitting a single metric, opening more accounts without regard for how those targets were achieved. Under intense pressure, many took shortcuts, creating millions of fake accounts to meet sales goals. It worked on paper, but ultimately cost the bank billions in fines and destroyed trust. When organizations focus only on outcomes, people will find the quickest route to those outcomes, even if it damages the system around them. By contrast, rewarding behaviors that align with values, such as transparency or integrity, collaboration, helps create the psychological safety teams need to speak up, challenge poor practice and act responsibly.