Questions to ask a CEO to ensure a healthy company culture

“Do you have good, leading indicators of culture?”

I was emailing with an investor recently discussing how so many have written about the value of culture, yet it often goes un-discussed by boards until there are Uber-level problems.

They told me the only indicator they had was to watch for turnover. Unfortunately, by the time you have turnover problems, it’s often too late, or very expensive to fix.

questions to ask a CEO - andy grove knows to fix problems when they're small

Catch and fix problems early.

Any good leader knows you need to fix problems when they’re small. They’re less expensive and easier to fix then. No one’s feelings get hurt. And the fix is much easier than if it’s snowballed.

When it comes to culture as a company grows, this is especially important.

Culture is like concrete.

As Joe Gebbia, co-founder of Airbnb recalls learning from Tony Hsieh in the video above: culture is like concrete.

When it is first laid out, it is malleable and can take many shapes. However, after some time, it will harden and then it’s very hard to change.

By the time you have 100s or 1,000s of employees, it’s too late. You have the culture you’re going to, for better or worse.  Changing it would take monumental efforts like when David Sacks was brought in at Zenefits, got rid of office beer, laid off hundreds, and made dramatic changes.

Or your company may not make it at all. A toxic culture can derail your company, causing you to lose key people and damaging productivity.

An ounce of prevention…

To avoid such a fate, you have to be proactive. Get out in front of these issues and be intentional about them.

So what do you do? How can you tell if a company’s culture is on a good track or not? Today we look at the questions to ask a CEO to ensure a healthy company culture is developing.

Questions to Ask a CEO to Ensure a Strong Company Culture

Whether you’re an investor, advisor, or founder yourself, what should you look for to tell if there’s culture problems at a company? Here’s where to start and some specific questions to ask a CEO.

1) Have you had any voluntary turnover?

First and foremost, losing people is a major indicator. When people decide to leave, it’s a sign that they decided the benefits and enjoyable things at work are now outweighed by what they do not like about it.

People do not change jobs hastily. Even a “job-hopper” needs to stay at a job for 12-18 months.  This means that if someone is leaving, and it’s not for performance issues, the company, and leadership are partly responsible.

[Ed. Note: People quit managers, not companies. Manager Score can help you catch early warning signs of problems with managers in your org & their teams, so you can fix them before you lose good people. Click here to learn more.]

Questions to ask a CEO (or yourself):

  • Have you lost any staff you didn’t want to lose? What happened?
  • What’s your voluntary turnover for the last quarter and year?
  • How do you treat staff that leave?
questions to ask a ceo - colin powell knows you need to look for problems

2) How are problems solved?

No company is perfect. Problems always arise that have to be addressed. How they are (or are not) addressed is a key part of a company’s culture, and whether it’s on the right track.

There’s a few ways problem-solving can become its own problem:

  1. Concentrated decision making: If everything goes through the CEO, that’s a sign of a command and control culture forming. Politics won’t be far behind, and the CEO may be at risk of burnout from too much on their shoulders.
  2. Avoiding problems: If, like an ostrich, the tendency is to ignore problems for as long as possible, it’s setting up the company to always be in fire-fighting, reactionary management mode.
  3. Inconsistency: A big reason for developing company values is to provide guidance on making decisions. If every problem is handled differently and sometimes in the opposite way of a past, similar problem, it leaves teams uncertain what to do next time.

These are not easy to overcome, and they can be moving targets; as a company grows, new problems arise, and the structure of the organization requires different approaches.

This is why asking about them is so important; when you’re in the weeds, it’s hard to see the forest for the trees. When you stop and someone asks you (or you ask yourself) the big picture questions, it helps make better decisions that have a positive, long term impact.

Questions to ask a CEO (or yourself):

  • Do all problems go through you, or is the team empowered to fix problems?
  • How are problems in the company surfaced to you and other leaders?
  • What’s your biggest people problem you’re trying to solve right now?
questions to ask a CEO - horowitz knows what's up

3) What does your company’s hierarchy look like?

Hierarchy is not a bad thing. Done well, it makes decision making and key responsibilities clear. It also shows clear career paths for your people that want to grow and advance.

Unfortunately, too much hierarchy slows a company down. However, rarely is that the problem today. Many companies instead try to be as flat as possible, sometimes trying to have no managers at all. This a recipe for disaster.

As Wistia learned:

“Every company has a structure. If you don’t explicitly define your structure, then you are left with an implicit one, and that can stifle productivity. We had hoped that being flat would let us move faster and be more creative, but as we grew, we ended up with an unspoken hierarchy that actually slowed down our ability to execute.”

And Wistia is not alone as companies like Github and Buffer have had similar problems.

Being intentional about the communication architecture and hierarchy of a company is a key responsibility of a leader and a healthy discussion to have.

Questions to ask a CEO (or yourself):

  • What structure do you have in the company today? What will it look like in 6-12 months?
  • Who are leaders you see developing in your current staff?
  • Do you have growth paths for your people?
questions to ask a CEO - horowitz knows how critical 1 on 1s are

4) Are you and your managers having 1 on 1s with your staff?

1 on 1s are an essential tool to fix problems, coach people, build relationships, and talk about all the things that no one gets around to otherwise. It’s why we write about 1 on 1s so often on the Lighthouse blog and built a product to help you have awesome 1 on 1 meetings.

When a company is in its early days, it’s easy to think getting beers, social outings, and a tight knit team is enough. Unfortunately, it’s not. As investor and former serial entrepreneur Jason Lemkin writes:

“You may think you know if you have drinks together, or go see movies together, or whatever, that you know… You won’t learn, or know, what your top people need to find their growth path at your company.  Where they feel stalled out and frustrated.  You have to ask.”

The place to ask is in private, 1 on 1 conversations. It’s why so many CEOs and investors swear by 1 on 1s like Ben Horowitz, Andy Grove, Michael Wolfe, and Tomas Tunguz.

If you have more than 5 employees and don’t have them, you’re on your way to trouble. It’s only a matter of time.

Don’t have time? Can you afford to lose your best people? Remember: by the time people are frustrated and go get a job offer, it’s too late.

[Ed note: if you’re new to 1 on 1s and need help getting started, this free e-book on having amazing 1 on 1s here can help.]

Questions to ask a CEO (or yourself):

  • Do you and your leaders have one on ones with their staff?
  • What usually gets talked about in your company’s one on ones? How do you know?
  • How are you training new managers?
questions to ask a ceo - leadership by example

5) What kind of example are you setting for your team?

The gift and curse of being a startup founder or CEO is that your team will emulate you. If you work hard, they’ll work hard. If you’re kind to customers, they will be too. If you struggle with something, so will they. If you have a bad habit, they’ll pick it up.

It’s hard to build up self-awareness, but it’s essential to being a great leader. If you’re trying to help a CEO, look for these signals:

  • Word choice: Do they say “We” or “I” did something? Is it “our” or “my” accomplishment?
  • Responsibility: Do they take responsibility for problems, or is it always someone else’s fault?
  • Hypocrisy: Have they done everything they ask their team to do, or are they headed down the path of “do as I say, not as I do”?
  • Approachable: Are they open to feedback? Do they tend to reward, or shoot, the messenger delivering bad news or problems?
  • Character: When someone leaves, is it good riddance, or do they treat past employees with respect?

Little things add up. While many of these can seem subtle on their own, they either add to the health of a company culture, or its slow poisoning.

Over time, working on the example a leader is setting is the best way to fix any problem they’re facing and change their culture for the better.

Questions to ask a CEO (or yourself):

  • Have you noticed how your habits are picked up by your team?
  • How did you handle the departure of (person who left)? What do you say about them around the team now if they come up?
  • What did you say and do the last time someone brought you bad news?
questions to ask a ceo - drucker knows

Conclusion

A CEO I met once remarked, “every company is a mess”; unfortunately, they saw that as the end of the conversation instead of the start of one on how to get better. That mindset led to them losing wave after wave of staff until their own departure after they had turned over almost the entire staff.

No company is perfect. Even the best company with a great culture will still have some work to do in some of the above areas.

The point of all of this is to make sure leaders are thinking about these things, and doing something about it. Making positive progress in these areas is meaningful to their employees and the health of their company’s culture.

If you’re a CEO growing your company, get out in front of this. Start asking yourself these tough questions and get help making some of these needed habits a reality. (Need help and have more than 40 employees? Schedule a call here or email jason at getlighthouse dot com with your questions.)

If you’re an investor, advisor, friend, or mentor, help the leaders you’re working with by being proactive about this stuff. Don’t wait for them to come to you. Get them thinking about it so they catch the issue sooner. Even if they don’t buy in now, they will down the line when things get worse.