George Stefanis

Cultural fit is killing your company. Hiring for diversity.

20 May 2017

Back in the early 90s a group of experts, led by sociologist James Baron looked through various companies and followed them until the dot com crash in the dawn for the 21st century. They were focus more around how the companies were managing to grow and the strategies they followed.

They categorised these firms in three basic categories : * Companies that hired people based on professional skills. These are people that are highly skilled on a specific field. Do you want a JavaScript developer? Hire one with 4+ years of experience. Data analyst? Someone with extensive experience etc. * Companies that hired people that were superstars. These are you typical super talented people that can nail pretty much everything they get their hands on. You normally see a lot of them in Silicon Valley in big companies like Facebook, Google etc. * Companies that hired based on cultural fit. These are companies that are looking for like minded people that can quickly fit in the culture of the company and move the needle forward towards a certain direction and a common goal.

Then the researchers analysed the performance of the companies and how much success they had (or hadn't). It turned out that the companies that hired based on cultural fit failed less than everyone else! "Great, we are doing this. We will be successful" i hear you say. Sure, you might but before you get too happy I need to tell you what else the researchers found. The researchers found that from all the companies going, eventually, public the ones hiring for cultural fit had the worst performance. As Marshall Goldsmith said "What got you here won't take you there"

Confirmation Bias

What we can observe from the research mention above is a case of failure via confirmation bias. Confirmation bias is the tendency to interpret new evidence as confirmation of one's existing beliefs or theories. The problem with it is that when you are surrounded by likeminded people it's hard to hear different opinions and when that happens you are really hindering creativity, originality and innovation.

A great example of such a failure is Polaroid. Polaroid was founded in 1937 by Edwin Land and until the late 80s it was dominating the photography industry. Its innovations brought them to the early 90s as the industry leader. But then something terrible happened. Polaroid missed digital photography, even though they brought a CTO that suggested buying a startup with experience in digital photography. The entire company (including Edwin Land) couldn't see a future without film. They couldn't see it because everyone in the company was seeing the world the same way; because polaroid did hire for cultural fit. As a result the confirmation bias was really strong within the company. Edwin Land did leave a legacy in his company but it was so strong that in 2001 it led it to bankruptcy. Polaroid is now a use case for things that can go very wrong.

Groupthink

The above example of polaroid can also be classified as a typical example of groupthink. Groupthink is the practice of thinking or making decisions as a group, resulting typically in unchallenged, poor-quality decision-making. Yale psychologist Irvin Janis found out that it's the main reason behind colossal failures like the bay of pigs and the war in the Vietnam.

Fixing your culture

So we know that confirmation bias and groupthink are two things that stem from hiring for cultural fit (among other things). it would sound natural then to try and change your blueprint. Stop hiring for cultural fit and start looking for professionals or superstars. Well, don't. Research has found that switching blueprints doesn't just work, it's usually catastrophic. The solution lies elsewhere.

A great example of how to solve/prevent that problem is companies like Google and Bridgewater. What these companies have in common is that they support and foster dissident by finding the "canaries in the goldmine" and supporting them to drive change.

Bridgewater specifically is a super interesting example. They are one of the few funds to weather events like the credit crunch and forecasting the crash. Their performance is something to be jealous of. To succeed that they have a very unique culture, stemming from the founder and ex-CEO Ray Dallio. You can sum up the culture in one simple sentence of his "Don't let loyalty stand in the way of truth and openness"

In Bridgewater employees are encouraged to speak up when they identify any problem. In fact, not talking up to a problem can get you fired. Talking behind the back of someone can get you fired too. Speaking up on the other hand can propel you up. Google has something similar where the "canaries in the goldmine" have their own group where they drive change from within the company.

So fostering dissident is step one but there is another equally important step. Stop hiring for cultural fit. What companies should really strive for is hiring for people that can enrich your culture. Hire people that have something to add to your culture and therefore create pluralism and cultural diversity. Let me repeat myself, don't assess cultural fit, assess cultural contribution, that's exactly what Bridgewater does.

"There is a line between a strong culture and creating a cult" - Adam Grant

P.S: This post was inspired by the awesome book Originals by Adam Grant. I can't recommend it enough. Originals: How Non-conformists Change the World eBook: Adam Grant, Sheryl Sandberg: Amazon.co.uk: Kindle Store

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