Second only to growing quickly, I think the best thing a company can do to have a strong culture is to have a promotion culture.
A “promotion culture” is one that, as often as possible, orients itself towards internal promotions and steep internal career trajectories.
Companies that scale quickly by definition need to hire lots of people from the outside, and many of those will be leadership roles. So what I’m talking about isn’t something that’s all or nothing, but rather about defaults; knowing that there will always be a mix of internal promotions and external hires, what is your orientation?
My experience is that having a promotion culture gives companies tons of advantages.
Having a promotion culture gives you two critical edges in hiring. First of all, if you know that you’re a company that biases towards promotions, you have to be especially careful in the hiring process to filter for slope over experience, which turns out to almost always be more important for startup employees.
The second hiring advantage is that it’s much easier to attract people when your company has a strong history of promotions. Having lots of examples of great career arcs at your company goes a long way towards attracting ambitious candidates.
A company with frequent promotions also has lots of advantages in managing employees. You hold onto great employees for much longer periods of time, and they’ll be much more engaged while they’re with you. It energizes people to see growth for themselves and for the people around them, and it creates a positive-sum mindset: as the company grows, everyone grows.
A promotion culture lets you capitalize on your “people secrets”. Startups are in the business of betting on great but undiscovered talent; because your company is still unproven, the best way for you to get great people is to find great people who also happen to be unproven. Once you’ve hired someone like this and you know they’re great, you have asymmetric information relative to the rest of the hiring market. Rather than *taking advantage* of this by underpaying or undertitling, it’s much more valuable to *capitalize* on it by investing in them with conviction. These are the situations when you get to take sure-fire bets on people you know are great, rather than rolling the dice with new hires, which may or may not work out the way you hope. There is a grass-is-always-greener cognitive bias where people tend to underestimate the caliber of their own talent.
Finally, a promotion culture forces you to have better management hygiene. It requires you to start with a long term approach to your employee relationships, and to make investments as though the relationships are long and repeated games. This mindset will cause you to create better relationships with employees and to be a better manager, which will create somewhat of a self-fulfilling prophecy.
Hopefully these arguments persuade you to try and move your promote vs. hire defaults in the favor of more promotions.
There are a few noteworthy caveats worth mentioning. One is for very senior, very broad executive roles, you will often want to bring in external talent who have led through a scale beyond what you’re currently experiencing. The other is companies where the growth is truly breakneck, in which cases very few people can hope to grow at the rate of the company and so this approach may set people up to fail.
Lastly, it’s worth noting that when promotions don’t make sense, companies can get many of the same benefits by helping people make lateral moves, such as a transition from marketing to product.