I recently moved into a new house. Within the first 24 hours, several flaws stuck out like a sore thumb. What’s striking is that I missed these details during multiple tours. 🙈
It got me thinking: touring a staged house is like interviewing with a company or reading their employee handbook. Everyone’s putting their best face forward, and what’s seen and said reflects aspiration more than reality. In both cases, we make a big decision after mere hours of exposure.
What if there was a better way to predict life inside a company before joining?
“Ask about culture. Culture eats strategy.” — says the avid business book reader. The problem with culture is that it’s hard to detect through words alone. Culture emerges through how teams work together, but we spend most of our interview loops with individuals.
Have you ever changed your behavior based on who’s in the room? I sure have. Adaptation is by design. People can carry different personas in different environments.
Org design > culture
To evaluate a group phenomenon like culture, it’s more useful to look at org design and incentives. I first read about this in the book Loonshots. A simple formula demystified questions like: why are some teams risk-averse? Why are some merit-leaning, while others are mired in politics?
There are five main levers:
- Stake (size of stakes in group outcomes, often measured by equity)
- Rank (size of salary and title bump from promotions)
- Span of control (# of direct reports per manager)
- Return on politics (how much lobbying & networking gets you what you want)
- Project-skill fit (how skilled people are at their assigned jobs)
Stake vs. rank
This one is the most intuitive — it explains the stark behavioral differences across early-stage startups, scale-ups and established companies.
At an early-stage startup, nobody gets paid much unless the valuation grows. Even the rare fat salary is easily dwarfed by equity upside. The stakes are existential, while the differences in rank are trivial. Big swings are not only encouraged, they’re required for survival. Serving customers is far more useful than sounding smart in a meeting.
At a scale-up, the stakes dip as the upside splits across more people. Fortunately, there’s usually a path to 10X through expanding into new geographies and verticals. When this path is clear, people are incentivized to grow the pie rather than fight over each slice.
As a company grows into a more optimized business though, getting a bigger title with higher salary and headcount becomes more valuable — and let’s be real, easier — than trying to start a new product line that makes a dent. People with appetites for big bets either leave, or shrink their appetite to survive.
I saw this firsthand in a scaling company when big bets with uncertain timelines for payoff drew heavier scrutiny and required more approvals. The swing-for-the-fences projects that used to be encouraged turned into a slog to keep alive. Cozying up to the right people and sounding smart in the right meetings grew in importance.
This shift between stake and rank is a natural part of any maturing company. Knowing where you get energy and what you’re down to tolerate is useful for picking the right stage. But not all small companies are nimble, and not all big companies are bumbling elephants. There are more levers at play.
Span of control
Span of control, aka # direct reports per manager, is surprisingly revealing. Let’s say two companies are the same size, but company A’s typical span of control is 8 people while company B’s is 3.
Due to a narrower span of control, company B has far more layers than company A, which translates into a longer corporate ladder. This means:
- Greater need to split hairs re: title and compensation
- More distance between people calling the shots and people on the ground; this comes with its own set of challenges (out-of-touch strategy, longer reaction time, room for broken telephone communication)
The most awkward org charts are skinny pyramids in which each manager has only a handful of direct reports. This can emerge out of the well-meaning intention to promote ICs into managers. But if everyone needs direct reports to feel like they’re “progressing”, you end up with a gridlocked org chart.
A low span of control also sucks for managers. To make any progress, you need the buy-in of other teams because your own is not enough to move forward. Granted, there’s a natural limit to increasing span of control — managers can only oversee so many direct reports, but the point is that many orgs are nowhere near that limit.
Asking about team structure and mapping out the org chart reveals hidden dynamics. It also plays into our next lever…
Return on politics
What’s a better use of time: 1 hour solving customer problems or 1 hour politicking (networking, promoting your work, lobbying for more resources)? In many places, especially those with skinny orgs, politicking is the no-brainer answer. When you are buried in the org by default, you gotta figure out how to get noticed.
Asking about the way performance reviews and promotions are run is also revealing. The more it’s grounded in qualitative measures like “presence” and “leadership potential” vs. quantitative measures, the greater the return on politics. While it’s impossible to stamp out politics, there is an effective way to reduce the temptation…
When people are matched to projects they can crush, they are likely to spend more time pushing their work performance. Here’s a telling question: if you spend more time on your project, will you create a lot of value, some value or none at all? If the answer is little to none, the mind will seek greater gains elsewhere.
I think this is an overlooked variable because it’s easy to assume that as long as a team has skilled people with good intentions, great work will naturally happen. The reality is that people with skills have to be matched with projects that engage and challenge them.
Ensuring high project-skill fit is probably the greatest value managers can add to their teams. When people are in the right seats, there’s little need to meddle in the work.
To put it all together, here’s the formula for predicting behavior inside a company:
stakes * span of control^2 * project-skill fit / (return on politics * rank)
If your goal is to be rewarded on your merits, look for higher values in the numerator (stakes, span of control - up to a point, project-skill fit); and lower values in the denominator (return on politics, perks of rank).
No org is perfect, but we can all use a mini-roadmap to evaluate what’s ahead.
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