A few weeks ago, I was on a call with a founder. The company was at a critical juncture: The founders were about to scale the team from 50 to 75, and were ready to put the gas on growth. They wanted to hire self-propelling talent. But with a 50% increase in the size of the team, the founders realized they’d no longer have the same hand in day-to-day decisions that they’d been used to. How would they ensure those choices, now beyond their control, would be wise ones?

I suggested a starting point: Set your operating principles, the foremost beliefs that define the actions you and your team take on a daily basis. Done right, they reflect your culture in a tangible way, which is what enables your team to make the right decisions — whether or not you’re in the room.

Here’s how to figure out your operating principles and put them to work.

How operating principles strengthen company culture

I’m in the camp of using the term “operating principles” versus the more common “company values.” The word “operating” implies (and inspires) action. “Values” calls to mind a cliche poster that you might hang on a wall: a team of rowers on a river with “There’s No I in Team” written below. That’s precisely what operating principles are not.

For startups in their most nascent stages, company culture is organic. Founder-led companies are a reflection of those founders, their priorities, and their values. That’s easily disseminated when the team is small and sitting in the same room. Culture is more than just having a beer after work — it’s the stuff that decides how choices are made and what gets rewarded.

As companies grow and add new people, offices and locations, a founder’s influence over company culture naturally diminishes. Teams cannot learn what’s important from fleeting one-on-one interactions or occasional meetings.

If you want to build a company that reflects the very values and priorities on which you founded it, you must actively work to make them stick as you scale.

A critical juncture for founders

Some founders start their companies with principles in mind. They found their business with a point of view on how things should be done, who they’ll hire, and how decisions will be made. That’s a solid foundation, but it’s also rare.

Most founders find themselves in need of guiding principles when they no longer manage their whole team directly. I find that the turning point usually occurs when the company reaches a headcount of approximately 50 people.

One founder told me that he knew it was time to get out of the way and remove himself from day-to-day decisions so the team could move faster. “But,” he said, “I want to make sure my team can get into my brain.”

To do that, he had to define the company’s principles. With that as a guiding light, the team could make the best decisions in the service of the company without him in the room.

5 steps to identifying your operating principles

Operating principles inspire action when employees are faced with trade-offs. They show employees how to prioritize their work, and can help guide difficult decisions.

Define your operating principles with these five steps:

1. Name your ethos

Why did you start the company? Returning to that moment when you felt you had hit on something big can help you uncover the principle(s) you already live by and work by.

2. Solidify your purpose

When you built the company, what did you want it to stand for? When you make a decision, as a founder or founding team, what are your guiding lights? Many founders will realize they may already have some operating principles, whether named or not.

3. Cast your ambition

What will your company do better than anyone else? Force yourself to be specific. Offering a better user experience is not a differentiator. Nor is putting the customer first. But removing the stigma associated with seeking financial coaching could be, for example, as could helping companies run financial planning and analysis (FP&A) without consultants or coding.

4. Envision your team

What kinds of people do you want to work with? Do they love to grind all day without a break? Are they unafraid to question authority?

I’ve watched a founder coach a high-performing employee who was excellent at her job, but didn’t exemplify what the company stood for. The operating principles he’d set gave the founder a concrete reference point for correcting her behavior.

5. Codify your principles

You’ve probably written down a long list of statements for steps one through four. It’s time to whittle them down for easy recall. One is probably too few, while six is certainly too many. Also, make each principle succinct. You want this to be a short enough list that members of your team can rattle them off the top of their head — not have to pull up a document. And once you identify your set of values, make an internal comms plan to put them into practice.

How to know if you got it right

Founders often feel pressure to get it right the first time. But free yourself of that: Your operating principles are a carefully cast vision, not an inflexible law. Here are a few tangible signs that they’re working:

• Employees cite the operating principles as a reason to settle a disagreement (for example, “The ‘customer first’ way to think about this is…”).
• Highly regarded team members are recognized (by leaders and peers alike) for not only the strength in their core job, but also for how they live the principles.
• When a candidate asks a member of the team to define the culture, the principles are referenced as a way to show examples of its cornerstones.
• When hiring, the company uses a defined way to assess for the attributes associated with all operating principles, and a candidate must be strong in both core job skills and these cultural hiring attributes to be hired.

Setting your operational principles should not be an onerous exercise. Pick three principles and try them out — put them into practice and see how they feel. The best companies will iterate on their operating principles until the end of time. While you may not scrap the whole lot, you might add one or two, or decide the one that was relevant when you first scaled isn’t so relevant today.

Find out how operating principles can transform the way you scale. Contact Leslie Crowe at lcrowe@baincapital.com to learn more.