iYell: A Startup's Thorough Pursuit of Organizational Development

In the startup world, organization-building is sometimes positioned as a "means of business growth.” In itself, this is not a bad thing. If the company's business growth brings about socially meaningful change, and the people who work there feel joy in contributing to that change, then "organization-building as a means" certainly makes a lot of sense.

On the other hand, even in the same startup world, is it possible to grow by emphasizing the "organization"? This is a theme that I myself have faced many times in the past, but I have not always been able to take a clear stance on it.

iYell, the company I would like to introduce here, is a company that has taken a consistent approach to "organization" in its own way to answer this very question. And all while achieving business growth, of course.

I had the opportunity to speak with iYell's representative, Mr. Kubota, back in December 2019, as I am a member of the planning committee for the White Company Awards.* Obviously, a little more than three years have passed since then. So, I recently asked him about various details of further development.

*In Japan, "black companies" are the ones that do not care about the happiness of their employees and encourage harsh labor, poor working environments, non-payment of overtime, and so on. White companies are the opposite of this. The White Company Award is an initiative to recognize companies that value the happiness and job satisfaction of their employees and their contribution to society as White Companies.

Company profile

iYell was founded in May 2016 and is nearing the end of its seventh fiscal year. The company has around 350 employees and has raised a cumulative total of 7.6 billion yen in funding to date.

The company's business is described at the top of its corporate website as a "mortgage tech startup" and on its services page as a "mortgage platform" that utilizes technology. Specifically, the company offers a wide range of services for real estate agents, users, and financial institutions, respectively. This is due to the fact that Mr. Kubota, the president of the company, previously worked for SBI Mortgage Co. (He has also appeared in various media as "the man who knows the most about mortgages in Japan,” for what it’s worth.)

However, there was virtually no discussion of business in this interview. iYell's commitment to its organization (or, in its own words, "culture") is unparalleled. The company has won the White Company Award for two consecutive years and has been ranked among the top "Best Companies to Work For" in Japan.

The company also stands out for its low turnover—there was zero turnover from when it was founded until it had more than 100 employees. Even now, with hundreds of employees, the turnover rate is still extremely low, at around 2%.

A strong passion for organizational development

iYell's strong commitment to people and organization has been consistent since its founding. In one interview, Kubota described the background of the company's founding as follows:

“It is interesting that we decided to invest in the company before we had even decided on a business model or anything. The business model would change anyway, so it didn't matter what it was. Who you do it with is important, so I was told to bring in my friends first. So I brought two of my trusted colleagues with me, and they agreed to invest in the company.”

This phrase, "It's not what you do, but who you do it with," has been highly valued since the company's founding and is still listed as "iYell's most cherished desire" regarding its management philosophy.

Kubota hasn’t changed since I interviewed him in 2019—his efforts to build an organization that puts employees first are still a top priority.

Here are some notes I was taking at the time during our talk. It was easy to sense that Kubota's stance is consistent:

• “In terms of management, I put the happiness of employees first. Putting employees first results in putting customers first.

• I believe that if we can create a flow of joy from employees to customers to shareholders, our business will grow in return for the happiness of our customers.

• In terms of the organization and business, the business is more fluid and flexible. The strength of an organization that can do this is very important.

• We must have an organization that can respond to changes in the business model.”

Formulation of COMPASS

Because of the strong commitment to the organization, some difficulties began to arise when the number of employees began to increase 4-5 years after the company was founded. The existence of several values and concepts, such as "value management," "employees first management," and "1,000-year management," in addition to the management philosophy ("It's not what you do, but who you do it with") mentioned earlier, began to prevent employees from grasping the overall picture in the same way.

To address this situation, a nearly 150-page booklet called "COMPASS" was created in 2021. This booklet clearly shows the relationship between the above management principles and values. It took about a year and a half from conception to the creation of this booklet, but the effects of this effort were remarkable.

Kubota:

"The effects of creating COMPASS were very significant. Until then, "Employees First Management" and "1,000 Year Management" were sometimes understood differently by different people as to whether they were in parallel or hierarchical relationships or whether they were chronologically related. We created this system in order to align the foundation, including the overall structure.”

iYell conducts a variety of in-house training programs. Some of them deal with questions that have no answers, such as, "How can we improve the job satisfaction of our employees?” At such times, the COMPASS allows everyone to pull assumptions from these questions and truly think about them.

When COMPASS was formulated, the "vision" and "mission" were also formulated for the first time. In addition to the management philosophy and values that had already permeated the company up to that point, sharing new concepts within the company imposes a certain burden on both individuals and the organization. Still, the benefits gained from this formulation seem to be far greater.

Kubota:

"Creating the words certainly puts a load on you at the moment, but even though the initial push is hard, once you start moving, it moves forward on its own. The vision, 'Toward a planet of mutual support - chain of Yell' now appears in daily reports and meetings on a daily basis, so when that happens, it naturally permeates."

Kubota also describes the period up to the formulation of COMPASS as "iYell 1.0" and the period after that as "iYell 2.0" (the details of this change will be discussed later).

Culture > business

The most important aspect of what is explicitly stated in COMPASS for understanding iYell's management is that the management strategy is divided into "cultural strategy" and "business strategy.” And it is pretty clear that the cultural strategy is the priority.

Basically, this is consistent with the strong commitment to people and organization introduced earlier. However, the thoroughness of this comes to light when we look at the specific operations of the two aspects of "organizational management" and "business management.”

Talk of "business" was held back for five years

Kubota did not ask the members to set any numerical targets regarding the business for the first five years after the company's founding.

Kubota:

"From a management standpoint, of course, we want to raise the numbers. However, for Japanese people, raising numbers is not necessarily noble, and it is stressful. If you do that and instill the culture at the same time, you won't make progress, so I spent the last five years just trying to instill the culture.

Then, everyone started talking about how they wanted to raise the numbers. Some said, ‘Mr. Kubota, you don't need to look at the numbers(because we do),’ while others started saying, ‘I enjoy tracking numbers,’ and ‘Tracking numbers creates a cycle that makes the culture even stronger.’ I thought to myself, ‘This was worth the five years of waiting!’”

Mr. Ito, the CHRO, felt the same way. However, the assumed scenario naturally included a negative story about actually expecting numbers in the field.

Ito:

"Essentially, a company needs to make its employees happy and its customers happy, and to do that, it also needs to make business figures. Not focusing on that is just an escape from reality. However, when we first told the entire company about the figures, I even assumed some might point out it was not consistent with what we had done. Actually, it turns out that everyone was excited to hear it. I think this is the result of the culture we have developed over the years.”

Culture is flat; business is a pyramid

The basic premise of this story is the coexistence of two separate mechanisms in the operation of iYell: culture (organization) management and business management.

The management of the business is, in principle, extremely hierarchical and top-down. Mr. Kubota himself is aware of this point, and he intentionally adopts such a structure in order to produce business results.

On the other hand, as for the management of culture (organization), there exists a "conceptual structure," as shown in COMPASS, but there is no organizational structure or organizational dynamics to put it into practice and embody it.

“Rational" decision-making for iYell

What is important, then, is the consistent stance that "cultural strategy always takes precedence.” iYell's "rational decisions" are only rational for the culture (organization), and for this reason, according to Kubota, the rationality of the business is "meaningless.”

The operation of the business, which is a pyramid, and the operation of the culture (organization), is, in a sense, flat. The coexistence of the two naturally requires a lot of power.

Kubota:

"To take a simple example of transfers: when a department is short of staff for a business project, in other companies, the decision is made by the supervisor or the personnel department alone, and it is not uncommon for the employee to be unaware of the decision until the day the resignation is announced. iYell begins by soliciting applications from within the company; if there are applicants, each is interviewed. If there are no applicants, we ask those we think would be a good fit to apply.”

When a person transfers to a new department, both they and those around them naturally know about the transfer and greet those around them by the day before the actual day of the transfer. It is the same in a new department. For iYell, 'rationality' is in the culture, not in the business alone. So, it is clear that culture is the most important basis for their decision-making.

From iYell 1.0 to iYell 2.0

iYell, which had been thoroughly devoted to "culture" to this point, was changing phases in its management around the time COMPASS was created in 2021. Mr. Kubota described this as "iYell 2.0.” However, in my own interpretation, there have been three major changes.

From "executive initiative" to "organizational strength”

The first is that they have entered a phase in which both culture and business are driven by the "entire organization" rather than the "individual" driving force of Mr. Kubota and other senior management.

Simply put, this is due to the increase in the organization's size in terms of numbers of people and business figures. In the past, Kubota would have been able to communicate directly with the management. If the business figures were in jeopardy, the senior management would have been able to come to the forefront to turn things around. But nowadays, this is no longer within the scope of their influence.

From "Culture" to "Culture & Business”

Second, the weight of the entire organization has begun to shift from the permeation of "culture" to the two wheels of culture & business. This is symbolized by the fact that, as mentioned earlier, business figures were communicated even to members in late 2022.

The foundation on which the organizational culture has been built over the past five years has enabled the business to be placed on top of it, and the two have reached a state where synergistic effects can be generated.

Change in the president's role

Third, the role of the president, Mr. Kubota, has changed. He has shifted from his previous position of "seeing everyone's face" to "the role of president.” This is something that he himself clearly recognizes and is trying to change.

Kubota:

"When the total number of employees exceeds 300, and the number of people I can be involved with is limited, I have no choice but to shift from ‘the president close to employees,' to simply ‘the president'—as in, a more distant presence.’ We have entered a phase in which we have to figure out how to instill a culture amid all this, especially among the cultural executives.

In fact, I have decided for the first time this fiscal year to exclude myself from the final interview process for new graduate hires, and I am also trying to reduce the number of award dinners with employees. These things are both my joy and my life's work, but the time has come for me to let go of them.”

The way he uses his time as president is also a clear indication of his own stance as a business owner. Mr. Kubota is always conscious of what his time should be used for to maximize its value, and he reviews his priorities once every three months. He also asks those around him, "What should I be doing right now?”

Kubota:

“As a manager, I think there should be a distinction between 'what I want to do' and 'what I should do.’ There are many things I want to do, but they are not always the things that will contribute the most to the culture and the business. As president, my time should be focused on what will bring the most value, and other areas should be left to other executives.”

Incidentally, as Kubota's time priorities change, the way executives use their time changes in tandem, and this, in turn, affects the whole company. This is where the "pyramid structure as a business" is clearly expressed.

Organizational management

Here, I will introduce, more specifically, the organizational management at iYell.

The foundation is "culture > business”

As I have written many times, at iYell, the mantra is “culture is greater than business,” which is thoroughly reflected in all organizational management measures. In the words of Mr. Ito, CHRO, "I am confident that we spend an overwhelming amount of time on culture.”

Symbolically, senior management and CXOs meet "every morning" and spend "1.5 to 2 hours" talking about people and the organization alone. For example, the hiring and transfer of employees, which was illustrated earlier, is often handled at this meeting.

However, this does not seem to be driven by a sense of obligation that “culture must be the first priority”. It is solely based on the premise that "we are talking about things to people we love, and that is fun.”

Three types of executives

I have used the term "senior management" several times, but to be precise, iYell's senior management is divided into three categories: "executive management," "cultural management," and "business management.” Of these, executive management is the more comprehensive role, and the two roles that embody it are the cultural executives and the business executives.

It is the cultural executives who reflect iYell's personality more strongly. They are known as the "iYellists7" (i7), and seven are elected each year by a vote of all employees. The term of office is one year, but they are often reappointed (although one of them is always replaced).

The cultural executives are not a department on the organizational chart, and the positions of elected employees vary. In the past, many of them held concurrent positions with management executives, but from 2022 forward, all management executives will be removed, and the new board will be composed solely of employees.

On the other hand, business executives are sometimes positioned as "business managers" or other roles responsible for business promotion in general companies. At present, many of them hold concurrent positions with management executives, but in the future, the company would like to separate these roles.

A new form of "a good old-fashioned company”

When asked about specific organizational operations, Mr. Ito described iYell as a "good old-fashioned company.”

Ito:

"For example, in a start-up company, many organizations have a fully remote working style or simplify the decision-making process. On the other hand, at iYell, after much discussion, we have decided to work in an office as a general rule, and we assume a hierarchical transfer of authority for decision-making in order to advance our business.

At iYell, we place the utmost importance on maintaining consistency in the management of the company as a whole. This is part of why the board members get together daily to talk. In some respects, I think this is a 'good old-fashioned' style, but I think it is a style that clearly makes sense for iYell.”

Appointing managers

iYell's thorough commitment to culture is also clearly expressed in the hiring of managers.

Ito:

"Basically, I only look at the cultural side when I make appointments. I make judgments based on such questions as, ‘Can you make your team members happy from a cultural standpoint?’ At that time, I refer to the 360-degree evaluation values taken by all employees. The higher the position, the higher the standards, but the basic stance remains the same”.

iYell's organizational structure is hierarchical: Member < Group head < Department manager < General manager < Director, but the basic stance remains the same at all levels. However, in the change from "1.0 to 2.0" mentioned earlier, there seems to have been a slight change in this aspect as well.

Ito:

"Two years ago, even if we lacked some business promotion skills, the executives could cover for us as long as they took care of the culture. However, now that the company has become multi-functional and larger in scale, it is necessary to have the employees run their own businesses to a certain degree. As one's position increases, unless one is able to fulfill both of these requirements, or is prepared to face them, they will not be able to work happily in the position”.

Evaluation and compensation

Evaluation is broadly divided into three categories: contribution to business progress (40%), embodiment of culture (40%), and cross-cutting contribution (20%). The contribution to business progress is linked to OKRs, while the embodiment of culture is based on 360-degree evaluations. Cross-cutting contributions include activities outside of the mission in the organizational chart and the overall impact on the surrounding environment.

Compensation is currently based on a relative comparison within the same grade level based on the total evaluation of these three perspectives.

The 360-degree evaluation on "Embodying Culture" is to be answered, "by everyone for everyone." The question is simple but somewhat abstract: "Does the person embody the values?" The answer is on a scale of 1 to 10. "Each person needs to decide for themselves what is important in embodying the values,” says Ito. “I think it is important to have them face that in itself when answering the questions."

In addition to the 10-point scale, there is also an "I don't know" option. Ito says he is closely monitoring the number of people giving or receiving this "don't know" response.

Ito:

"The main message of having everyone evaluate everyone is to 'understand your surroundings.’ When you don't know the person and can't answer the question, I want you to become 'I need to know more about them.'"

Incidentally, at the time of the last implementation of the program, there were about 140 people who were eligible for the program, but the number is expected to exceed 200 for the first time at the next implementation, which exceeded Dunbar's number. They think some improvement may be necessary, but they will try it with 200 people as a trial for the next round.

Recruitment

iYell places a strong emphasis on discernment in hiring. Of all the steps in fostering and instilling an organizational culture, Mr. Ito states clearly that recruitment is particularly effective.

The key here is, of course, a sense of fit with the "culture.” To prove his point, Mr. Kubota recalled a moment from a new graduate recruiting session:

"At a recruiting session for new graduates, after I talked about what iYell values, a student asked, 'Excuse me, what kind of company is iYell?’ I said, ‘I'm sorry, I didn't tell you once, we are a mortgage company. Please take a look at our website and read about our business. So, what is your next question?’”

However, this is also starting to change a bit. No matter how well a person fits into the culture, if they do not have the competencies that match iYell's current business areas and operations, it is likely to be difficult for the person to work happily as a result, no matter how well they fit into the culture.

Expanding support

Finally, when we asked Mr. Kubota what he feels about the future of iYell from his perspective, he mentioned two points related to the keyword "support," which is included in both the company name and its vision.

One is the relationship with shareholders or, more broadly, the stock market. iYell has received investments from many shareholders, including last year's Series D financing. Naturally, the current shareholders are given the opportunity to share the progress of business figures and other information as appropriate. However, he says that the ultimate ideal is to end the meeting by saying, "I will only talk about the organization and culture of the company,” and then ask them to please read the documents for the figures.

Although it was a semi-chatty conversation, it also turned out to be a kind of "organizational” version of ROI.

Kubota:

"It's not just about the numbers, but about the trust between people, the value of the team and the community, which are the tangible assets. It would be interesting if an organizational version of ROI could be created, such as, ‘I am sure that this team can generate any amount of money, regardless of the business model.’

I believe that the future of society will be based on supporting capitalism. In the past, people may have bought products based on functionality and convenience, but in the future, people will pay for things based on their support and empathy. I think it will become increasingly important to build strong people and teams that are supported."

The company is taking a hard look at the current iYell as well as its business figures and is also engaged in a series of dialogues with various stakeholders. On top of that, the worldview that iYell is aiming for leads to this kind of focus on the value of people and organizations.

Another challenge? Going overseas. Mr. Kubota says iYell's organizational structure is aided by Japanese culture.

Kubota:

"It is symbolic that you can walk through the Shibuya scramble crossing without bumping into people, which I think is because people unconsciously walk with consideration for others. This may be typical Japanese. But I believe it is universal for people to support others, and the more we do that, the more peaceful the world will be. I think that our vision, ‘Toward a planet where people support each other,’ is something that we can contribute to because we have the culture and history of Japan.”