AI-native startups are deciding in days what takes your team quarters. They hit $1 million in revenue in 11.5 months. Your traditional SaaS company? 15 months. This isn’t because their product is better. It’s because their organisational structure is built for speed.
Your company is 8, 10, maybe 11 years old. Valued in the billions. But you’ve piled on the approval chains, the risk committees, the functional silos. Institutional drift has eaten away at why you started the company in the first place—buried under years of accumulated decisions and the complexity that comes with success. Understanding institutional drift and refounding is essential context for why cultural change is needed during organisational transformation.
This is what refounding transformation looks like. It’s a transformation where the stakes are as high as when you were founding the company. Your team expects stability. You need experimentation. They’re set up for predictable execution. You need people who act first and ask permission later.
Which creates some real problems: How do you tell people they’re being laid off without tanking morale? How do you structure severance so you don’t burn every bridge? How do you keep your technical teams feeling safe enough to take risks when the whole org is being turned upside down?
Yale’s three-part refounding framework—purpose, culture, strategy—gives you a systematic way to tackle this.
How does refounding affect company culture and employee expectations?
Refounding resets your culture by putting the stakes back at founding-level importance. You’re asking people to try new things, accept that some experiments will fail, and operate at a completely different pace.
Culture is like an intuitive, silent language that shapes how people behave, what they consider normal, and what they actually do every day. It decides which projects get money, how fast decisions happen, whether teams wait for permission or just do the thing and apologise if it goes wrong.
Success speeds up drift. Your company grew. You added layers. Maybe you bought other businesses. Only 20% of people actually doing the work feel connected to company culture. Compare that to 43% of leaders. That gap is a big problem when you’re trying to transform.
AI-native startups work differently. Flat hierarchies. Small teams that run themselves. Engineers talking directly to customers. Shipping code multiple times a day. Your organisation? Probably has approval chains, risk committees, functional silos, and annual planning cycles that take months. These things made sense during growth. Now they’re slowing you down when you need to move fast.
Employee expectations have to shift from “things stay the same” to “things keep changing.” From predictable to experimental. From being a specialist in one function to working across multiple areas. Edgar Schein stated: “The only thing of real importance that leaders do is to create and manage culture. If you do not manage culture, it manages you.”
Cultural transformation means embedding new ways of working into your governance, your compensation, who you hire, and how you evaluate performance. Not aspirational posters on the wall. Actual operational systems that make the new patterns stick.
How do I communicate a refounding decision to my employees?
Use stakeholder segmentation. Different people need different messages. Technical teams want to know what’s happening with the tech stack, how fast they’re expected to move, and whether their jobs are safe. Leadership wants the strategic thinking and competitive context.
Structure your communication using why-how-what. Start with purpose: explain why you’re refounding. Then describe how you’ll operate differently—the cultural shift. Finally, outline what you’re building—the strategic changes.
Garrett Lord at Handshake shows how transparency works. He said employee departures “really, really sucks” while also explaining why it was necessary. AI-native startups were deciding who wins and who loses.
For technical teams, talk about the tech stack directly. You’re adopting AI-native development. New tools. Different frameworks. Faster iteration.
Velocity expectations are changing. You’re shortening the time from decision to deployment. Cutting approval layers. Giving product teams more power. Moving to continuous deployment.
On job security, be straight. Refounding targets organisational patterns, not individual performance. If someone’s role is affected, you’ll tell them directly and give them proper severance.
Make your announcement before rumours start but after you’ve got leadership aligned. Never let gossip get ahead of your official message.
The sequence: get leadership aligned → get board approval → tell affected individuals → company-wide announcement → team-specific sessions within 48 hours.
Don’t use corporate-speak that hides what you actually mean. Don’t be prematurely optimistic in a way that feels fake. And don’t send one message to everyone that addresses nobody’s actual concerns.
People resist operational changes less when they own them. Create ways for people to talk back to you, not just sit and listen.
How do I structure severance and equity during refounding layoffs?
When refounding means reducing headcount, how you structure severance becomes part of your message about who you are as a company.
You’re balancing legal obligations, financial constraints, and how the people staying feel about what you’re doing. The standard approach: 2-4 months cash severance, accelerated equity vesting for time served, and extended healthcare.
Cash severance is typically 1-2 weeks per year of service. Senior people might need better packages.
For equity vesting acceleration, there are three common approaches:
Full acceleration for time served is the fairest. Someone who worked three years of a four-year vesting schedule gets their three years vested right away.
Extended exercise window is another option. Instead of the usual 90 days to exercise options, extend it to 2-3 years. Costs you nothing upfront but provides real value.
No acceleration with the standard 90-day window is technically legal but kills your reputation.
Healthcare continuation means COBRA minimum plus company-subsidised extensions. Three to six months of subsidised coverage is common.
Legal framework stuff you need to watch: WARN Act 60-day notice requirements, age discrimination protections, and documented selection criteria.
Outplacement services—help with resumes, career coaching, job search—represent goodwill investment.
How you treat people leaving affects how people staying feel about you. Severance generosity signals company values to everyone watching.
Handshake’s 15% workforce reduction shows how this works. Affected employees got extended equity exercise windows, removed one-year equity cliffs, and better severance packages.
What is the three-part refounding framework and how do I implement it?
The three-part framework from Yale research structures refounding around purpose, culture, and strategy. This framework is central to our comprehensive refounding guide, providing a systematic approach to organisational transformation. Purpose is why you exist. Culture is how your values show up in what people do every day. Strategy is what keeps evolving while staying grounded in why you’re here.
Start with purpose rediscovery. Work out what organisational need you uniquely serve that goes beyond your current products. Not what you build. Why you exist.
Airtable’s CEO Howie Liu said they picked “the language of founding because the stakes feel the same.”
Cultural transformation comes next—embedding purpose-driven values into how things actually work. Governance structures. Compensation frameworks. Management processes. Hiring criteria. Leaders embed character through operational systems that make identity stick.
Strategic evolution becomes continuous adaptation grounded in unchanging foundational purpose. What you do evolves. Why you exist stays stable.
How to sequence it: Start with leadership alignment on purpose. Then cascade cultural expectations through your managers. Finally, validate strategy alignment every quarter.
Airtable’s organisational restructuring shows how implementation works. They created fast-thinking and slow-thinking team structures. Fast-thinking teams focus on rapid experimentation. Slow-thinking teams maintain platform infrastructure and reliability.
Common mistakes: treating the strategic decision-making frameworks as a one-time thing, skipping cultural embedding to jump straight to strategic pivots, and leadership not modelling what they’re asking for. Culture change doesn’t happen on paper. A critical mass of people have to actually change how they think, what they value, and how they work with each other.
Track cultural transformation metrics, employee engagement scores, and how fast decisions get made.
What role does organisational agility play in competing with AI-native startups?
Organisational agility is your capacity to quickly sense and respond to market changes through flexible structures and empowered teams. AI-native startups hit $1 million revenue in 11.5 months versus 15 months for traditional SaaS companies. That speed gap represents an organisational structure advantage, not a product advantage.
Legacy companies pile on decision-making layers, approval requirements, and risk-averse patterns that slow everything down. Refounding aims to tear them out.
They use generalist employees who adapt quickly across functions while traditional siloed specialist teams move too slowly. When technical people talk directly to customers, you get faster feedback loops.
Cultural enablers of agility: psychological safety for experimentation, accepting that smart failures are part of learning, and incorporating feedback quickly. Structural changes: fewer approval layers, product teams with real power, continuous deployment.
How to measure it: decision-to-deployment cycle time, how fast you’re running experiments, how quickly you respond to customer feedback. Speed defines success.
How do I maintain psychological safety during rapid organisational change?
Maintain psychological safety by explicitly admitting what you don’t know, acknowledging concerns without dismissing them, and creating structured ways for people to give you feedback.
Psychological safety is the belief that taking interpersonal risks feels safe. Rapid change threatens it because people worry about losing their jobs, their skills becoming obsolete, and making political mistakes when power structures shift.
The IMF projects AI will affect 30% of jobs in advanced economies. Your engineers know this. Pretending the threat doesn’t exist destroys your credibility.
Show vulnerability by admitting what you don’t know. “Here’s what we know. Here’s what we’re figuring out. Here’s what’s still uncertain.” Leaders can create psychological safety by sharing their own learning moments.
Celebrate smart failures during experimentation. Experiments that tested reasonable ideas, had proper controls, and generated actual learning.
Treat resistance as useful feedback rather than a problem you need to eliminate. Someone pushing back might see risks you missed.
Proactive communication means regular town halls, small group listening sessions, and anonymous feedback channels. Not one announcement. Ongoing conversation.
Structural reinforcement matters more than words. Separate experimentation failure from performance reviews. Publicly acknowledge contributions with things like “Thanks for catching that; let’s dig into it.”
Technical leaders often struggle with ambiguity. Give examples of acceptable risk. Define boundaries for experimentation. Clarify who makes which decisions.
What happened with Handshake’s refounding and layoffs?
Handshake is an 11-year-old recruiting platform valued at $3.5 billion. CEO Garrett Lord cut workforce by 15%—about 100 people—while launching an AI division that hit $100 million in annualised revenue in eight months. This case study is one of several organisational transformation examples that demonstrates the practical challenges of cultural change during refounding.
Lord spotted a market gap in data labelling for AI model training, using Handshake’s network of 500,000 PhDs and 3 million Master’s degree holders. The AI division went from 15 to 150 employees in months.
Combined annual recurring revenue is $200 million. Projected year-end: $300 million. 2026 forecast: “high hundreds of millions.”
Lord communicated the shift as competitive necessity. Winners and losers are being defined right now. Without aggressive AI investment, Handshake becomes just “okay,” stuck making incremental improvements.
The refounding included cultural mandates. Mandatory five-day office week to increase collaboration intensity. Explicit expectations for experimentation.
Board member Mamoon Hamid from Kleiner Perkins was initially surprised but ultimately backed the direction.
What this means for your transformation: Being transparent about how hard this is matters. Generous severance signals your values. Cultural mandates require consistent enforcement.
How long does cultural transformation take during refounding?
Cultural transformation typically takes 12-18 months for new patterns to become embedded habits. You’ll see initial behaviour changes within 3-6 months of consistent leadership modelling.
Resistance usually peaks at 2-3 months when the novelty wears off but the new patterns aren’t comfortable yet.
Initial phase (0-3 months): Announcement shock, active resistance, leadership modelling intensively. This phase feels chaotic. Some people leave.
Adaptation phase (3-6 months): Tentative adoption of new behaviours, early wins get celebrated. Teams start experimenting. Momentum builds.
Integration phase (6-12 months): New patterns become comfortable, metrics show measurable improvement. The transformation feels less forced.
Embedding phase (12-18 months): Cultural self-reinforcement emerges, practices feel “normal.” Teams correct each other without management intervention.
What speeds it up: Consistent leadership modelling, quick wins celebrated publicly, replacing resistant managers, reward systems aligned with new culture.
What slows it down: Inconsistent enforcement, leadership contradictions, reward systems misaligned with the culture you say you want.
How to measure it: experimentation velocity, decision-making speed, employee engagement, voluntary turnover patterns. Establish baseline measurements. Track quarterly. Expect measurable improvement by 6-9 months.
Tell people upfront this takes multiple quarters. Celebrate incremental progress. Don’t declare victory too early.
FAQ Section
What’s the difference between refounding and pivoting?
Refounding elevates stakes to founding-level importance by fixing institutional drift and foundational refounding concepts. Refounding restores lost foundational purpose while pursuing new strategies. Pivoting corrects wrong strategic direction. Pivots are directional corrections. Refoundings are identity restorations that need cultural transformation, not just strategic adjustment.
Do all refoundings require layoffs?
Airtable’s refounding focused on restructuring without immediate workforce reduction. But layoffs commonly happen during refounding when your existing workforce lacks skills for the new direction or leadership uses workforce change to signal how serious the transformation is. Handshake’s 15% reduction shows workforce alignment with AI-focused strategy.
How do I know if my company needs to refound versus incrementally improve?
Use Yale’s diagnostic questions: Does leadership struggle explaining enduring purpose beyond current products? Do employees describe culture as “lost” compared to the founding era? Are decision-making processes increasingly bureaucratic? Has success complexity distanced the organisation from core identity? Multiple “yes” answers suggest you need to refound.
What if my engineering team resists the five-day office mandate?
Acknowledge legitimate concerns while explaining the strategic thinking: increased collaboration intensity, cultural transformation visibility, competitive urgency. Offer a transition period (1-2 months). Commit to reassessing based on measurable outcomes after 6 months. Replace resistant senior engineers unwilling to adapt. Inconsistent enforcement kills transformation credibility.
How do I measure cultural transformation success beyond revenue growth?
Track leading indicators: experimentation velocity, decision-making cycle time, employee engagement scores, voluntary turnover patterns, cross-functional collaboration frequency, customer feedback incorporation speed. Establish baseline measurements. Track quarterly. Employees strongly connected to culture are 3.7 times as likely to be engaged. Expect measurable improvement by 6-9 months.
Should I communicate refounding plans before or after workforce reductions?
Communicate strategic refounding rationale before layoff decisions when possible. But legal constraints sometimes require simultaneous announcement. Never let rumours get ahead of official communication. Sequence: leadership alignment → board approval → affected individual notifications → company-wide announcement → team-specific follow-up within 48 hours.
What happens to equity for departing employees during refounding layoffs?
Standard approaches: accelerated vesting for time served (fairest approach), extended exercise window (2-3 years increasingly common), or no acceleration with standard 90-day period (damages reputation). Handshake provided extended equity exercise windows and removed one-year equity cliffs. Generous severance maintains relationships and signals company values.
How do AI-native startups achieve faster organisational agility?
AI-native startups design for speed: flat hierarchies (3-4 layers maximum), small autonomous teams (two-pizza rule), product-engineering integration, continuous deployment (multiple daily releases), customer-facing technical roles, bias for action over consensus. Legacy companies accumulate decision layers and approval requirements that AI-native organisations intentionally avoid.
Can refounding succeed without CEO-level commitment?
Successful refounding needs CEO-level ownership because cultural transformation demands consistent modelling from visible leadership, resource reallocation authority only CEOs have, and board communication establishing transformation as strategic priority. You can advocate for refounding and lead technical organisation transformation, but company-wide cultural change needs CEO championship. Handshake’s Garrett Lord and Airtable’s Howie Liu personally drove their refounding initiatives.
What if refounding transformation fails after 12 months?
Diagnose failure causes: inconsistent leadership modelling, misaligned incentive structures, insufficient structural changes, declaring victory too early. Fix root causes through leadership changes, incentive realignment, structural adjustments. Consider whether your initial refounding premise was correct—institutional drift diagnosis may have been wrong, suggesting incremental improvement is enough.
How do fast-thinking and slow-thinking teams actually work in practice?
Airtable’s model separates teams: Fast-thinking teams focus on rapid experimentation with higher failure tolerance and weekly sprints. Slow-thinking teams maintain infrastructure, reliability, security with quarterly roadmaps and lower failure tolerance. Teams have clear swim lanes and distinct success metrics—both necessary for sustainable innovation.
Should I hire external talent or develop existing team during refounding?
Balanced approach: Hire strategic external talent bringing AI-native startup experience (typically 20-30% new hires in key roles). Simultaneously invest in existing team development through training and role expansions—preserving institutional knowledge and signalling commitment. Replacing entire teams signals distrust and triggers talent exodus. Keeping everyone unchanged risks insufficient transformation momentum.
