The observation
An annual plan is built using the previous year’s conversion rates — a routine, sensible planning input, used because it worked well the last time it was used. Actual performance falls well short of what the plan projected. The instinctive read is optimistic planning: the targets were set too ambitiously, and the shortfall reflects an overreach in expectations rather than a flaw in the method used to set them.
This is a specific instance of a much broader pattern that shows up across growing organisations in less numerical, more human form — including in how culture is protected. The plan was not wrong because it was optimistic. It was wrong because it rested on an assumption about the business that had quietly stopped being true.
What leaders usually conclude
Blaming optimism is the natural first read because it is the simplest explanation and does not require questioning the method itself, only the ambition applied to it. It is also, in this case, demonstrably incomplete: the conversion rates used in the plan were genuinely accurate for the business as it existed the previous year. The forecasting method was not flawed in principle. What changed is what the method was being asked to describe.
The mix of business shifted during the year toward a segment with structurally different, lower conversion characteristics than the segments that made up most of the prior year’s activity. The planning model used blended historical figures — an average across the whole business — which had been a reasonable simplification when the business’s composition was relatively stable, but became a source of systematic error the moment that composition changed meaningfully. The model was correct about the past. The past had simply stopped describing the present, and nothing in the planning process was designed to test whether the underlying composition it relied on still held.
What the evidence suggests
This same mechanism — an assumption that was accurate, applied past the point where the conditions that made it accurate still exist — is a close cousin of what happens to culture during rapid growth. Culture, in most organisations, is rarely written down comprehensively. It exists as a set of shared, largely unstated assumptions: how decisions get made, what gets recognised and rewarded informally, what “the way we do things here” actually means in practice. Those assumptions were calibrated to a specific population — the people who were there when the culture formed, who absorbed it directly, often without anyone explicitly teaching it.
Rapid growth changes that population faster than culture, as an unwritten thing, can transmit itself. New joiners arrive in large numbers, learning “how things work here” secondhand, from people who are themselves relatively new, rather than directly from the original group whose behaviour the culture actually describes. Much as the planning model kept using conversion rates calibrated to a business mix that no longer existed, an organisation can keep assuming its culture is intact because the same words are still used to describe it, even as the lived experience behind those words has shifted for a growing share of the people actually working there.
Larry Greiner’s research into organisational growth phases identifies culture-adjacent strain as a recurring feature of scaling, particularly around what he terms crises of autonomy and control — periods when the informal coordination and shared understanding that characterised an earlier, smaller stage of the organisation can no longer hold the same way, and something more explicit has to take its place, or a gap opens between how the organisation believes it operates and how it actually does. The parallel with the conversion-rate example is precise: neither the planning model nor the cultural assumption was wrong when established. Both became wrong gradually, invisibly, as the underlying population and composition of the business shifted beneath them, with nothing in either process designed to flag the moment that happened.
This matters for how the “culture is eroding” symptom gets diagnosed. It is often read as a motivation or values problem — people caring less, or newer hires not sharing the same commitment as the founding group. The evidence suggests a different, less personal explanation is frequently closer to accurate: the mechanism by which culture was transmitted — proximity, direct absorption from the original group — simply does not scale at the rate the organisation is adding people, and nothing has replaced it. Nobody has stopped caring. The channel through which caring used to become shared understanding has been diluted past the point where it can do its original job.
There is also a timing asymmetry worth noting, the same one that appears in the conversion-rate example. The gap between an assumption becoming outdated and someone noticing tends to be long, because nothing about a slowly diluting culture produces an immediate, attributable failure the way a missed revenue target does. A forecasting error shows up clearly the moment results come in below plan. A cultural assumption quietly going stale shows up, if at all, as a diffuse sense that “things feel different now” — harder to pin to a specific cause, easier to attribute to something else entirely, such as the personalities of recent hires or a general, vague sense of growing pains that leadership assumes will resolve on its own with time.
For how this pattern presents in other kinds of organisation, see other sectors.
Questions worth considering
- What does this organisation currently assume about itself — about how decisions get made, what is valued, how people behave — that was true of an earlier, smaller version of the business, and has anyone checked whether it is still true now?
- How is culture actually transmitted to new joiners today, compared with how it was transmitted when the organisation was smaller — and has that transmission mechanism kept pace with the rate of hiring?
- If today’s newest cohort of employees were asked to describe “how things work here,” how closely would their answer match the answer the founding group would have given — and has anyone actually asked?
This perspective is part of Growth.
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