I had an opportunity to witness two distinct cultures in action in my personal life this past week. I am in the Tampa Bay area of Florida. Like most mid-market cities there are several startups and rising companies throughout. I have friends at two that have had events transpire as of late that had two completely different outcomes and I wanted to share my observations.
One company that is located here is backed by VC’s and has been growing rapidly. They have a great culture from how I understand it. Very laid back, treat you like a friend and encourage all team members to go beyond their own role to take on more responsibility.
My friends who work there always talk about the company with pride and enjoy working there. The CEO is a thought leader in the community and can cut to the core of what is needed to accomplish the job.
In my current role, I also use this company as a customer. They provide data on prospects from several databases. It is not unique as there are many in this space, but they provide an excellent customer experience and the data is usually accurate.
Last week we were told that we would no longer be able to access the application. I reached out to my friends and it was the worst news you could hear.
The company was not able to secure another round of funding and they had to close their doors.
This happened basically overnight. They were brought in on a Tuesday told the bad news and sent on their way.
My first reaction is that the folks who worked there would be bitter about the company and the way they were let go. That could not be further from the truth.
Are they out of jobs? Yes. Do they need to scramble to pay bills? Yes. However, they also felt like they were a part of something bigger than themselves.
President Theodore Roosevelt famously spoke about the man in the arena, “The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming….”
These folks were in the arena and were honored to have strived. They spoke positively of the company and its CEO, realized sometimes you lose and looked at the opportunity to learn as a valuable experience.
In my opinion life is about balance. In the same week as the above news broke I had some friends at another company I am familiar with share some news.
This company is no longer a startup; I would call them a rising company. No VC backing, the CEO started with his own money and they have been profitable through customer acquisition for some time. (I realize if you are in Silicon Valley you may find the concept foreign, but it does still happen.) This company started out with a great culture. Awesome offices, snacks and coffee, smart folks to work with. From the outside looking in it is very desirable.
This company has been on the decline with sales in recent years. It could be the industry it serves or that the products haven’t adapted to the needs of the marketplace.
Speculation from my friends has ranged as they truly believe in the company and its founder. He is a thought leader as well, spends a lot of time with Richard Branson and other luminaries, and is extraordinarily intelligent.
However, sales have been down and it has caused strain on the company.
They recently released the new comp plan for the sales team.
We could discuss how releasing a comp plan in month five and making it retroactive to January is a problem, but that’s not the point of this post.
The team was excited to hear what the new plan would be as some of the teams hit and surpassed their goals last year and figured they would be honored for that.
This could not be further from the truth. The new comp plan essentially cut their income by as much as 30%.
Now the average income for these folks was between $100,000-$150,000 annually. 30% is a huge cut and most may not be able to absorb that. Six figure deals that would bring in commissions of five figures dropped in some cases to the hundreds in commission earned on that deal. I’ll let that sink in for a moment. What’s the incentive to work!
The reaction from my friends there was as expected. They felt betrayed.
This company strives in being inclusive, expecting hard work from the team and tries to create a fun atmosphere.
These folks are invested, they love the company and the friends.
However, when you sign on and are told that you will make X amount and the company flips that on you halfway through the year it causes issues.
I cannot imagine how you would expect a great effort out of team members who feel betrayed and are now worried about paying bills.
I realized that higher pay didn’t equate to a better job fit for me. I do know that at the end of the day, life is so much richer than the number on your tax form — and that’s a lesson that’s priceless.
Not that there is anything wrong with financial success.
Schweitzer Engineering Laboratories, a manufacturer of sophisticated equipment for the global power industry based in Pullman, WA, solved its people problem internally.
While others outsource, Schweitzer goes DIY. While others establish a tightly focused definition of work history and skills they’re looking for, Schweitzer focuses on fundamentals: “I like to hire smart people with good values and strong fundamental education,” says founder Ed Schweitzer, who started the company in his basement 35 years ago. Today, it employs just over 5,000 and has revenue of nearly $1billion.
Schweitzer also set the company up as an ESOP, meaning it’s employee-owned.
Even in Silicon Valley, maximizing financial success isn’t everyone’s preferred road, like Craig Newmark — the Craig in Craig’s List.
“Basically I just decided on a different business model in ’99, nothing altruistic,” he said. “While Silicon Valley VCs and bankers were telling me I should become a billionaire, I decided no one needs to be a billionaire — you should know when enough is enough. So I decided on a minimal business model, and that’s worked out pretty well. This means I can give away tremendous amounts of money to the nonprofits I believe in … I wish I had charisma, hair, and a better sense of humor,” he added in a completely deadpan voice. “I think I could be far more effective.”
When enough is enough.
A quaint concept by today’s standards.
Read the stories.
Think about them.
Then create your own definition of success—what you want, not what you’re supposed to want.
It’s amazing to me, but looking back over more than a decade of writing I find posts that still impress, with information that is as useful now as when it was written.
Golden Oldies are a collection of what I consider some of the best posts during that time.
Money. Everyone’s favorite subject that no one wants to talk about. Especially when it comes to work, as in, “what were you making previously” and “what are you looking for now?”
Tomorrow’s post focuses on a new law enacted in Philadelphia and New York City that has the potential to change that entire, unwanted conversation, forcing managers/companies to focus on the future, as opposed to history.
In a post last week I asked for opinions on the ideas presented in a series of articles in Business Week on managing smarter but especially one that claims that “treating top performers the same as weaker ones is ‘strategic suicide’” and said I would add my thoughts in a future post.
Bob Foster left two interesting comments (well worth your time to click over and read). Regarding pay for performance he tells the story of a company where everybody from the CEO down all quit.
“Taking on the task to salvage the company, I hired new people that met unusual qualifications: they had to be qualified for the job they were applying for; they had to be unemployed and available immediately; they had to work at sub-standard wages; they had to work while knowing the company could close at any minute; and they had to work without supervision. The team that came together produced a highly successful company, and it was not because of high pay, or performance bonuses (there were none). The team stayed together, and performed, because of mutual respect, trust, appreciation, and consideration—people were ‘valued.’ To me, this is the truest form of ‘pay for performance.’”
I agree that trust was one of the key ingredients in what Bob accomplished, but it wasn’t the only one—or maybe I should say that it needs to be based on fairness and honesty.
Bob says the pay was ‘sub-standard’, but I assume that it was universally sub-standard relative to position and experience. If he had chosen to pay part of the team, say 10% more than their peers, the team wouldn’t have coalesced.
And that is exactly why I disagree with the idea of paying top performers, AKA stars, big sign-on bonuses or higher salaries than their peers.
Based on my own experience, 98% of star performers become stars as a function of their management and the ecosystem in which they perform. Change the management, culture or any other parts that comprise that ecosystem and the star may not survive.
Just as a chain is as strong as its weakest link there is no star in any sport, business, media, etc., who can win with a team that is subject to constant turnover and low morale.
Consider this common example.
Two people are hired at the same time with the same background, same GP0 and similar work experience, but with the one exception. One graduated from a ‘name’ school and the other from a community college. Starting salary is $50K, but the manager adds a 20% premium to the first candidate’s offer on the basis that she must be better to have gone to that school.
Neither candidate lived up to their potential because the manager made poor choices. In doing so he set both up to fail but for different reasons; one thought she had it made and the other that he was low value.
Merit bonuses fairly given for effort above and beyond acceptable performance levels make sense as long as they don’t come at the cost of developing new talent.
But one problem with ‘pay for performance’ is the pay often comes before the performance, but there are others and I’ll discuss them more Thursday. In the meantime, here are links to five posts from 2006 that give more detail on the trouble with stars.
Originally published in 1957 and now back in print to celebrate its fiftieth anniversary, The Hidden Persuaders is Vance Packard’s pioneering and prescient work revealing how advertisers use psychological methods to tap into our unconscious desires in order to “persuade” us to buy the products they are selling.
A classic examination of how our thoughts and feelings are manipulated by business, media and politicians, The Hidden Persuaders was the first book to expose the hidden world of “motivation research,” the psychological technique that advertisers use to probe our minds in order to control our actions as consumers. Through analysis of products, political campaigns and television programs of the 1950s, Packard shows how the insidious manipulation practices that have come to dominate today’s corporate-driven world began.
It was considered highly unethical and, although there was no social media to spread the word, people were vocally upset enough that many companies stopped doing it.
Gone but not forgotten.
The behavioral social science behind Hidden Persuaders continued to grow and became a driving force underlying the deliberate addictiveness of video games.
Uber helps solve this fundamental problem by using psychological inducements and other techniques unearthed by social science to influence when, where and how long drivers work. It’s a quest for a perfectly efficient system: a balance between rider demand and driver supply at the lowest cost to passengers and the company.
Employing hundreds of social scientists and data scientists, Uber has experimented with video game techniques, graphics and noncash rewards of little value that can prod drivers into working longer and harder — and sometimes at hours and locations that are less lucrative for them.
Is it ethical to manipulate a workforce to produce more work at less cost to their non-employer?
Of course, Uber and “ethical action” seems an oxymoron, but psychological manipulation does appear to be on the uptick in many companies.
This article should be required reading for anyone who works in the “gig economy” or is thinking about doing so.
Only this time it’s Tesla and she still works there; not only works, but loves her company.
“Until somebody stands up, nothing is going to change,” she said in a recent interview, her first comments about a discrimination lawsuit she filed last year. “I’m an advocate of Tesla. I really do believe they are doing great things. That said, I can’t turn a blind eye if there’s something fundamentally wrong going on.”
Tesla’s response was hilarious, in as much as it parroted almost word-for-word the Valley mantra.
“As with any company with more than 30,000 employees, it is inevitable that there will be a small number of individuals who make claims against the company, but that does not mean those claims have merit”
Whoo hoo. Doesn’t that just give you a warm, fuzzy, confident feeling of trust?
Things were better for women 30-40 years ago. What happened?
When Silicon Valley was emerging, after World War II, software programming was considered rote and unglamorous, somewhat secretarial—and therefore suitable for women. The glittering future, it was thought, lay in hardware. But once software revealed its potential—and profitability—the guys flooded in and coding became a male realm.
Now look a bit further and think about the industries notorious for their bad treatment of women.
Wall Street/financial services. Law. Doctors. University-level teaching. Architecture. Chefs. Construction and journeyman crafts. I can keep going.
What do they have in common?
Follow the money.
White and blue collar = high pay.
Pink collar = low pay.
Money means freedom. Freedom to choose. Freedom to walk — from a job or from a relationship.
Put another way, money means control.
The more money you have the more control you have over your world — whether for good or for evil.
So maybe control is the real root cause.
Men (some, not all) need to control women, AKA, mom…
Poor, insecure, little guys.
Trying to change their past by taking revenge on the present and, in doing so, damaging the future.
A Friday series exploring Startups and the people who make them go. Read allIf the Shoe Fits posts here.
Tuesday I cited a post by Scott Belsky on Medium talking about how employees are often conned (my word) by founders, especially unicorns, when it comes to the wealth that is supposed to flow from their ISO.
As pithy as the post was, some of the comments were even pithier. I especially like this one from colorfulfool (21st comment)
If profitability were proportional to hypocrisy, there would be no failed startups in the Valley.
Not just true, but succinctly and elegantly stated.
Founders love to talk about the importance of transparency, trust and authenticity.
However, their stock plans and pitfalls thereof exhibit such a high degree of opaqueness and caveat emptor that they kick a hole the size of Texas in the fabric of the founders’ authenticity.
Another prevalent piece of hypocrisy is “change the world.”
Do you really believe that another dating app or being able to evaluate a new restaurant or a better way to buy your groceries will change the world?
While they may impact one’s personal world, they certainly don’t have the impact of something like Mine Kafon.
What is proportional to the Valley’s hypocrisy is its sheer greed.
Actually, when I stop to think about it, the greed probably exceeds even the hypocrisy.
What if paying workers more, training them better and offering better opportunities for advancement can actually make a company more profitable, rather than less? “Efficiency wages” is the term that economists — who excel at giving complex names to obvious ideas — use for the notion that employers who pay workers more than the going rate will get more loyal, harder-working, more productive employees in return.
Ford astonished the world in 1914 by offering a $5 per day wage ($110 today), which more than doubled the rate of most of his workers. (…) The move proved extremely profitable; instead of constant turnover of employees, the best mechanics in Detroit flocked to Ford, bringing their human capital and expertise, raising productivity, and lowering training costs.
However, these days, money isn’t everything. People want more challenges, more ways to grow and better career opportunities.
“We realized quickly that wages are only one part of it, that what also matters are the schedules we give people, the hours that they work, the training we give them, the opportunities you provide them,” said Judith McKenna, who became chief operating officer in late 2014, in a recent interview. “What you’ve got to do is not just fix one part, but get all of these things moving together.”
“Quickly?” Considering the years of complaints, falling sales and stock price I’m not sure “quickly” is particularly accurate.
Just think. People who earn more money have more discretionary money to spend.
Rocket science? No, just logic.
But making your company look like a hero for paying people $18K a year definitely is rocket science.
Penny Kim is a marketing professional who relocated from Dallas in July to work for WrkRiot (formerly known as 1for.one and apparently also known as JobSonic) for $135,000 a year plus equity and a $10,000 signing bonus for relocation expenses,
It ended with her dismissal in August after she filed a complaint with the Division of Labor Standards Enforcement over failure to properly pay her
If you wonder whether she’s just another disgruntled employee, she’s not.
Not when the CEO gives everyone faked documentation of wage payment.
“Thursday, August 4th was D-Day … That afternoon in the office, Michael emailed each employee a personalized PDF receipt of a Wells Fargo wire transfer with the message: ‘Here is the receipt. It has been calculated for the taxes on your semi-monthly salary and signing bonus. The money is arriving either today or tomorrow. I am sorry about the delay.'”
But the receipts were fake.
Al Brown, former CTO and one of the founders, confirmed much of her account, even the most outrageous accusation: The CEO she dubbed “Michael,” whose LinkedIn profile identifies him as Isaac Choi, gave employees fake receipts for money wire transfers to convince them the company had paid their back wages when in fact it hadn’t.
Not even a good fake, since the photoshopped receipts said 2014.
Even after that two employees lent the company an additional $65K.
All told, Choi burned through $695,000 (his own initial $400,000, Brown’s $230,000 and the borrowed $65,000) in less than a year.
A comment on Hacker News should serve as a bona fide caveat emptor for everyone in the global startup world, not just in Silicon Valley.
“Welcome to the club. It’s pretty much a rite of passage here to spend some time with a psychopath VC, a completely self absorbed CTO with a rich investor dad that fuels his fantasies, or an idiotic CEO with an ego problem, and to pay the price for it (just time if you’re lucky, time+money if you’re not).”
This isn’t a warning not to join, just a note to do so with your eyes open.
There’s a reason it’s called “due diligence” and it’s as much for employees as it is for founders and investors.