This blog is provided by the IPR Organizational Communication Research Center.
The Trajectory is Everything (for startups)
Small changes at the beginning of a journey can make huge differences in the destination. For startups, small, but important choices in the first two years can lead to more intentionally managed workplace cultures that either support growth or catalyze decline. Consider some of the companies whose cultures focused solely on economic growth for their founders and investors: WeWork, Uber, Theranos come to mind. How might their destinations be different had they made some modest, but significant commitments to growing sustainable cultures?
Innovation & Crisis
The years following the 2007-08 financial crisis saw a renaissance of startups. Airbnb was founded in 2008. Uber in 2009. WeWork in 2010.
Looking back at the rapid scaling of these companies and others, we see the positives and we also see the highly destructive outcomes. Witness entire industries revolutionized and our day-to-day habits forever changed. Also witness widespread workplace discrimination, harassment, and bullying, as well as countless other forms of unethical and reckless behavior.
It can feel all but impossible to separate your culture from your brand in a world where customers demand transparency into the companies they patronize and the social-media-activated voices of employees ensure they’ll have it (whether management wants that to happen or not.) A consumer study by Sprout Social revealed that 81% of people believe social media has increased accountability for businesses, shedding more light than ever on the employee experience. However, it should not feel impossible for startups to build a culture and brand that benefits both people and profit.
In 2021, our call to action is that we provide the groundwork for a new renaissance of startups, one that benefits both people and profit.
The Startup Achilles’ Heel
The startup ecosystem has an Achilles’ heel: a belief that office snacks, ergonomic furniture, and company values printed on tote bags and water bottles make for a great culture. Ironic, of course, because so much good has actually come from startup culture. And yet, this startup culture stereotype has replaced what once was a truly innovative reaction to starched and uniform corporate culture.
Company cultures need to be managed from the start, even when it’s just a founder or two and a few friends. A culture that exists solely to advance economic growth to the exclusion of all else will end in disaster. A more holistic culture, intentionally codified in values and leadership and designed to evolve, like its business model and talent pool, inspires loyalty and drives scale.
Unfortunately, the stereotyped startup culture to date repeatedly manifests itself in the same behaviors: not respecting employees, not valuing diversity, and putting the bottom line before ethics. When resources are limited, decisions are made quickly, and culture isn’t appropriately monitored. The most recent generation of startups proves to us that things can and do break down.
These actions (or lack thereof) result in employee burnout. In a study by CBI Insights of more than 100 startup postmortems, burnout was found to be a leading reason for failure. The study includes a quote from Uber board member Ariana Huffington who said, “The prevalent view of startup founders in Silicon Valley is a delusion that in order to succeed, in order to build a high-growth company, you need to burn out.”
Uber paid $4.4 million because of a workplace culture that allowed harassment and retaliation to go “unchecked.” WeWork paid $2 million in 2018 to settle a sexual harassment case and at present have other ongoing gender and racial discrimination suits. Airbnb has been involved in at least 230 legal cases, involving not paying taxes and providing unsafe accommodations for guests.
Travel, luggage and lifestyle brand Away, founded as recently as 2016, ended up in a December 2019 article on the Verge detailing patterns of bullying and public shaming by the highest levels of leadership. Electric scooter company Bird informed 30% of its workforce they would be laid off via 2 minute Zoom call in April. Everlane continues to face allegations of poor working conditions from customer service employees after founding the company on a brand of “radical transparency.” And most recently, Glossier, one of the most carefully constructed and managed brands of the last five years, has come under fire by employees who shared experiences of racism, anti-blackness and transphobia in stores, and the failure of leadership to intervene. The list goes on.
What happened in all of these startups? Each started with excitement and a vision to disrupt an industry but lost their way when they became hyper-focused on hyper-growth, investment rounds, monetary success, and public limelight to the exclusion of all else.
The post-2020 generation of startups can be different with the right scaffolding.
Employees deserve better treatment. Investors and consumers deserve better returns. And, young entrepreneurs should demand a better ideal without fear of consequence.
The Scaffolding for Growth
The recession and rebirth of the workplace amidst the current landscape of racial inequality and following COVID-19 will produce innovation, entrepreneurship, and likely a few startup giants. The suffering that brought collective consciousness with it can inspire entrepreneurs to build cultures that scale not just for singular economic benefit, but for holistic positive impact. Positive cultures will be not just a strategic advantage, but a non-negotiable characteristic to attract both customers and the talent to serve them.
Your company’s culture is not a “nice to have perk;” it’s the scaffolding for growth. And it will be one of the determinants for which startups survive the aftermath of the COVID-19 pandemic.
It takes investment, bandwidth, and resources to devote attention to human capital, leadership coaching, communication flows, and workplace culture. All are hard to come by when being as lean as possible is the conventional wisdom. Yet an engaged team, self-aware leadership, thoughtful communication, and an actively anti-racist workplace culture are the lifeblood of any venture. Employees will remember how leadership did or did not communicate with them in the pandemic. Or how quickly action was taken to acknowledge and then correct wrongs.
A New Strategy
To become the next generation of startups employees want and consumers deserve, startups need strategic resources to shape their culture. They don’t need them full-time, but an advisory network allows startups the partnerships they’re otherwise unable to meaningfully access. Engaging with external advisors, outside of a typical VC structure, provides startups with coaching on employee experience, human capital strategy, and leadership effectiveness. As the Business Collective puts it, advisors can also provide guidance for market-specific trends, managing a pivot, or overseeing an acquisition. Most importantly, external advisory gives startups a much-needed system of checks and balances on workplace culture.
Employers also need to find a balance between rewarding employee social media activity and discouraging it. The rising popularity of apps such as TikTok have proven the effectiveness of authentic brand awareness from “employee influencers.” The Financial Times reported on the rise of employee activism which makes a case for why celebrating influencers instead of silencing (or firing) them has stronger brand benefits. It is human to make mistakes and not see the long-game in high-pressure situations. However, it would be a missed opportunity for the post COVID-19 generation of founders to make the same mistakes as those who came before them.
As startups respond to the call to innovate through 2020 and build new systems to combat institutionalized racism, their new imperative is to do so in an ethical way benefitting employees, customers, communities, and shareholders. In that spirit, let us create a better world of work together in 2021, making smart and budget-conscious decisions in hyper-growth, without being blind to the advice we need to truly achieve business success for both people and profits.
Emily Goodson is founder and CEO of CultureSmart, a consultancy that helps startups scale smart and save money. She also regularly serves as an advisor to VC and PE firms on People + Culture initiatives.
Ethan McCarty is the founder and CEO of Integral, an employee activation agency serving leaders of Communications, HR, Marketing and Technology. Formerly the global head of Employee and Innovation Communications for Bloomberg LP and Global Director of Social Strategy for IBM, Ethan has more than 20 years of experience leading digital communications, engagement and marketing initiatives at scale.
Julia Race is the Director of Strategy of Integral. She is an organizational culture strategist and leadership coach with a background in brand transformation