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Hill88 helps corporates engage with the Silicon Valley startup ecosystem, and helps early stage startups scale to sustainability.

Avoid the Corporate Disease

All startups fear becoming too “corporate”.   Like a frog being boiled to death by a slow rise in water temperature, this can happen right before an entrepreneur’s eyes without warning!    Here are the key disease markers to avoid – and how to detect them.

HR

“We need a quarterly employee review system,” an executive recently advocated at a startup’s weekly strategy meeting.   At the time, this comment really rankled me, but I didn’t know why.  After all, I am a big advocate of Process and Procedure (see my previous blog), even in early startups.      But something bothers me about the whole concept of “Human Resources”.    I can see how this department serves a valuable purpose in a large company, but in a sense, by creating an HR department, you are shifting responsibilities that every manager and founder should continue to own for as long as possible.

  

  

Take performance evaluations.   Most corporates practice an annual ritual of managers (with perhaps some input by the employee and his/her peers) filling out a form and then presenting it to their hapless target.    Some corporates do this on a quarterly basis.    Nobody enjoys this ritual.

How does an early stage startup assess performance and provide feedback?   Continuously.  There is so much overwhelming work to be done, the team can’t afford to employ “fence-sitters”.  Similarly, the budget is small, so action is taken quickly if expected results are not attained.    In a startup, the team is continuously self-evaluating and self-correcting.    This “in-the-moment” feedback process can be messy and emotional, but for an individual, the feedback received from the team in this manner is both valuable and impactful and builds lasting relationships.   No form or management process could ever do the same.

By all means – out-source those HR posters, payroll calculations, and benefit packages.   But keep the essential means of resource management distributed among the team for as long as possible!

Complacency

The joke in Silicon Valley about Corporates is that they are all dinosaurs – slowly chewing their food, oblivious to the changing environment, staying in place for most of the day, while the startups flitter (and admittedly, die) around them.      What makes corporates so slow?   The main reason is that they are not staring at an impending abyss – like a startup.    Generally, startups have funding for a year or less and a plan with a set of overwhelming objectives (i.e. “set up supply chain from scratch to source 10,000 units within 6 months”) that can prove to investors that they are worth the investment for the next stage of fundraising.   

Employees at corporates, on the other hand, can take heart in the assumption that their company will continue to exist for several more years – even decades.   They have quarterly objectives, and a boat-load of KPIs (Key Performance Indicators), but smart managers know how to make these measures look good – no matter the actual pace of progress.  

If you’ve ever climbed a mountain you’ll know that staring into an abyss will clearly focus your mind – making every step count .   Startups do this on a daily basis!

But complacency can creep in – even in a startup.    One cause can be the level of funding.    If your startup is enjoying some early success, or part of a heavily hyped industry, your fund-raising may be oversubscribed and you have more money than you need.    That may seem like great news – but it removes the abyss from the equation.   With more money,  you can afford to do multiple experiments – losing focus.   Or you tell yourself that you can now stretch your expenses for a longer period, perhaps even eliminating the need for future funding rounds – you can relax and develop your brand – and lose focus.

Another source of complacency is an the lack of accountability.    Corporates are full of imposed decisions, from the type of laptop you will be using to the engineering assignment you will be performing – some corporates even have KPIs that measure your productivity in lines of code!    Do you still feel accountable to complete your objectives if your cheap laptop conks out?     What if you come up with an ultra-elegant and efficient algorithm that completes your assignment early – your manager only cares about lines of code.    Over time, the engineers become coal-miners, just showing up each day to “shovel the coal”.

As I explained in a previous blog (Founders vs. Owners) as a startup grows beyond early stage, founders need to work hard to push decision making to its newly hired staff – i.e. make everyone an owner of the emerging corporation.    Without this work, decisions could continue to be handed down from the top – fueling lack of accountability and thus, complacency.

Politics

As a corporation becomes dominated by process and complacency, the performance-oriented culture breaks down.  Corporate politicians fill the vacuum – these are the employees less motivated by helping the corporation succeed and more motivated by gaining personal power  and promotions.     As politics dominate a company. people start watching what they say in meetings, and ever so gradually, a “troika” emerges that takes the key leadership positions.  Time to shovel that coal, but make it faster than last month, remember those KPIs….

The rise of politics in a startup can be tough to notice – after all, everyone is so outwardly friendly and positive to each other – we all believe in the mission!    And founders can feel they are so loved and respected – nobody ever seems to raise a criticism – i.e.” we have created a happiness nirvana”!   Be careful in that assessment – all of the above are symptoms of an emerging political culture.

In a performance-based culture, there should always be a certain level of differing opinions and dissatisfaction with the status quo.   Founders are visionary but like every human being, are often wrong.    A certain messy dialog should constantly be emerging - voicing dissatisfactions, brainstorming ways to improve, and disagreeing with prevailing opinions.     If all is quiet, be very worried.    People are beginning to watch what they say!

What about those employees that really seem to “get it”, i.e. they are always agreeing with you and full of positivity.   Be careful, those may just be your biggest political operatives!  

 

 

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