When should a Startup grow up and act like a Business? 1

In the past, we have blogged about the need for Startups to grow up and start acting like a business (or small-business.) The recent investigation into failure of management, corporate governance at Uber is a case in point for Entrepreneurs and founders of Startups should watch and learn from.

The failure of workplace culture at Uber, a startup-turned-private company that pioneered ride-share, point to larger systemic issues here: startups that just refuse to grow up.

The background

Uber, a poster child for ‘sharing economy’ has grown exponentially during the past decade.  While growing, the company under Travis Kalanick continued to nurture an aggressive ‘startup culture.’ The workplace culture continued to be ‘homegrown,’ even after crossing a market cap of nearly $70 billion.

In February of 2017, Susan J. Fowler, a former Uber employee posted a blog (link) describing how she was sexually harassed and experienced gender bias during her time at the company. In her post, Susan claimed that her manager, who said he was in an open relationship, propositioned her and other female Uber workers for sex. On reporting it to HR, she was told that the manager in question would not be punished because it was his first offense and he was a high performer.

That blog prompted Uber’s CEO Travis Kalanick to announce a high-profile internal investigation led by Eric Holder, the former US attorney general.  On 13th June, the Holder investigation came back with a series of recommendations at Uber (link).

Lessons for startups

The investigation and Eric Holder’s recommendations have received a lot of media coverage. Many tech analysts and digirati are pointing to the ‘Silicon Valley culture’ as the root cause of the issues.  Just this week we blogged on the topic of  “Startup culture: The Gospel of Hard Work, According to Silicon Valley”

The wired magazine has an interesting feature on “The Gospel of Hard Work, According to Silicon Valley,” that describes how Silicon Valley still doesn’t care about work-life balance.

Another article highlights “Elon Musk’s secret to success” quoting Musk, who works up to 100 hours a week, saying “creating a company is almost like having a child … It’s almost like, how do you say your child should not have food?”.

This race to crank out new products and solutions should not come at the cost of one’s personal life and should be structured. A structured workplace is also key to attracting and retaining top-talent. According to research compiled from 3,800 small business leaders by Salesforce.com, growing small businesses prioritize talent retention at a much higher rate than large enterprise.

When should a Startup grow up?

There are endless debates on whether a Startup should be run as a small business. By running a startup as a Business or a small-business, the founders acknowledge that they are ready to seek help from specialists to lay down the foundation to grow a robust organization. Running a startup as a business will also help them focus on the basics and encourage them to think about the real value they are delivering customers. A few recommendations from the Eric Holder report include:

  • Addition of more independent board members, an independent chair of the board, an oversight committee, and using compensation to hold senior executives accountable
  • Better Human Resources Systems and Training – The report called for Uber to make sure it had good tools in place to track employee data, including complaints
  • The Complaint Process – In particular, the report called for a “a robust and effective complaint process.”
  • Mandatory leadership training for executives, human resources training and manager training.
  • Cultural Values – Responding to criticism of a generally toxic environment at Uber, the report urged the rewriting of the company’s written cultural values to “reflect more inclusive and positive behaviors.”

Bottomline: Uber is an example of a startup that just refused to grow up. Startups need to learn from Uber’s missteps and try to avoid them by growing into a ‘business’ as soon as possible.

Other links and references:

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