When news broke early in 2016 that Parker Conrad, the founder and
former CEO of “unicorn” startup Zenefits had built a macro to help his
sales reps avoid the mandatory training to get their insurance license, it
was easy to understand why the company was in turmoil.
From day one, he created a culture focused completely on doing
whatever it takes to win, all ethics and morals aside. Further stories have
been reported about the company’s culture of drinking, sex in stairwells
and all sorts of crazy behaviour that involved huge amounts of money
and social irresponsibility. And it all started with 1) the founder and 2)
the team he built around him and 3) his attitude towards company
culture.
David Sacks was, until recently, Zenefits’ new CEO. He was hired by
the board to turn the ship around, which he’s since done. Putting all of
that aside, the stories and scandals coming out about Zenefits really got
me thinking about culture — and two points specifically.
First, how it all starts and ends with the founder, no excuses, no
exceptions. And second, how hard it is to change course once you’ve
achieved some sort of critical mass in terms of headcount.
The culture of a startup is really born from how the founders views the
world and what they will or won’t sacrifice to grow. A lot of it has to do
with their upbringing too. What were they taught by their parents? How
straight is their moral compass? What do they believe to be true about
competition and winning? What does being a founder mean to them and
is it all about the money, or is it about building a legacy that outlasts
them? Will they hire someone who is functionally great, but morally
bankrupt? Etc.
It really boils down to one simple statement: all businesses can grow in
one of two ways — the right way or the wrong way.
When you make sacrifices in the right way, you do so with integrity and
honesty. For example, you might sacrifice time away from your family
to open a sales office in another country. Or you might sit through
dozens of interviews to find the perfect person because you won’t
sacrifice your hiring standards. Or you might pull endless midnight
shifts to make sure your next product release is perfect.
Those are all examples of good sacrifices.
So what about making sacrifices in the wrong way? Well, that’s when
you “interpret” the law in your own way. You live in the land of make
believe and focus on revenue (not profit) growth at all costs, assuming
you’ll just continue to raise money from investors who are happy to
keep pushing the idea of profitability out in exchange for market share -
“it’s a land grab!”, they tell you.
You treat people as numbers, cogs in your wheel to get ahead no matter
what. When you’re done with them, you replace them. You don’t place
too much emphasis on culture because, fuck it, “that doesn’t matter
here”. And you don’t worry about your reputation because once you sell
your startup for $100,000,000,000 you won’t give a shit what people
think of you.
You’re all about that fuck-you-money, baby.
The founder with the correct moral compass tends to make the right
decisions and hire the best people early on — good, honest and
hardworking people like them, who see the world in the same way. This
sets the tone for everything moving forward as they start to experience
growth and some sort of success. They take pride in their reputation and
their integrity and want their name to stand for something. They want
their kids to be proud of them not because of the money they make, but
because of the positive impact they’ve had on the world.
They don’t tolerate liars, cheats and people who are only in it for
themselves. They are selfless and put their employees and customers
ahead of everyone else — including themselves, their investors and
their board.
They want to go to bed at night with a clear conscience, even if that
means growing a little bit slower and in a way that’s a little more
controlled.
These are the traits of the best founders I know. And these are people
running companies which collectively generate billions of dollars in
annual revenue. They all work hard, are honest people and shake their
heads when they hear about the Zenefits story. Because they know from
experience, there’s a completely different way to grow a business.
Founders who are primarily focused on the money or the short term tend
to take the view that nothing but growth matters. Ironically, though, the
best way to grow is to hire people who share the same views on the right
way to win — as a team, honestly, with integrity and while serving
customers so amazingly well that they tell everyone about you.
If your foundation is solid and you’re lucky enough to get past
product-market fit and into the getting ready to scale or scaling phases
of your business's growth, it’s 1,000 times easier to make that transition
when the team you’ve hired is full of genuinely good, helpful people
who care about your customers like they’re family.
When you experience that, it’s magic. Everyone pulls in the same
direction, based heavily on the voice of the customer. They support each
other and help out where they need to. When someone tries to take a
shortcut or cheat, they’re called out not by the founder, but by their
peers.
The culture takes on a life of its own because the founder made the right
kind of sacrifices early on. They didn’t lie, cheat, break the law or take
dishonest shortcuts. They put in the work, hired the people and never put
revenue ahead of their honest intentions.
That’s the kind of culture that makes a business great from day one and
continues to keep it great on day 10,000. And it all starts and ends with
the founder.