I spoke on a panel regarding Performance Management at early-stage startups yesterday, and there was a question from the audience that I’ve been mulling over since. The question was, “As a startup CEO whose company just raised seed funding and has a handful of employees, how much should I really care about fostering an environment where employees get feedback, professional development, growth?”
I didn’t answer this question, but probably looked aghast. (I have no poker face; everyone knows this about me.) Because to me, as a People person, focusing on making your team stronger and professionally fulfilled is a critical part of building a company. But, I also recognize, it’s not necessarily the goal for many. And it’s perfectly fair and reasonable to ask — is investing in people ‘worth it’, particularly for a CEO who has limited mindshare and a shitload of obligations?
Here’s my current thinking: it depends on the ultimate goal, and if the goal is to build a profitable, sustainable business, the question on making investments in people is a matter of when it’s worth it, not if it’s worth it.
(Allow me to make some vast simplifications here.)
Some entrepreneurs view the goal of their venture as solely getting to the destination — a lucrative exit and making a difference. Others view the goal as getting to the destination while enjoying the journey — creating a work environment where they and their colleagues love coming to work. And still others view the goal as: destination, journey, AND equipping their colleagues to become navigators of their individual own journeys — this is about creating a diaspora of talent who will later go on and do great things.
The types of entrepreneurs I like working with are the third kind, but that doesn’t mean the first two aren’t going to lead to great outcomes that investors are happy about.
For the “destination only” company, where everything is sacrificed in service of “the business”, you’ll be able to attract and retain employees if the business idea is so break-through and phenomenal that everyone believes they will make a ton of money at the end. Two companies that come to mind that were like this in the beginning are Uber and Rent the Runway. They were both billion-dollar ideas, led by strong personalities, and for the first few years, were anecdotally known to be pretty difficult places to work and attrition was high. In more recent times, they have each put more effort and resources in place to create a positive environment for its employees, including expanding benefits, bringing on an ombud, investing in People Ops (not just recruiting), etc. In these cases, the initial focus was to get the business off-the-ground, ahead of the competition, achieve market dominance, etc., and then later, when there was less of a sense of urgency and attraction/retention of employees became the rate-limiting-step, they invested in people. The presumed downside of this type of approach is that you’ll struggle to retain people, maybe even to attract them, unless you have a killer business idea and execution. And there might be self-selection of employee-type: those who care less about creating a culture of collaboration and where everyone elevates each other. This could lead to a vicious cycle that is hard to get out of. It’s really hard to change cultures after a company is established. But that’s the price you may have to pay if you wait to invest in people.
For “destination + journey” companies…well, I don’t know of any of these and suspect this is likely an interim step between the first and third types. And the third type –“destination + journey + navigation skills” — these are the companies that try to balance everything, which probably means making trade-offs across each, even deciding to invest in people ahead of the business at times. But you’ll end up with more loyal employees, a more supportive environment along the way, and hiring becomes a lot easier, which pays dividends down the line. Think of companies like Warby Parker, or Digital Ocean, or Ro. The presumed downside to this approach may be that you have to spend some time thinking about — or invest in a People leader to do this — what’s best for employees, commit time to communicating effectively, and listen to and respond to their demands. People are demanding, that’s for sure. And there may be opportunity cost expended on focusing on people versus the business. But I can’t think of any leader who has publicly reflected, “Shit, I shouldn’t have spent so much time developing or motivating my employees. I should have focused that time on the business instead.”
An analogue to this is life. When we’re young and naive, we care about getting to our highest point, our achievements. We don’t stop to smell the roses because we want to get ahead. When we’re older, we realize that life is not about the achievements, it’s about all of the things that happen in-between. An enjoyable life is one where you’ve had great shared moments, times to relax, laugh, and learn. So when you think about your company, which is it, and which do you want it to be?
Most likely, your business will fail. But that’s only if you define ‘failure’ as not having achieved the “destination”. Because I posit that if you invest in people, and can help them become their own navigators, even if the business idea fails, you’ll have succeeded in affecting change, in launching careers, and impacting the startup ecosystem.