HR in Startups and What Happened at Uber?

HR dilemma: How do you scale the culture of a startup?

Is it possible to scale the culture of a startup and not suppress risk-taking – the essential ingredient in building a disruptive business model and the next uniform?

Imagine you are the first HR professional at a new, fantastically successful startup. You notice two things. One: the amazing disruptive work this company is doing, enabled by a culture that embraces innovation and risk-taking. Two: a culture where people burn out regularly, and where reports of undesirable behaviour pile up without any action from leadership.

You want to keep the first thing and fix the second, but you know they’re connected. How do you do it? In other words, how do you scale the culture of a startup?

What does risk-taking look like?

Paying for the taxi

I run a startup, so I’ll give you an example that shows the problems we can encounter as we get larger and bring in people who expect the infrastructure to resemble a more established, less flexible company.

A few years back, I was on a business trip to Melbourne to close a $16,000 deal and I needed $200 to be transferred to my account for expenses. To my surprise that caused a big issue because, according to the new HR & Payroll person who was hired by one of the new investors and a director of the board, this was a very disorganised and messy way of doing business. They said to me that I should use my personal money and when I came back I could present the receipts to the accounts person and they would process them.

It would seem fine but there was one problem – I didn’t have money in my account. I was building a company that was growing rapidly. We had clients lining up to sign up for our product but I was still paying myself around $70,000 a year. I was living month-to-month.

So there I was in the airport arguing over taxi money so I could close a deal. It took 30 minutes on the phone to fix the situation and be able to go meet the client. Thankfully the delay didn’t cost us, and I closed the sale.

late nights and work-life balance

At some stage, we wanted to start to do more frequent releases (continuous development) and so we needed some of the dev team and one QA person to stay back late at night to manage the new release process.  It took me hours to convince one of the directors that we can do it with the core team.  His views were that we should hire a new set of R&D guys that would specialise in the late maintenance work.  That would’ve been a disaster for us because it was imperative that the people who write the code take accountability for it by seeing it released and working in the production environment, as opposed to “Oh well, it works on my development environment and so I don’t know what happened – it’s not my fault!”

I’ve been there before and I know that unless there is accountability on behalf of the dev team who creates the new code/features, we would end up in a very inefficient development process.  Inefficiency is the killer in startups – we’re all about creating new ways of speeding up the go-to-market strategy.

Eventually, I was able to convince him and have it my way and work out a flexible schedule that accounted for the 2 late nights a developer was doing, and in return offer them late starts and other compensations.  This created a work-life balance and at the same time, our production line remained supper efficient.

This is what getting larger often looks like. You go from flexibility to rigidity.

When the team is close-knit and all sharing a vision there’s an understanding that you’ll do what it takes to succeed. When you’re larger, that vision can get lost. People expect you to behave like the companies you’re trying to disrupt.

It sounds like a total negative but it’s not. The risk-taking culture of startups can have a downside.

A culture of bad risks

Isn’t this what happened at Uber? The founder Travis Kalanick built one of the most valuable private companies ever, yet he had to give up his dream job – the proud CEO of a successful company that he built from scratch.  All because his company’s culture allowed for completely unacceptable personal behaviour.

The first HR person that’s ever employed in a startup must just think, “Are you kidding me?  You guys are telling me that you’ve been doing this for the last 3 years and yet, no one got hurt and you don’t have 90 percent churn rate?”

But how many regulations can you place on startups without stifling innovations and without reducing their appetite for risk-taking?

Should HR turn a blind eye to some of the behaviour and risk-taking that goes on in their startup companies? Or should you just bulldozer everyone with a new set of rules for everything?

Remember, too much of a culture shock and you isolate yourself. Even if the board wants to do that, you’ll never succeed because you won’t get the support from the founding team.

Who are the relevant stakeholders here?

I think the first thing that HR person should do is to think about the different stakeholders they have to balance.

First, you have the Board, who want the culture to be perfect because they don’t want to expose their shareholder value to risks.  Also, they want the business to be tight, tidy and ready for capital raising, mergers or acquisitions. In other words, they want it ready for when a new investor is allowed to take an inside look at the company.

The founder(s) – they don’t mind the culture scaling, as long as those changes don’t stifle the company’s agility and ability to take risks. Don’t forget, they started the whole thing, and so they are responsible for these questionable habits. Which, on the one hand, were crucial during the early days of the company. And on the other hand, they are now causing issues and putting strains on the growth of the business.

The founding employees – this is the group of employees that the founders hire, and I would say they’re the ones who probably caused most of the controversies at Uber – well we know that Emil Michael was Travis’ right-hand man and he’s the one that caused the biggest controversy at Uber when he suggested that Uber could hire journalists and equip them with a 1 million dollar budget, in order to investigate and dig into the history of the media people who reported negatively on Uber . they are also the guys (and they were mostly guys) that helped the founders build the company.

Your founding employees are the first 20 or so staff members who worked directly with the founder(s) and built very close and trusting friendships with them. These guys will not listen to anybody other than the founder(s). They’re going to be a nightmare to manage and so the last thing an HR person wants to do is trying to have confrontations with them too early.

The rest of the employees. These are the new ones who typically report to the founding members as opposed to the founder(s) themselves and so they don’t have much direct friendships nor connections with the founders. They are the ones who are most likely to contact HR with complaints about unacceptable behaviour.

What would/did you do?

Please share your thoughts and experience by commenting below!

I would love to hear from an HR person who’s got thoughts on this or, even better, someone who has been amongst the first HR professionals at a successful and fast-growing startup.