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The Next Generation of Startups

Ethan McCarty is the CEO of Integral Communications Group, and a lecturer of Executive Education and Strategic Communication at the School of Professional Studies. He co-authored this article with Julia Race, Director of Strategy at Integral Communications Group, and Emily Goodson, Founder and CEO of CultureSmart.

Trajectory is everything (for startups)

Small changes in course at the beginning of a journey can make huge differences in destination. For startups, small, but important choices in the first two years can lead to more intentionally managed workplace cultures that either support growth or catalyze decline. Consider some of the companies whose cultures focused solely on economic growth for their founders and investors: WeWork, Uber, Theranos come to mind. How might their destinations be different had they made some modest, but significant commitments to growing sustainable cultures?

Innovation & Crisis

The years following the 2007-08 financial crisis saw a renaissance of startups. Airbnb was founded in 2008. Uber in 2009. WeWork in 2010.

Looking back at the rapid scaling of these companies and others, we see the positives and we also see the highly destructive outcomes. Witness entire industries revolutionized and our day-to-day habits forever changed. Also witness widespread workplace discrimination, harassment, and bullying, as well as countless other forms of unethical and reckless behavior.

It can feel all but impossible to separate your culture from your brand in a world where customers demand transparency."

It can feel all but impossible to separate your culture from your brand in a world where customers demand transparency into the companies they patronize and the social-media-activated voices of employees ensure they’ll have it (whether management wants that to happen or not.) However, it should not feel impossible for startups to build a culture and brand that benefits both people and profit.

As we approach 2021, our call to action is that we see a new renaissance of startups, but this time ones that benefit both people and profit.

The Startup Achilles’ Heel
The startup ecosystem has an Achilles’ heel: a belief that office snacks, ergonomic furniture and company values printed on tote bags and water bottles make for a great culture. Ironic, of course, because so much good has actually come from startup culture. And yet, this startup culture stereotype has come to stand in for what once was a truly innovative reaction to starched and uniform corporate culture.

Company cultures need to be managed from the start, even when it’s just a founder or two and a few friends. A culture that exists solely to advance economic growth to the exclusion of all else will end in disaster. A more holistic culture, intentionally codified in values and leadership and designed to evolve, like its business model and talent pool, inspires loyalty and drives scale.

Company cultures need to be managed from the start, even when it’s just a founder or two and a few friends."

Unfortunately, the stereotyped startup culture to date repeatedly manifests itself in the same behaviors: not respecting employees, not valuing diversity, and putting the bottom line before ethics. When resources are limited, decisions are made quickly, and culture isn’t appropriately monitored, the most recent generation of startups proves to us that things can and do break down.

Uber paid $4.4 million because of a workplace culture that allowed harassment and retaliation to go “unchecked.” WeWork paid $2 million in 2018 to settle a sexual harassment case and at present have other ongoing gender and racial discrimination suits. Airbnb has been involved in at least 230 legal cases, involving not paying taxes and providing unsafe accommodations for guests.

Travel, luggage and lifestyle brand Away, founded as recently as 2016, ended up in a December 2019 article on the Verge detailing patterns of bullying and public shaming by the highest levels of leadership. Electric scooter company Bird informed 30% of its workforce they would be laid off via 2 minute Zoom call in April. Everlane continues to face allegations of poor working conditions from customer service employees after founding the company on a brand of “radical transparency.” And most recently, Glossier, one of the most carefully constructed and managed brands of the last five years, has come under fire by employees who shared experiences of racism, anti-blackness and transphobia in stores, and the failure of leadership to intervene. The list goes on.

When resources are limited, decisions are made quickly, and culture isn’t appropriately monitored."

What happened in all of these startups? Each started with excitement and a vision to disrupt an industry but lost their way when they became hyper-focused on hyper-growth, investment rounds, monetary success, and public limelight to the exclusion of all else.

The post-2020 generation of startups can be different with the right scaffolding. Employees deserve better treatment. Investors and consumers deserve better returns. And, young entrepreneurs should demand a better ideal.

The scaffolding for growth

The recession and rebirth of the workplace amidst the current landscape of racial inequality and following COVID-19 will produce innovation, entrepreneurship, and likely a few startup giants. The suffering that brought collective consciousness with it can inspire entrepreneurs to build cultures that scale not just for singular economic benefit, but for holistic positive impact. Positive cultures will be not just a strategic advantage, but a non-negotiable characteristic to attract both customers and the talent to serve them.

Just as a snap pea vine will grow across the garden bed if it’s not trained up a trellis, organizational culture can be pruned or left to go to seed. Your company’s culture is not a “nice to have perk;” it’s the scaffolding for growth. And it will be one of the determinants for which startups survive the aftermaths of the COVID-19 pandemic.

Just as a snap pea vine will grow across the garden bed if it’s not trained up a trellis, organizational culture can be pruned or left to go to seed."

It takes investment, bandwidth, and resources to devote attention to human capital, leadership coaching, communication flows, and workplace culture. All are hard to come by when being as lean as possible is the conventional wisdom. Yet an engaged team, self-aware leadership, thoughtful communication, and an actively anti-racist workplace culture are the lifeblood of any venture. Employees will remember how leadership did or did not communicate with them in the pandemic. Or how quickly action was taken to acknowledge and then right wrongs.

A New Strategy

To become the next generation of startups employees want and consumers deserve, startups need strategic resources to shape their culture. They don’t need them full-time, but an advisory network allows startups the partnerships they’re otherwise unable to meaningfully access. Engaging with external advisors, outside of a typical VC structure, provides startups with coaching on employee experience, human capital strategy, and leadership effectiveness. It also gives startups a much-needed system of checks and balances on workplace culture.

It is human to make mistakes and not see the long-game in high-pressure situations. However, it would be a missed opportunity for the post COVID-19 generation of founders to make the same mistakes as those who came before them.

As startups respond to the call to innovate through 2020 and build new systems to combat institutionalized racism, their new imperative is to do so in an ethical way benefitting employees, customers, communities, and shareholders. In that spirit, let us create a better world of work together in 2021, making smart and budget-conscious decisions in hyper-growth, without being blind to the advice we need to truly achieve business success for both people and profits.

The views expressed are those of the author and do not necessarily represent the views of any other person or entity.