Bad Startup Policies
Some policies create stakeholder value while others might destroy it.
There is a systematic flaw in how our startups are financed, evaluated, and perceived in practice. Perceived success of a startup in comparison with how these entities create stakeholder value. I often hear the idea that the best startups are managed the same way as any sports team is managed. But unlike sports teams, startups have no rapid and effective doping restrictions.
This is why I am noticing over and over that - startup teams close their eyes and run very fast following the voices of founders, but these founders live, talk, and guide their team to the vision of the future while teams have to operate in the present and need someone to steer their direction away from the break wall that the team is about to hit on full speed because their eyes are shut.
Uber’s refusal to provide benefits to drivers ($328 million settlement).
Stripe generates yields from customer funds placed on hold as the management team seems fit to meet the company’s credit risk policies even though Stripe does not provide credit to its customers.
Upwork charges fees to take client relationships outside of the platform based on the fees that the contractor would earn working for the client 40 hours a week for the full year but denies the contractors any benefits of a person employed by the company for the same period.
Amazon, Reddit, RedBubble, Twitter, and practically all other platforms have a practice of restricting users’ accounts for violations of unspecified terms without providing any ways to appeal.
I do believe that in each of the cases listed here, the company’s management enforces rules that destroy the stakeholders’ value and lead the company to future multi-million dollar losses as a result of lawsuits and settlements that could have been simply avoided if the management was seeking for criticism of their actions and plans. However, it is not possible in an environment that identifies criticism or skepticism as toxic to the team culture.
The common tone that I can hear in each of the scenarios listed is the sound of an unfair advantage that startup teams are attempting to create by establishing policies and procedures they need to scale existing operations. The team will, of course, support the good policy that protects the company’s profits. If later they hear that this policy or practice is unfair to the degree that playfully transitions to illegal activity, they will say that this is how they did business forever (i.e. during the 16-month lifespan of the company) and there were never any issues in the past. Everyone will continue to comply with absolutely senseless directives until the day they have to settle in court the class action against their customers (correction, ex-customers).
The characteristics of successful teams are perceived as drivers of their success and used in an attempt to reproduce the results
Until then, these policies are perceived as driving the team’s results although they are simply characteristic of what is typically being written by some successful startup teams. However, the characteristics of a successful team are not the same as the driver of their success. Startup had to first succeed and grow to the level when this policy became necessary and only then the policy is typically established.
I do believe that we need to be more thoughtful about the fairness of our systems, the legality of our policies, and the empathy towards those affected by actions we undertake to implement our processes.