Imagine you haven’t cashed a paycheck in months, and suddenly your startup is offered a route for seemingly easy money. Even if it’s not entirely ethical, what would you do?
By Heidi Roizen (Operating Partner, DFJ)
At about 6 a.m. on an otherwise uneventful morning, the fire sprinklers in T/Maker’s stockroom went off for no apparent reason, destroying almost everything in the room.
The timing could not have been worse. We were on fumes financially -- pre-VC and bootstrapping by a razor thin margin. The latest update of our product was in beta, but it still had over 20 significant bugs so it was not shippable. Even worse, news about the new release had already leaked, so sales of the prior version had dried up. Every member of our team -- myself included -- was spending most nights and weekends at the office, testing and squashing bugs, and my cofounder Royal Farros and I had not cashed a paycheck in months. It was all wearing very thin.
What a mess. The inventory had turned to mush and the artwork for all our recent ads and brochures was also destroyed. I remember to this day how miserable I felt standing there with water still dripping from the vertical surfaces, the smell of wet paper and humidity filling the room.
We called the landlord, who assured us all would be fine. He said all he needed was a spreadsheet documenting our loss with the value of the items destroyed and his insurance would write us a check pronto. We were damp, but relieved.
We set about to calculate the losses. The retail price of the software, when combined with the cost of creating all the art masters, could easily justify our claiming $150k in damages.
This disaster was starting to look like a gift from sprinkler heaven.
But Royal and I knew that the destroyed products were the old, soon-to-be-obsolete versions. And all those art masters, they were for the old product too. Truth be told, it was all pretty much worthless even before the downpour.
We pow-wowed about what to put on the spreadsheet. The landlord did not seem to care what we asked for because he was insured. The money would be hugely helpful. What harm would it do to inflate the value to retail?
But we knew that that would be a lie.
And more importantly, every other employee would also know it was a lie.
So we told the truth to the landlord, and hoped that our honest deed would in turn make him more lenient about an upcoming lease renegotiation (which I believe it did.)
Why did we forego the easy money?
Because, if you lie about anything in front of your team, what does it say to them about how they should behave when faced with their own dilemmas?
To me, it says, lying is okay. Go ahead and steal a hard drive if you need one for your personal use. And take your friends out to dinner and charge it as a business expense for a client who wasn’t even in town. We cheat, so you can too.
We did not want to run a company where cheating was a way of business. So we told the truth.
And that leads me to the promised single rule about building your company culture:
Your actions are all that matters.
All the fancy office furniture, designer juice bars and and swinging vodka parties don’t really matter. It’s been proven time and again that even direct compensation matters only to a point (and even then, fairness is more important than absolute dollars.) All that stuff is nice, and makes life more pleasant, but it does not change the core of who you are as a company.
How you act -- and how you reward or punish the actions of others -- will determine how everyone else in the company will act. And that in turn will set the culture -- honest or cheating, respectful or disrespectful, friendly or mean, trusting or mistrustful.
And it isn’t just you. If you are an open collaborative leader, but you have a direct report that you “use” to do your unethical, back-stabbing dirty work, your culture will be infected with that — because you, as the leader, condone that behavior by allowing it in your company. It’s on you even if it’s not directly you -- no one is fooled.
As your company grows, you have to strive to communicate, manage to and act on your values and ethics, because if you allow them to be morphed by a department or isolated office, dangerous sub-cultures can be formed. I’ve seen more than one startup end up in a world of hurt because the founder decides, more or less, “I don’t want to know what the sales VP is doing as long as he makes the quarter.”
While this rule is incredibly simple, following it can prove to be very difficult. I’ve made my share of mistakes and learned over time how painful those could be. I also kept people on the team and rationalized their belligerent behavior or ethical transgressions because I thought they were too important to lose. In the end, I can’t remember a single situation where I was glad I did so. I learned the hard way.
As you head into entrepreneurial battle today, here are some thoughts to keep in mind as you make the countless decisions that go into building your startup:
- Is this decision consistent with my values?
- If my team had complete visibility into this decision, would they believe it aligns with our company values as well?
- If not, is there another decision I could make that would be consistent with our values? Which cost is ultimately higher?
- If we are living with a transgression, how can we fix it? How can we learn from what happened to prevent such an issue arising in the future?
- If someone in our company is not being consistent with our values, can I get that person to change? If not, is it worth the infection of our culture to have that person on the team?
What’s one rule you live by in building your own company?
This article originally appeared on Heidi's blog, Heidi Roizen's Adventures in Entrepreneurship!
About the guest blogger: Heidi Roizen is Operating Partner at DFJ. She co-founded T/Maker before joining Apple and then Mobius Venture Capital. A Stanford educator, she is on the boards of TiVo, DMGT, Eventful, ShareThis and XTime. She serves on the advisory boards of Springboard Enterprises and the National Center for Women in Information Technology.