Am I Crazy? A Guide to Dysfunctional Startups

When I interview for a new role, I expect to explain my varied work history in detail and to every person with whom I speak. While it certainly deserves some scrutiny, moving around in the startup industry has yielded unique insights into culture, mission, and what drives success.

What I’ve found is that dysfunctional trends are not always the result of intentional behavior or poor group dynamics. Rather, when influential parties are neutral or passive, the lack of positive leadership and good business practices leads to the same destination. There’s a quote along the lines of ‘not speaking up, is speaking up’ and that seems to apply here.

Whether it is worth avoiding dysfunction or not is a personal decision. It may be the case that through avoidance, what is left is success, but that approach seems too passive. If dysfunction is the obstacle, learning how to right that wrong may be a better payoff for some. Ryan Holiday wrote a phenominal book on the topic, entitled The Obstacle is the Way.

With this said, it is easier to identify trends that lead to dysfunction than it is to quantify indicators of success. The picture of success varies - some define it as customer satisfaction, while others point to exits, longevity, or achieving long-term company objectives. With the right tools, you can learn to confront dysfunction and find opportunity. While it may be difficult to identify success, we certainly all know dysfunction when we see it. It’s also much easier to complain and point fingers; none of which I aim to do here. It is my hope that I can create value and guideposts for others navigating their journey in the startup industry.

In this article, we’ll identify indicators and trends of dysfunction, which can also serve as red flags for applicants, and end each section potential remediation tools.

Two more brief notes —

  1. My assertions are supplemented with personal anectodes. While I know these are true, they are certainly biased and I would advise you to trust accordingly.
  2. Not all indicators are equal — strong correlative indicators and weak correlative indictors are expressed as such.

Indicators and Trends of Dysfunction

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I. The hiring process requires no reference check.

While I appreciate not having to exhaust my reference tree, this has consistently been a standout indicator of a dysfunctional startup.

Let’s objectively consider some of the reasons why a startup — a relatively small group of people where every addition has a major impact on the culture and potential for success — would skip an opportunity to speak with your former colleagues and managers.

  • Churn is high and they need people, regardless of quality,
  • They’ve failed to plan hiring needs and this role is reactive (related indicator — the job description will say you must be able to hit the ground running),
  • They’re too lean to pay adequately for your role and less willing to uncover a questionable work history,
  • The recruitment team is understaffed and stretched too thin to perform reference checks,
  • Value is not placed on culture, or there is no culture, in which case it really doesn’t matter who they hire.

Advice to Applicants: Ask to speak with employees off the interview panel, tour during the workday to observe the atmosphere and confirm the culture for yourself.

Remediation Opportunity: The path here is to take corrective action and simply start performing them. At a minimum, you’ll gain insights into the applicant’s work style, challenges, and management preferences. The ratio of investment to payoff is significantly in favor of payoff.

II. The Pay is Marketedly Low

Unless you are employee #2 or #3, you shouldn’t sacrifice base compensation solely to work at this company. But first, be cognizant that low pay may be related to your industry experience and not simply a function of the company paying you less than you deserve.

In the role I primarily undertook (IT Manager) between 2013 and 2018, in New York City, pre-covid, as a highly autonomous IC/general SME, at early-mid-stage startups with < 5 locations and < 100 employees, the base compensation was always between $95,000 and $120,000.

While interviewing at one startup (that really wasn’t doing any good for the world) and looking for exactly what I had done in previous roles. They offered $87,500 — not up for negotiation — and justified it by highlighting the potential to work for an exciting new startup. If the organization was mission-focused, there is a case to be made for sacrificing base pay, otherwise, who wants to show up to a place with 100 other people who are underpaid and overworked?

SIDEBAR

Working at a startup is not like working at other companies. Have you every gone on a hike in a forest? During that hike, how often did you abruptly turn off the path into the brush? Never? Why not? Most of us would say because it:

  • is full of brush and thorns which will cut you,
  • leads to nowhere, into the wilderness, the unknown,
  • is not conducive to survival, etc., etc.

Working at a startup is lot like turning off the cleared path into brush — could be fun, but not without sacrifice and high risk of discomfort. That sacrifice is going to occur everyday as you try to establish policies, procedures, good-ways-of-doing-things, and working with constraints such as no funds, no personnel, late work hours, industry/regulatory compliance measures, inefficient departments, and more. Do you want to do this on top of being underpaid?

END SIDEBAR

Advice: Be willing to work for less than a large company, but don’t accept their offer if it feels less than what you know to be fair.

Remediation Opportunity: This is a clear lack of humility. Expecting employees to sacrifice livelihood for the name of a company on their resume will spell disaster. Clearly exploring the trade-offs and finding creative ways to make up for reduced base compensation can alleviate this dysfunction.

III. Founder assumes role of CEO

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Out of the 10 true startups I have worked for:

5 startups had Founder as CEOs who acted in one or more of the following manners:

  • Questionable qualifications to run a business and execute a vision,
  • Exhibited petty, defensive behavior and responded to disagreement as it were a personal threat/challenge,
  • were invisible — entirely absent from company operations,
  • ruled with an iron fist that kept everyone on edge.

1 had a Founder as CEO who was a strong leader with business acumen, was able to establish a shared vision, and had industry knowledge/experience. He shared the leadership role, taking CEO in title only. It was the only startup I joined with an impressive, active board. The takeaway here is that he surrounded himself with knowledgable professionals and consider implementing a shared power structure.

1 startup had 3 founders who shared executive roles. This was clearly their personal agreement on how to split power as each one was severely unqualified to perform their function for a mix of the reasons outlined above.

1 startup had Founder as CEO who recognized when it was time to find a seasoned CEO and execute a transition. She was brilliant woman and it was easily the best company for which I had the pleasure of working.

2 startups did not have Founder as CEO.

Advice to Applicants: CEO as Founder is one of the strong correlative factors for of a positive or negative employment experience. You should be able to request 10 minutes with this individual — ask to speak with them, or ask people of different levels what they think of her.

Remediation Opportunity: Having a vision and executing a vision require different skillsets. Being realistic about your capabilities and playing a role that serves the vision, not yourself, is a strength.

IV. Artificially Inflated Glassdoor Reviews

I worked at a startup in mid-town that developed onboarding and training platforms for companies, an early stage LMS. It had 3 founders who took different roles, CEO, CTO, and Early Exit Through Buyout. The company had loads of 5 star reviews on Glassdoor in clusters spanning every 1–2 months. After joining, it turns out that after every monthly team meeting, a push to leave 5 star reviews on Glassdoor was common practice.

About 6 months into employment, they underwent massive layoffs and were bought a couple years later for pennies on investor dollars.

Specifically look at former employee reviews, but learn to distinguish the vindicative ones. Do you generally get the sense people on the inside are excited about the company? Is there high turnover? If so, why? What are they doing to address it?

Advice to Applicants: Look for anomalies in the reviews, but be conscious of developing an echo chamber. Use in-person discussions to endorse or deny reviews. Do not be shy to bring up a bad review to ask for a staff member’s take on it. Do be judicious in your choosing of which to bring up — choose a review that is well formulated and not one that shows signs of a simple vindicative review of a former employee.

Remediation Opportunity: Read the feedback and address it in-house. If you are consistent and well-intentioned, feedback will be left over time to counter the negative reviews. Avoid a quick fix here.

V. High Turnover or Senior Leadership Turnover

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High turnover can the strongest indicator of dysfunctional trends within an organization. It alone can convey the message that this is not a good place to work. You will know high turnover when you see it.

A startup with a clear mission can avoid high turnover for the same reason non-profits exist — a mission can supercede compensation, less-than-ideal working conditions, and overloaded work schedules. If you believe in the mission, if you identify with the mission, then you’ll be willing to contribute to it’s realization through thick and thin.

A company without a mission is like a flea market — people come in, look around, walk out. You spend so much time on flash that you’re unable to build something long-lasting.

A company with a mission is like a grocery store — people come in, look intently, consider alternatives, buy something. Hiring and onboarding is resource-intensive, without high turnover, you can focus resources on trying new things to evolve your business — self-checkout and different products.

If the company has relatively low turnover, but the executive team turns over — that’s also a great indication to get out. Decisions flow from the top — if the people who have direct line of sight to the source run away, then something is rotten. For those removed from the top, use team meetings to better understand executive sentiment. Do executives sound confident in the Town Hall meetings? Are they willing to go into detail and answer questions?

A positive, inclusive culture can be a powerful tool to combat churn. There are two startups that come to mind when I recall my personal experience. In one, the founders stood on a ladder in a crowded room to hold a phone up to a microphone while a celebrity congratulated everyone on becoming a force. In another, champagne was handed out while everyone held up a printed copy of the founder’s face on a stick when the announcement showed up on the news. Both were incredibly exciting, charged atmospheres. Everyone in those rooms were willing to do what it takes to further our shared vision. Not every aspect of the environment was conducive to this, but it was unmistakable.

Conversely, I interviewed at a startup that exhibited exactly this same atmosphere. However, the hiring manager was 10 minutes late to the interview and seemed annoyed that he had to speak with me. Our interview was interrupted by someone who seemed to be an intern with important news, for which he briefly left the room. The pay was marketedly below expectations. The excitement of the room was offset by the clear indications this is a bad place to work. Sure enough — they went bankrupt 2 years later while showing signs of it much sooner — and after their founder publicly antagonized a larger startup competitor (WeWork) for its founder’s mistakes.

Advice to Applicants: Try to understand the churn rate prior to joining. Ask what retention is like and what the company is doing to retain employees. The mission is what attracts talent, it’s what holds people together. It’s the common vision that supercedes all the daily, petty disagreements and disruptions. Ask 3 people what the mission is and see if it’s the same answer. Do you agree with their answer?

Remediation Opportunity: Culture and retention requires effort, all relationships do and a passive approach simply will not work. While it is easy to point at leadership when culture is lacking, you have to be the change you want to see at the organization. Form a social group, create a Diversity and Inclusion initative, try to effect meaningful change.

Working at a Dysfunctional Startup

Photo by Javier Allegue Barros on Unsplash

If you accepted a role, you may be asking yourself, “Am I crazy? Or does this make no sense?” If so, here are some indicators that you’re not crazy.

I. Employees are not trusted

Do you feel confident making a call here? Does your manager? Does your manager make calls that are frequently reversed or questioned?

This will often manifest as micromanagement or, more overtly, in policies that monitor employees, a low number internal promotions, and high turnover at the organization.

II. There doesn’t seem to be a plan

No process, procedures, nor plan. Things happen, sure, but it’s ad hoc. There’s a purchase here, an acquitision there, a new location — things tend to happen all of a sudden.

The environment will be chaotic with persistently high levels of stress. Most everything will be urgent and reactive as priorities are dictated by the environmental variables. The churn will be high at this organization.

III. Authority is not delegated

Similar to distrust, there is a long chain upwards to get anything done. You frequently find yourself held up without clarity on being able to move forward.

You’ll find all projects on extended timelines with most never completing. The buck will never stop here as everyone keeps passing questions up the chain.

Photo by Jim Strasma on Unsplash

IV. The reason for doing anything is “because the executive said so”.

Do you recall your parents telling you to do something “because they say so”? How often have you heard that since childhood? Never? Me too! Until I worked at a startup where directives required mentioning that the CEO just wanted it done. Everyone turned off the critical thinking portion of their brains, they forgot all their education and training — no matter how bad the idea was, they executed it.

It will be difficult to assume ownership over objectives as your ideas may be countered without warning and there is little payoff for taking the burden of responsibility. Conflicts and ‘things that don’t make sense’ will be rampant as the directives become a game of telephone from the top.

V. Teams are working in silos

An environment that lacks interdepartmental alignment can be likened to Game of Thrones — various factions playing political games to further their goals. Progress will become a pyrrhic victory or grind to a halt altogether.

To get anything done in a dysfunctional way will cost a significant amount of resources. This will become apparent to anyone involved in a project outcome.

What To Do With This Information

Dysfunction is a spectrum and all companies operate on it. Identifying it requires some time and reflection — akin to the personal development every adult should undertake to graduate from their current state. There are great stories of many companies identifying and overcoming dysfunction within their systems. Many begin with the same first step — identification.

If you can identify the problems, you can categorize and prioritize them. Tackling dysfunction with the same commitment that you’ve tackled your work will surely yield positive results for yourself, your colleagues, and the company as a whole.

Building IT infrastructure and teams where there was none before. Fitness, wellness, and adventure enthusiast. Consulting + more at dave-bour.com