People First

On Friday, Matt Blumberg from Return Path came to talk to a group of First Round portfolio companies on scaling your organization from a management perspective.  Many of our companies are at the stage where they have only one person, if any, in each functional area—and many areas are probably being covered by someone else.  Having spent two years at Return Path, where Matt was generous enough to lend a few desks for my startup, I saw what the end goal was—functional teams of multiple people in each area, employees working together as a cohesive unit, and lots of communication up and down the organization.  What wasn’t so clear was how you got from five people wearing lots of hats to 300 people, which Return Path will get to in the next week or so.  Clearly you get there with money and success—but where and how do you get the glue to keep it all together before mismanagement or just lack of management altogether derails the whole thing. 

What struck me in Matt’s Talk was how early he started putting together some of the management and communications processes.  They had an employee handbook with their core values just two months into the company.  From day one, when someone joined, their desk was setup and computer unpacked the day they came in.

A lot of these practices come from one of the company’s core values: People First.  The idea that if you have a happy, engaged employee base, you’ll attract the best people and they’ll be highly motivated to produce the best product and service experience to the customer possible.  One of the drivers of that success with people is work/life balance.  In the startup world, we publically eschew work/life balance, and we instead celebrate pushing the physical limits of how much you can pure into your company.  You start cutting out other things—hobbies, sleep, even friends and maybe significant others (or the potential for significant others). 

This may work temporarily to meet a launch deadline, but I don’t think this is how you build a long term, sustainable company.  I don’t think Return Path would have grown to 300 people if they were pulling all-nighters every night.  Eventually, your best people would get burned out and leave—and then where would you be.  You can’t be a company that gets a reputation for chewing through people like a mulch machine.  Last year, 50% of the over 100 hires Return Path made came from internal referrals.  If all of your people are burning out, why would they ever want to subject their friends and the people they admire most to that environment.  Some people think that if you can’t take the heat, you aren’t cut out for a startup—but I think there are some fantastic folks who could add a tremendous amount to your company that simply can’t think straight at 10PM at night.  They have families to go home to or simply need the time away to make the time in the office effective.

I think a lot of entrepreneurs need to take another look at how they’re treating themselves and their own people if they’re ever going to build a large, sustainable entrepreneurs where you tack on 100 people, or anywhere near that, and 50% of the hires come from internal referrals.  That kind of atmosphere has real cost benefit and will undoubtedly provide a better service experience—particular because low turnover helps knowledge of best practices stay within the organization.  I’ve always been impressed with how Matt runs his business and now I know that one of the secrets is starting with putting your own people first as a prerequisite to being able to satisfy your customers well.