I spent five years in microcomputer distribution in the late 80s-early 90s. The CEO of the company believed that when fast-growing tech companies built ornate headquarters that it was a sign that they had peaked and that it was time to short the stock. I don't think that LNKD has peaked, although the shares are very richly valued.
Steve Blank: The Curse of a New Building
STEVE BLANK
Wall Street Journal
August 5, 2013, 2:41 PM
At some point in my career I began to ponder how and why startups morph from agile “can do” companies to ones that have lost their edge. I didn’t need to look much further than the “new building debacle” I had a hand in.
Signs of Success
One of the things you do right in a startup is moving from one cheap and cramped building to another as you grow, with desks, cubicles and engineers piled cheek by jowl.
Then, one of the signs of success is when you outgrow your last cramped quarters and can afford a “real” building. This happened to us at SuperMac when our sales skyrocketed.
That’s when things went south.
Let’s Fix Everything That Was Broken
At SuperMac we were excited to finally get out of the crummy tiltup we had occupied since the company had emerged from bankruptcy. Now with cash in hand, we wanted to fix everything that had seemed broken and annoying about our last office environment. We made what seemed to be a series of logical and rational decisions about what to do with our next office building.
- Engineers had been packed in cubicles or desks right on top of each other. Now engineers can have their own offices.
- We couldn’t bring customers to this rundown building. The new building needs to reflect that we’re a successful and established company.
- The lobby of the last building didn’t “represent” the company in a professional way. Let’s “do it right” and have a lobby and reception area that projects a professional image
- We had used, crummy and uncomfortable furniture. Let’s get comfortable chairs and great new desks for everyone.
- The last building had stained carpets and walls that hadn’t been painted in years. Now we can pick out carpets that look and feel good, and we can have clean walls with great artwork and murals.
- We didn’t have enough conference rooms. Let’s make sure that we have plenty of conference rooms.
- Everyone used to leave the old building for lunch. We need our own cafeteria so employees don’t have to leave.
Designing the Perfect Building
Once the commitment to fix everything wrong was in place, we were off and running on the design phase. We hired an interior designer and a great facilities person to manage the process. The exec staff started meeting about the design of the new building.
The staff weighed in on what color the carpet and walls would be. And there was a lot of discussion on what style of furniture was appropriate.
Our exec staff spent time worrying about who had the corner office, and what departments had the “prime” location (I was great at “office wars”). There was a lot of talk about the importance of natural lighting. And even better, marketing got to design the graphics for the lobby and hallway (bright and colorful neon) to better represent the color graphics business we were in.
We kept the board informed, but they didn’t have much to say since business was going so well, and a new building was needed to accommodate the growing company.
None of This is Good News
This is when things started to go downhill for SuperMac. The most obvious problem: the time we spent planning the building distracted the company from running the business. But there were three more insidious problems.
1. While offices for everyone sound good on paper, moving everyone out of cubicles destroyed a culture of tight-knit interaction and communication. Individuals within departments were isolated, and the size and scale of the building isolated departments from each other.
2. The new building telegraphed to our employees, “We’ve arrived. We’re no longer a small struggling startup. You can stop working like a startup and start working like a big company.”
3. We started to believe that the new building was a reflection of the company’s (and our own) success. We took our eye off the business. We thought that since we were in such a fine building, we were geniuses, and the business would take care of itself.
While our competitors furiously worked on regaining market share, we were arguing about whether the carpets should be wool or nylon. The result was not pretty.
The Curse of a New Building
If this was just a sad story about a single company, it would be interesting, but not instructive. However, I’ve seen this story repeated time and again, and not just in Silicon Valley. There’s an entrepreneurial mindset that says, “By the dint of our hard work, we are ‘entitled’ to a building upgrade and this is our just reward.” And on an emotional level it makes sense. But if you are lucky, you have a board of directors who have seen this before. (And they’ll take the CEO out for a trip to the woodshed.)
1. An upgraded new building is a premature transition away from a startup culture.
2. It’s a tipping point to a big company culture.
3. This is a culture and values issue worth fighting over.
Letting a situation like this happen is a failure of a board. If the management team is thinking they’ve made it, the new building is just symptomatic of a company heading for a crash. It’s a company that’s lost sight of the values that got it there.
Don’t let it happen to you.
Stay hungry, stay lean.
Lessons Learned
- New buildings are a distraction.
- You should avoid them at all costs
- Building upgrades can destroy a culture
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