Jessica Alter | August 23rd, 2012
This FounderDating Guest Post was written by Ted Rheingold for our series: FounderTalk – The Real Story. Ted was Co-Founder of Dogster and is now VP Social at Say Media. He’s also an advisor to several startups and can be reached and/or followed @tedr.
At the very beginning of my business Dogster, before generating revenue, before we even incorporated, I knew the site could be a very special business if we grew it right. I didn’t know how much work that would be until we hit our lowest points.
Very early on I was invited to meet with Benchmark Capital. I almost didn’t even accept the meeting as I had seen good companies go under in 2001 because they had been overfunded and indifferent about culture. The partner I met with sized my concerns up quickly and said if I should outline the needed company culture right away so it would be precede anything else. And we did that. We made sure we had the creative, free thinkers that could help us uncover how great and profound a business this could be and we were off and running. But no one told us how difficult it was going to be to keep culture as a top priority.
In 2005 we had 5 employees, and immediately committed to making their professional experience as rewarding we could provide. Advisors and investors strongly suggested we move down to the Valley, but we stuck to our guns about staying in SF and attracting the right people. We instituted very thorough bi-annual reviews – and we actually did them. We gave people desks with privacy. We included the greater company in our road map and planning processes. We did fun outings. We grew to 12 employees in 2006,18 in 2007. Unfortunately, I had no idea how much work it took to make a positive work environment, and that’s when things were going great. Now try to pretend you’re having a good time at a post-launch celebration when you’re carrying so much business stress you can’t even sleep at night. Suddenly, it’s really hard trying to care a rat’s posterior about employee parking spaces, or what employees think of the more crowded confines when you’re suffering through one of the worst dips on an already bumpy roller coaster ride.
Fortunately one of my co-founders, John Vars, took creating a fun, rewarding harmonious workplace as seriously in practice as I wished I could. And he made sure we did the employees reviews even when we were in the middle of back-against-the-wall fundraising. And he set up a great communication workshop for the staff so we could really understand what was behind the problems that employees we’re having.
But as time went on, success only meant our competitors and challenges kept getting bigger and bigger. I began internally debating – was all the work we put into doing right by the employees even a net benefit for the company? Sure, it’s easy to be generous when budgets are growing each month, but when they’re flat or worse I would let myself selfishly think, “now is brass tax time: the team needs to hunker down, not ask questions and just work.” Some days I was so stressed and frustrated I realized I couldn’t even open my mouth or I’d risk exploding at them for things they had no part in. Just like you will be, I was in way over my head and had limited abilities to manage my position. Thank god I knew that no matter what I had to stick to our original philosophy because the stress and the frustration was my problem, not the problem of our team of top-performers.
But what I learned was the payback for committing to the employee experience came when the company was at it’s most vulnerable. Twice our financial situation was so precarious we had to do layoffs. Once in October 2008 when the global economy was on the brink, and then in 2010 when intense competition created by the recession came to our doghouse and ate right from our dog bowl.
Both times the founding team painfully sweated prepping layoffs. We had to keep it all a secret and ensure the company was still in a good position to excel with the remaining team. Since we knew the 2008 belt tightening was going to come as a surprise – because the company had been doing great up to the crash – we announced the layoffs at the same time to the whole team. We then gave a presentation to everyone, including those being laid off, so we could explain why this had to be done, why certain positions were being cut and why others were kept. We asked everyone remaining to take a 10% pay cut, while founders took a 15% cut. Within 15 minutes of the presentation’s conclusion all of the remaining staff were back at work. While I feared it would be like a dirge, to an outsider the vibe was like any other day. A lead engineer (a true A player) even voluntarily offered a further reduction if it meant saving the company; we had feared he’d be the first to jump ship. In the ensuing months when we needed output to be even more than before the layoffs, morale was high and strong the whole time. One would be tempted to think the hard work was just a “I hope I’m not next’ attitude, but for the team is wasn’t about the job. It was about the company and team mission. It was about what we had committed to week in and week out. They had worked in enough places to know that collaboration, afternoon soccer games, open-communication were not the norm and that we were really trying to do something better.
I had always thought the reason to build a great company culture and supportive workplace was so a company could excel when things were going well (which is the case). What I learned though, is that when it really counts is you’re your back is against the wall – you’ll get paid back in spades because no else will be there. Together our smaller team pulled out of the recession with a work harmony and output that was unlike any other period of the business. The company was able to fend off massive top-tier competition and go through our acquisition by Say Media a year later.
The company could have fallen apart in more ways than I care to mention. If we hadn’t established culture as foundational early on, we may have caved later.