George Arison
The tech industry is home to some of the world’s greatest innovators, most profitable and valuable companies, and incredible startup success stories. But, these achievements notwithstanding, it’s also a space where there’s a surprising lack of appreciation for skilled management.
I founded three companies and have worked in the tech industry for 15 years, and I learned a lot of this firsthand through my experiences building Shift. If I could go back to when we launched in 2014, there are a lot of things I’d do very differently in terms of how we set up our culture — understood as the type of behavior that is rewarded and encouraged versus discouraged and penalized — and developed management practices.
From my observations, lack of proper management leads to the failure of many great startups and ideas. More importantly, it’s contributing to the scarcity of engineering talent and, in turn, the rising people-related costs of building companies. That puts Silicon Valley at a disadvantage.
What works for tech monopolies doesn’t work for everyone else
At first glance, you might think that some of Silicon Valley’s best technology companies are incredibly well-managed. In practice, though, many of them are one-product wonders. They’ve figured out one product and have built, some would argue, a monopoly around that product.
This is certainly true of both Google and Meta (formerly Facebook), both of which have one primary revenue stream (digital ads), and both of which have largely failed at building new products outside of acquisitions (Google Maps and Android being possible exceptions, though both started as early-stage acquisitions).
Because these companies command incredible pricing leverage in their respective advertising businesses, they can continue to dump nearly unlimited resources into attempts to build new products and take out potential competition through acquisitions – all while hiring any and every engineer they can get their hands on.
But this issue goes beyond just these two prominent corporations. It is fairly widespread across large tech companies throughout Silicon Valley.
There may be talk about objectives and key results in tech companies, but often these goal-setting frameworks are just words without any teeth.
When the bottom line almost does not matter, the result is too much leeway and too little accountability. It is wasted resources and stalled innovation. If companies effectively utilized their existing talent, they would be able to produce the same, if not better, results. There would be fewer failed products, ultimately freeing up talent to work on more impactful tasks and produce greater innovation.
I would even venture that many technology companies could eliminate 20% to 40% of their workforce with very little change to the bottom line. However, this would require getting work done with far scarcer resources, which would, in turn, require management (aka prioritization; the ability to start small, experiment, and only after testing and learning going big on a product; and greater control of the product initiatives and business through profits and losses).
With better management, companies would also see a significant cut in their out-of-control people-related costs. We all know engineering salaries are high and keep rising, and while many tech companies with high-margin businesses can afford to hire an excess of engineers and other technologists, they would significantly reduce their costs if they simply managed their existing talent better – allowing them to put resources toward fewer initiatives and more profitable outcomes.
Of course, not all companies building great technology suffer from this problem, with Amazon being by far the biggest and best example. It is also Amazon, of all the large, consumer-focused tech companies, that has been the best at innovating new products and creating new revenue streams — Amazon Web Services, Prime Video, Marketplace, Ads, to name a few — outside or on top of its initial retail business.
How Silicon Valley came to disdain management
This problem isn’t just a problem of large tech companies; it’s prevalent in many startups. There is a widespread belief that good culture equals having kombucha on tap, feeding employees gourmet food, and, pre-COVID, having an Instagram-friendly office space.
This snowballs into a lack of accountability, which, from a management standpoint, is extremely easy to hide. And, sure, while those are all fun perks for many, culture should be, at its core, a consensus of the behaviors that are rewarded versus frowned upon, encouraged versus discouraged.
Many founders have become conditioned to believe that they will not be able to innovate and enforce good management and accountability at the same time. Indeed, talent wars are so intense that lots of energy is spent on making everyone feel good about their job, not actually delivering results. Founders have come to believe that the users will come if and when they build a great product, rather than managing the business through the lens of P&L, testing, and learning their way to what that product may be.
This is easier said than done. I’ve made this mistake more than once in my journey at Shift, and these mistakes cost us an insane amount of time and money.
Yet we can — we need — to hire people who are much better managers than many founders can be in their early days. Speaking from experience, it is hard to be an early-stage founder (focused on product and capital) and manager (focused on people management and accountability) simultaneously, so you need to figure out where you succeed and where you don’t, and then fill in the gaps.
You also need coaching — early! Only through good coaching can you recognize your blind spots and determine how to address them with the right people around you.
Better management lets companies do more with less
Yet, if great companies are still being built — 2020 and 2021 saw some pretty incredible IPOs — why should anyone care about whether they are well-managed or not? There are two reasons.
First, there is an unbelievable scarcity of engineering talent. We are doing a disservice to innovation, and to the future prosperity of the American economy, if companies who can afford it are hoarding great talent, even though they can accomplish the same results with fewer engineers. This also leads to underutilized engineers stuck in humdrum workplaces, and the scarcity of talent further exacerbates one of our country’s most pressing shortages. As a result, our ability as a nation to stay ahead on the global tech stage is massively constrained.
Then, there is the cost issue. If you think inflation in this country is bad overall, you should see salary inflation in Silicon Valley. Salaries are out of control, and so is our cost of living. Many engineers are cognizant of the issue and use it to their advantage, as they should. But these problems continue to feed into each other like a vicious cycle. This, of course, impacts businesses, especially startups, which end up needing a ridiculous amount of funding to pay for all of this.
There is an enormous opportunity for Silicon Valley companies to change their mindset on management. The first step is for founders to hire and surround themselves with people who embrace management and think about business through accountability and P&L. Recruit leaders who are experienced managers or seek the support of a management coach or consulting firm. When you think you need another engineer, pause and consider if what you really need is a manager to get more out of your existing engineers.
Second, leaders should focus on developing and managing their existing talent, such as matching employees with the right growth opportunities, reorganizing teams, setting goals, and holding leaders and employees alike accountable for meeting them.
What I’m proposing is a paradigm shift, one that is going to take time. Obviously, one or two companies implementing better management won’t change this issue overnight.
However, the work culture in Silicon Valley as we know it today originated and evolved from just a few companies. If, over the next decade, we see more well-managed, Amazon-style businesses being built, it would completely shift Silicon’s Valley culture and, as a result, how this industry — and country — is managed overall.
Comment