The See Through Startup
This post is one of a series which covers common questions about where startups come from, how they work, and how to navigate a career in the startup world.
Q. How much information should a startup share with its team?
Probably more than you think.
Startups are hard, and most fail. To have even a shot to succeed, a startup has to solve some very tough problems, all of which are easier with a culture of transparency:
Getting great people to join. Startups win when they have the best team. Competition for the best people is fierce, and the best people will only join a team where they can learn quickly, have autonomy, and are treated like adults. They simply won’t join a company if the leaders keep them in the dark. The best people are ambitious and want to learn quickly and contribute to the best of their abilities. They won’t join a company that doesn’t let them.
Working on the right things. Resources are limited at any company, and startups are always racing the clock, counting down to the day they run out of money. Everyone on the team has to be working on the things that will have the greatest impact. The management team can help set priorities, but management becomes a bottleneck if they want to control every task for their team. When people across the company know the goals and objectives, they can organize their work to have the largest possible impact, and they can harness the collective intellect of the entire team.
Building trust and culture. A startup can suffer politics and infighting the same way that a big company can, especially when times get tough, which they always do. Once a company grows beyond a few people, it’s common to hear things in the hallways like, “what do those people in Marketing do all day?” or “why does Engineering take forever to ship anything?” When teams share with each other what they are working on and why, they are more appreciative of how hard each other’s jobs are and are more equipped to help. When people don’t have information, they can assume the worst.
Rapid learning. A startup begins with a list of unknowns: “What product features will resonate with customers? How will customers find us? What will they pay?” A startup wins by constantly learning and immediately putting that knowledge to work. That can only happen when everyone at the company has access to the latest and greatest findings.
Developing leaders. Once a startup starts to succeed, it will rapidly take on new customers, more funding, and a larger team. A company that shares information with team members will build its next generation of leadership, allowing it to promote from within as it needs to fill new roles with increasing levels of responsibility.
It is often said of the greatest athletes, like basketball great Larry Bird, that they “play like the the coach would play if he were on the floor.” A company that shares information allows that to happen by making sure everyone at the company is operating off the same information and priorities as the executive team is.
Q. What information should a company share?
The default position should be to share everything, except for a handful of things were there are specific reasons not to share. A company should focus on sharing the information that helps people learn, helps teams understand and trust each other, and helps people do their jobs. The top of that list will be:
Company goals and objectives. A well-run company organizes around a few high level goals and rallies the team behind them so that each team member knows how to contribute. As goals shift, the leaders should update the team immediately so that they can adjust their own work accordingly.
Departmental goals and objectives. Each department will have its own goals and objectives, and peer teams across the company need to know what they are. This builds trust and gives teams the knowledge they need to chip in to help each other.
Customer feedback. The entire team needs to know if the product is succeeding in the market and what the customer feedback is, especially when the feedback is lukewarm or negative.
Product roadmaps. The entire team needs to understand where the product is going and why. Roadmaps and dates may change, but that is no excuse for not share the latest plans.
Financial results. Most startups have a burn rate and a date that the cash will run out. The whole team needs to know how long they have until the money runs out and make sure the company is meetings the metrics it needs to to get profitable or to raise more funding.
Q. But isn’t there a downside? Can people really handle this much information, or will they freak out?
Startups employ adults, and they can handle far more information than managers often think they can. After all:
They know it’s a startup. They signed up to work at a startup and know what that takes. They should understand that it will be a bumpy ride, and they should get excited by the prospect of helping the company navigate through the inevitable twists and turns.
The truth is preferable to rumor. Human nature is to fill in the gaps when important information is not known, often with worst-case scenarios. When people know the reality they can roll up their sleeves and work the problems vs. speculating over drinks with their co-workers about how dire the news must be since the management team isn’t sharing it.
They know the truth anyway. Is the company about to run out of money? Customers aren’t buying the product? The team already knows it. They see the results, and they’ll hear it from co-workers or even via industry rumors. If at any point the store the management team tells them diverges from what they know is the reality, the team will lose faith in the company.
Q. OK, then what information shouldn’t a startup share?
Transparency has its limits, and there are a few exceptions:
Information that the company doesn’t have the right to share. This includes personal information about employees. It can include the names of interviewees who have not told their current employer they are looking. It includes information about customers or business partners that would damage their business if released. It includes information under NDA. Transparency is not an excuse for gossip or breaking confidences.
Information that could make or break the company. Some news, if disclosed, can severely damage the company and thus all of its stakeholders. Spilling the beans about a pending acquisition, financing, or key executive hire can scuttle the deal, so that information should be held to the people who need to know until it can be shared.
The leaders’ daily mood swings. Startups are volatile. Some weeks you’ll feel great on Monday, convinced you’re going out of business by Wednesday, then recover by Friday. You probably don’t want to share every little bump in the road as they happen, and avoid sharing when you are in a stressed or foul mood. Wait until you are calm, and share the weighted average of your mood over the last few weeks vs. the blow-by-blow of your mood swings.
Q. How about stock option information? Should we share that?
Talented people don’t join companies that don’t tell them the value of the stock grant they received. You don’t have to share every detail from your cap table, but people need to understand how much stock is outstanding, what percentage their grant represents, the current common stock price (which will be their exercise price), the latest preferred stock price, and a rough sense of your liquidation preferences. They need a way to get a sense of what they are receiving vs. what they might receive at another company.
Q. And salary information?
It’s becoming more common for startups to share salary information, and it’s common in other industries, as anyone who has every worked for the government or military can attest to. I suspect it works just fine. But if you are going to do this, it’s best to start early and set the expectation with everyone you hire that you are going to run the company this way. It’s probably also best tried by founders who have some management experience and can better handle hard conversations about why people are paid what they are.
Q. I’m on the management team of a startup. What are the best ways for us to share information?
Good companies do a few things:
Make transparency part of the culture. As you hire people, explain that transparency is expected, and recruits should only join the company if that’s the culture they want. Train people that they are expected to share information, train them on the systems you use, give them feedback on how well they communicate, and include it as part of their performance evaluation.
Bake it into the operating system of the company. Well-run companies have a steady rhythm of staff meetings, 1–1s, training events, and key documents that communicate what is happening across the team. Have weekly company meetings, and use them to talk about deals, products, financing, industry news, do product demos, and answer questions. After board meetings or financings, walk the team through the board meeting notes and term sheets. Make sure all managers do 1–1s regularly, and use them as tools to share information and get feedback on how well the company is communicating.
Keep all of your information out in the open. Keep all corporate information in public folders in Google Docs, Quip, or whatever collaboration products you use. Use Slack or a tool that allows conversations to be open to the entire company instead of buying them in private email threads. Discourage people from creating private folders or keeping content in stashes on their personal devices. If someone wants to find out the status about a key customer or an upcoming product, they should be just a simple search away. Your company will move faster.
Don’t shoot messengers. Hearing bad news sucks, and it’s tempting to get defensive and discount it. If you react badly, people will learn not to share. You might even need to overcompensate and bite your tongue when presented with bad news just to make sure others will feel comfortable sharing. Be patient: you’ll have opportunities to work the issues later on.
Lead by example. Share what’s on your mind, and ask people what is on theirs. Encourage them to be curious, and make sure they know it’s OK, or even expected, to ask probing questions.
Q. If I’m considering joining a startup, how can I find out how transparent they are?
Simply ask them. Let the hiring manager know, when you interview, that transparency is important to you. Ask what information the company shares and how they share it. Ask what the regular rhythm of meetings and company events is. Ask how they store their documents and how they message each other. Ask what kinds of information is kept inside of the management team vs. what is shared broadly.
Test it. As you meet people in interviews, ask them questions about the company. Ask them what the financial goals are, what the product roadmap is, or what the executive team’s top priorities are. At good companies, most people you meet will give you consistent answers to those questions.
Don’t compromise. Unless it’s your only option, don’t join a company where the team is being kept in the dark. You’ll have less fun, learn less, will experience more conflict, and the company probably won’t succeed anyway.
Good luck!
