Using Company Culture To Screw Your Employees
You may have seen the story about a couple who raised $400 grand for a homeless man using GoFundMe because he gave a woman who needed gas his last $20. Well, all three were arrested for running a scam. Seems they were all in on it and when they screwed the homeless guy out of his share, he lit up the gig with the police. The charge against the 3 is “theft by deception.” Maybe a company culture is being used by venture backed startups for the same scam. Let’s explore.
I started thinking about the concept of “…theft by deception.” It is a type of fraud I suspect. And for a fraud to happen, the perp has to either lie to you or hide key material info, then you have to rely on that info (some of which they are hiding) and then you get screwed.
Well, well, let’s look at employee stock options particularly in the tech world, and maybe we can even drill in a bit more into the DevOps world since so many of these firms have been in the news lately.
Theft by deception. Does have a ring to it.
“Jack and Jane, welcome to WeAreKind DevOps company. Today, your first day, you will get your hoodie, the new Macbook Pro, a logo water bottle and several cool T-shirts. We are really about delivering a wonderful, thriving, healthy culture here and we are so happy you are now part of it. You need to fill in all the benefits paperwork, and, of course, you need to sign the stock option agreement. Welcome to the WeAreKind DevOps, the leading industry……..”
Are stock options of material value? Well, for software engineers and top sales talent, they can and should make up about 30% to 50% of a 5 year pay package. Yes, that is material.
Do they ever pay out? Of course they do. We read about how many millionaires came out of Microsoft. Then Google, then Facebook and scores of other very high flyers. I personally have made 7 figures several times on stock options, and it changed my life because I did not need to take crap from some transaction sales manager. To me that was material.
That is why I am so focused (I wrote passionate but I hate that word since 37.5% of LinkedIn people are passionate about some nonsense) — back to our thought here — I am so focused on how many people are NOT getting their stock option payout.
And why are they not getting the payout?
Company Culture Used To Screw Employees
Because dear reader, the company — you know them, Perfecto Mobile, Xebia Labs, Chef, Puppet, a score of testing companies and perhaps a hundred others have taken in so many rounds of dilutive VC financing, then never made a dime of profit, and the value of stock options withered. Wealth was lost — or it never materialized.
Who lost? Well, the CEO and all the VPs will get special packages, set asides, even if the stock is worthless. They get paid to sell the company and get the VCs out of this mess whole. So they do quite well, even though they failed to ever make a profit.
Did the administrative state employees lose? Ouch, this is going to hurt. But the marketing types, the HR types, the customer service and the chirpy kids who call you when you hit the wrong button and download a white paper didn’t really get hurt. They are lucky to have a job and their work, while appreciated, does not bend the company’s trajectory in a meaningful manner.
Let’s face it. The head of legal and contracts for the WeAreKind DevOps company did not turn down the corporate counsel at Google to work there. He or she is some hack lawyer either just starting out or not able to get anything better. The HR types are pretty much the same thing. If they could work at a company with great stock option appreciation, they would do so, don’t you think?
These are the bulk of the company and they seldom have better choices. Who would take a gig at one of these firms on an E, F G round where there is zero chance of stock appreciation if they had an alternative? So, no they did not really get hurt. They had nowhere else to go.
But the engineers, and some top sales talent, well that may be a different matter.
Software engineers, a few key sales reps, can change the trajectory of a startup, or late startup, in such a meaningful manner they can deliver value that is entirely disproportionate to their pay package. Their skills are typically rare and in very high demand. They have lots of choices. So how did they get into this crappy company?
Here, dear friends, is where we start to taste that “theft by deception” thing. And it is part of the company culture.
These software engineers are recruited quite often by the internal HR types and sometimes outside headhunters using the “…great company culture” attraction. Rather than being a cog in a corporate wheel at a Computer Associates, Dell or HP, the engineers are lured by the youthful, fun, balloon blowing, free lunch and logo-wear frivolity in these VC funded startups.
These companies deliver what a financially successful company finds hard — a fun culture where everyone feels they are a valued member of a family. Software engineers, often in their 20’s or at most early 30’s have never heard about a “double dip preference” in a VC funding deal and have no inclination to mistrust that wonderful VP of People and Culture who just wants everyone to be happy.
And the VP of People and Culture is the hired hand who is there to keep things fun, happy, cheerful and entertaining. Dogs run around the office. Everyone wears jeans. Strange things hang from the ceiling. Free food, great benefits. Unlimited vacation.
Kind of a Keep Austin Weird concept applied to some DevOps tech company hardly anyone ever heard of.
The VP of People and Culture is the architect for the “fraud by deception” being slowly, warmly and softly perpetrated on those who believe the crap about a caring culture.
There is the “unlimited vacation,” one of the newest, most preposterous benefits offered. Unlimited vacation, paid? OK, just call your boss and tell her you will be taking off 5 months to meditate in India with your soon to be spouse!
Do it! I dare you!
Then there are the weekly or monthly company meetings. The CEO and execs get up and show everyone the financials, the forecast, give out a few plastic trophies, another free lunch. This is the theater of communication, it is not communication.
Sure, you hear about this customer or that one. But do they talk about the stock option value? I mean, why not, the value of any individual option is the same for everyone. Just the number of options is different. So why, if this number is 30% – 50% of the wealth bet those software engineers placed does the VP of Finance or the CEO not give out that number?
And why won’t they discuss the value of an option? This is material financial information and if the company were public, it would be disclosed under penalty of jail time.
And are we “going out for another funding round?” Here is more of the fraud by deception. Round E, F, G each refactored ALL the stock. The denominator for those options just got bigger but the numerator stayed the same.
Does anyone at these crappy DevOps companies know that tiny as they are they have over 200 MILLION shares outstanding and there will be more, like 40% more next round!!!
You have never heard happy talk in the face of financial peril until you hear a CEO and Finance VP talk about all the great meetings they are having with “potential investors” for that F or G round. All you hear is how interested everyone is. They recognize the company is the “…leader in emerging DevOps whatever.”
What is really happening is the CEO, having never made a profit in 7-12 years of the company’s life is on his or her knees begging for someone, anyone, to invest and keep the gig going for a bit longer. Starting to taste that “…theft by deception” yet?
Those software engineers are hearing all the happy talk, the “culture” delivered by those mannequins in the HR department keeping that happy-juice needle in the vein, all is well, there is nothing to see here, move along, everything is going to be great. Pass the hot sauce!
But it isn’t. These software engineers, maybe a few key sales reps have lost 30% – 50% of wealth they expected to get. They relied on that VP of People and Culture, that CEO, that VP of Finance to deliver. Here is where the fraud comes in so pay attention: when these people gave out the stock options, they NEVER told the employee the number of shares outstanding. They never told them how to do the math to determine value. They never told them about VC preferences which vitiate the stock value.
They never covered this critical info in the company meetings. Instead, they gave out logo-wear and free food and focused engineers on shiny objects.
And when asked for the info by the hardy few, these “our culture” cretins said: “that is proprietary information, and we cannot give it out.”
What is sickening, is that they KNEW!
They f*****g KNEW from day one that the stock options had zero chance, regardless of the numerator, of ever being a meaningful wealth reward. They KNEW and they deliberately built this fraud-inducing cocoon, called a CULTURE, as a sedative for those who were getting screwed.
What is so gut wrenching about this “our valuable culture” nonsense is that all the execs know it is bulls**t but they tout it nonetheless. I looked up one of the “cultures” on a San Fran DevOps company web site and guess what one of the 6 tenets is: “we value an ownership mentality.”
Wow! An ownership mentality. That means keep expenses low boys and girls–treat company stuff like it was your own.
But if they value an ownership mentality, why not share the key metrics of “ownership?” Maybe an owner might want to know how many shares are out there. An owner may want to know how much the preferences from that last VC round impacted his or her wealth!
Another DevOps site said: Our Community
There would be no Chef without the Community. Our community is welcoming, inclusive, and considerate. We act with integrity and professionalism. We give feedback directly, honestly, and clearly, and receive it in kind, even when it’s difficult.
Does this make you want to throw up? Just who would write this crap? Worse, who would believe it?
You want some feedback pal? Well, your employees are getting paid with stock options that are like Venezuelan currency. They cannot buy Jack! How’s that for feedback?
This is not going to continue forever. There is a “need-to-know” argument any option holder has in deciding whether to take a job or later pay for the options.
I know this because I pressed the point recently with a company where I have options and while they resisted, they had to cough it up and their really stupid corporate counsel admitted it.
OK, I got it. So what are those options worth Chef, or Puppet or Xebia or a hundred other such entities? You are out there selling this culture crap to your employees while you are on a D, E, F, G funding round where you would have to sell for a trillion dollars for an employee to get lunch money.
People, there’s something happening here. This is going to come crashing down. Since we started blogging on this stock option scam, we have been contacted by all kinds of employees who now know their VP of People and Culture is the head of the scam.
Some employees are properly beginning to see the CEO and VP of People and Culture are just the soulless company apparatchiks who will screw their most valuable employees with this well known scam of offering worthless stock options and making them look valuable with the wrapping of a fun, playful and endearing culture.
What kind of human being can do such a thing to those with whom they work?
This is the culture of deception. Don’t buy it for a minute.