The tech industry is home to some of the world’s greatest innovators, the most profitable and valuable companies, and incredible startup success stories. But despite these achievements, it is also a space where there is a surprising lack of appreciation for skilled management.
I founded three companies and worked in the tech industry for 15 years and learned a lot from my experiences building Shift. If I could go back to when we launched in 2014, there are a lot of things I would do very differently in terms of how we set up our culture — understood as the kind of behaviors that are rewarded and encouraged versus discouraged and punished — and developed management practices.
From my observations, a lack of good management leads to the failure of many great startups and ideas. More importantly, it contributes to the scarcity of technical talent and thus to the rising labor costs of construction companies. That puts Silicon Valley at a disadvantage.
What works for tech monopolies won’t work for everyone else
At first glance, you might think that some of the best tech companies in Silicon Valley are incredibly well run. In practice, however, many of them are miracles of one product. They have come up with one product and have, as some claim, built a monopoly on that product.
This is certainly true of both Google and Meta (formerly Facebook), both of which have a single primary revenue stream (digital advertising), and both of which have largely failed to build new ones products outside of acquisitions (Google Maps and Android are possible exceptions, although both started out as early-stage acquisitions).
Because these companies have incredible leverage in their respective advertising activities, they can continue to dump almost limitless resources in efforts to build new products and eliminate potential competition through acquisitions — all while hiring every engineer they can get their hands on. .
But this issue goes beyond just these two prominent companies. It’s pretty widespread among major tech companies all over Silicon Valley.
There may be talk of goals and significant achievements in tech companies, but often these goal setting frameworks are just words without teeth.
If you think you need another engineer, pause and consider whether you really need a manager to get more out of your existing engineers.
When the bottom line almost doesn’t matter anymore, the result is too much leeway and too little accountability. It is wasted resources and innovation stalled. If companies used their existing talent effectively, they could 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 more innovation.
In fact, I’d venture to say that many tech companies could eliminate 20% to 40% of their workforce with very little change in bottom line. However, this would require working with much scarcer resources, which in turn requires management (also known as prioritization; the ability to start small, experiment, and only after testing and learning to go big on a product; and more control over the product initiatives and business through profit and loss).
With better management, companies would also see a significant reduction in their unmanageable personnel costs. We all know that engineer salaries are high and continue to rise, and while many high-margin technology companies can afford to hire an excess of engineers and other technologists, they would cut their costs significantly if they simply manage their existing talent better – allowing them to focus resources on fewer initiatives and more profitable results.
Of course, not all companies building great technology suffer from this problem, with Amazon being by far the biggest and best example. It’s also Amazon, of all the major consumer-facing 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 original retail sales.
How Silicon Valley began to disdain management
This problem isn’t just a problem for big tech companies; it is common in many startups. There is a widespread belief that good culture equates to having kombucha on tap, serving gourmet foods to employees and, pre-COVID, having an Instagram-friendly office space.
This leads to a lack of accountability, which is extremely easy to hide from the point of view of management. And of course, while these are all nice perks for many, culture at its core should be a consensus of behaviors rewarded versus disapproved, encouraged versus discouraged.
Many founders have been conditioned to believe that they will not be able to innovate and enforce good management and accountability at the same time. Talent wars are indeed so intense that a lot of energy is put into 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 run the business through the lens of P&L, testing and learning what that product can be.
This is easier said than done. I’ve made this mistake more than once during my shift at Shift, and these mistakes cost us an insane amount of time and money.
Still, we can – we need to – hire people who are far better managers than many founders can be in their early years. Speaking from experience, it’s hard to be a fledgling founder (product and capital oriented) and manager (people management and accountability oriented) at the same time, so you need to figure out where you succeed and fail, then fill in the gaps.
You also need coaching – early! Only through good coaching can you recognize your blind spots and determine how to tackle them with the right people around you.
Better management enables companies to do more with less
But if great companies are still being built – in 2020 and 2021 there were some pretty incredible IPOs – then why should anyone worry about whether they are being well managed or not? There are two reasons.
First, there is an incredible scarcity of technical talent. We are doing the innovation and future prosperity of the US economy a disservice if companies that can afford it hoard great talent even if they can achieve the same results with fewer engineers. This also leads to underutilized engineers becoming trapped in everyday workplaces, and the scarcity of talent exacerbates one of our country’s most pressing shortages. As a result, our ability as a nation to stay ahead of the global tech scene is severely limited.
Then there is the cost issue. If you think inflation in this country is generally bad, you should see salary inflation in Silicon Valley. Salaries have spiraled out of control, and so has our cost of living. Many engineers are aware of the problem and use it to their advantage, as they should. But these issues continue to feed each other in a vicious circle. Of course, this affects businesses, especially startups, who end up needing a ridiculous amount of funding to pay for all of this.
There is a huge opportunity for Silicon Valley companies to change the way they think about management. The first step is for founders to hire people 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 consultancy. If you think you need another engineer, pause and consider whether you really need 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 engaging leaders and employees to achieve them.
What I’m proposing is a paradigm shift, one that will take time. Obviously, one or two companies that implement better management are not going to change this problem overnight.
However, the Silicon Valley work culture as we know it today originated and evolved from just a few companies. If we see more well-run Amazon-style companies being built in the next decade, it would completely change the culture of Silicon Valley and, as a result, the way this industry — and this country — is run in general. .