Notes from the End of a Startup

[Our Perspective by Jennifer Rock and Michael Voss]

Our first client died yesterday. LivingSocial – the crown prince of daily deal apps – took its last breath as a standalone brand, handing over its last few parts and pieces to Groupon for $0.

We’re not here to write LivingSocial’s obituary; the Washington Post did so brilliantly. Nor is this a pile-on postmortem, outlining the various reasons startups fail. Rather, this is what acquaintances do when we hear of someone’s passing. We pay our respects, reflect, and try to make some sense of our time together.

Nothing But Respect

Our work with LivingSocial began as an early-morning text from a friend and former colleague – a C-level exec who was consulting on strategic growth plans. He described a startup that had recently reached adolescence, booming from a few employees to thousands in just a handful of years. They needed help rallying their troops around the new, decidedly un-startup-like business strategy. We took stock of what we were dealing with: A geographically dispersed and demographically diverse employee base. An evolving company vision. New processes and mandates. An impending change of CEO. And nary a communications team or strategy in sight.

We couldn’t wait to get started.

We spent valuable time at LivingSocial’s funky D.C. headquarters, interviewing their executives and meeting employees. This was a company that had tasted sweet and rapid success, but was now in the fight of its life against a contracting market and stiff competition. Every employee there – including then-CEO and co-founder Tim O’Shaughnessy – was generous with their time and honest with their opinions.

A Look Back

We filled a composition book with interview notes and focus group results about communication issues. Executives talked about a lack of places employees could talk with each other. Team leaders described how they selected communication methods and tactics (e.g., “whatever’s convenient at the moment”). Employees explained they largely ignored official company announcements because they weren’t sure what was important.

Reading through it all now – years later – a few telling quotes jump off the page. And what we found underneath those comments is still relevant, whether you’re at the helm of a volatile startup or in the middle of an established corporation.

 “We’ve nurtured a healthy internal competition.” Have you? Companies of all sizes have rifts between factions and functions, often started with good-natured rivalries between team leaders. But what seems “heathy” at the leadership level can get downright cutthroat farther down the organization, especially when you factor in rewards and incentives. What had started as team-building at LivingSocial had become – by our assessment – five distinct company sub-cultures, divided among major team lines like sales, engineering and the call center. And this “healthy internal competition” had developed into some genuine bad blood. Key takeaway: Team identity is important, but build your strongest employee loyalty at the company level. And reinforcement of that loyalty needs to come from the leadership team as a whole.

“Employees are grieving because we killed the culture.” Early on, LivingSocial built a pretty great work environment to attract the innovative talent they needed. An on-staff culture team arranged employee social events like movie days, ice cream parties and free concerts. The company provided employees with dance classes and cross-fit sessions. The office kitchen provided “a never-ending supply of Snapple, fruit snacks and chips” – a perk they touted on their website. Eventually, however, times grew lean and leaders realized the company had to grow up and buckle down on spending. We designed an educational program to explain company financials and long-term benefits to employees. But when the free Snapple supply gets swapped for a vending machine, it’s of little consolation to many employees. Key takeaway: Free stuff doesn’t create a company culture; it creates a culture of entitlement. Build your culture on more solid foundations like shared values, community involvement and the company’s philanthropic endeavors.

“Our email distribution lists need fixing.” At LivingSocial, leaders at several levels asked to be included on financial updates and other email announcements sent to executives. Easy fix, right? Add them to the list. But we dug deeper. Directors wanted access to information because they felt execs hoarded it. Middle managers wanted more timely updates because those in the know early were deemed part of an exclusive leadership club. Turns out the outdated distribution list wasn’t the root cause, but rather these deep-seated misperceptions and suspicions that led to an undercurrent of mistrust. Key takeaway: Communication can be an easy target – but it’s often a symptom of a larger issue. Don’t be too quick to adopt what looks like an easy fix.

We’re not suggesting communication and culture issues were the primary cause of LivingSocial’s demise. They had well-documented and deeper competitive, business-model and marketplace challenges – which every hopeful but pragmatic startup should study.

For us, our time with LivingSocial validated how we would work with clients and approach business challenges. We never imagined a notebook full of scribbles would turn out to be a legacy.

@ROCKdotVOSS 2017

 



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