When dream workplaces go awry: 5 companies that did a cultural U-turn
May 31, 2021
They say employer branding is everything today and no effort should be spared when trying to attract the best talent. That’s why so many companies look to certifications such as B-Corp or Great Place to Work to showcase their attractive culture, social responsibility, and employee wellbeing programs. Others advertise their extraordinary office perks, their commitment to environmental sustainability, or inclusiveness. There are a few that try to do all of the above as well as create a culture that offers employees autonomy, freedom, and a healthy work-life balance.
When staff start to feel betrayed
Several companies present themselves as a kind of corporate utopia. Patagonia, the outdoor apparel company, and Buurtzorg, the healthcare company, have long been cited as model employers, for example. Then some invested a lot into becoming model employers––only to do a radical U-turn. Do you remember when IBM and Yahoo suddenly banned remote working in 2017 after allowing it for years? Recently a lot has been said about software company Basecamp’s cultural shift after its leaders announced that political discussions would be banned in the workplace.
Going from progressive to conservative, from permissive to strict is never popular with the media. For employees, it often feels like a betrayal. They didn’t sign up for this and often they decide to leave the company. Most companies would never willingly damage their reputation as a great place to work. So why do some companies make such U-turns? There are a number of reasons. An about-face may reveal a decline in the business. It may be the sign of a disconnect between the business model and the company culture. Or it can come with growth as a more mature company needs a different type of employee.
Why some companies stray from their original path
In short, there are several reasons, good or bad, for doing a U-turn. In this piece, I’ll explore some of them through five examples of companies that reneged on the original promises they made to their employees: Basecamp, Buzzfeed, Etsy, Google, and Zappos.
1. Basecamp’s U-turn looks like a hasty misstep
Relatively few people use Basecamp’s collaborative work software. Long before Slack, Teams Facebook, Trello, and the like, the company (which used to be called 37Signals) launched software to help distributed teams to collaborate. But Basecamp really became known for the life and work advice given by its founders Jason Fried and David Heinemeier Hansson whose books Rework (2010), Remote (2013) and It Doesn’t have to be Crazy at Work (2018) were huge bestsellers that laid out groundbreaking ideas about the future of work.
In these publications, Basecamp was presented as a forward-looking, socially engaged employer where people could work with autonomy and flexibility, balance work and life healthily, and bring their whole selves to work. So when, in April 2021, the founders announced a series of policy changes, including the end of political discussion at work, it prompted more than a dozen employees to quit––and it generated endless criticism on social media. Some accused its founders of being entitled, “privileged” white males who had no inkling what life is like for “real” people. Everything is politics, they said.
It’s likely Fried and Heinemeier Hansson had not fully anticipated what the reaction to their announcement would be. An internal debate about diversity, inclusion, what’s culturally acceptable and what’s not, spiraled out of control and they made the decision to end it without fear of the consequences. Basecamp is not a listed company and nobody knows exactly how many users it has. Perhaps this about-face signals a more profound crisis in their whole model. I’m sure Fried and Heinemeier Hansson are smart enough to bounce back one day, but in the short term, their personal reputations as “future of work” gurus took a hit that may take a while to recover from.
As for the company, either it was already in trouble, and the resignation of its designer and several key developers won’t make a difference, or these resignations will put the company in trouble. Not only does the sudden departure of one-third of all employees constitute an unprecedented organizational challenge but who can say how users will respond?
2. Buzzfeed boils down to a failed business model
Buzzfeed is a revolutionary internet media company founded in 2006 that focused on creating content to go viral. Its original “listicles” were created by readers as much as Buzzfeed content creators. As far as the media are concerned, Buzzfeed grew with the promise of impact and empowerment, turning the traditional top-down model on its head. They understood that the key to engagement was this: “Great content isn’t about the content itself, but the emotion it can evoke from its audience.” When it expanded into long-form journalism, it was with that same promise of emotion and impact.
But Buzzfeed has been facing difficulties for years now. Early in 2019, employees were notified via memo that 15% of them would be laid off. In 2020, it acquired HuffPost only to announce a few weeks later that 30% of its staff would be fired. And among the layoffs were senior journalists who had spent a decade at HuffPost. For many, it felt like a betrayal, a complete about-face from its impact-driven work culture.
In fact, as Streatchery writer Ben Thompson noted, “If you remove the societal impact, just for a moment, the story of publishers’ demise. . . is rather banal: infinite competition combined with an inferior product resulted in failed business models . . . The inferior product is advertising: when newspapers were the only option, advertising inventory was scarce; now advertisers — which only paid for newspaper space as a matter of convenience, not principle — can reach the exact customers they want exactly where they spend most of their time and attention, namely Facebook and Google. And thus the failed business model: is it any surprise that commoditized content and non-competitive ad inventory did not work?”
Cultural U-turns are most often accounted for by the (relative) decline of the company’s business model. No “future of work” utopia can stand the test of a decline. Yahoo was a case in point. So is Buzzfeed.
3. Etsy changed course culturally as it faced business trouble
Etsy is an online marketplace of handmade items and crafts supplies that were once offered to make the values of craftsmanship trendy again. Its commercial purpose––enabling individuals to sell their crafts online––matched its company culture and vision of work. Etsy became a B-Corp in 2012. It was often hailed as one of the best companies for working parents (one of the “best places to work for new dads”) and had an extraordinarily generous parental leave policy. Candidates joined Etsy because they “believed that business has a higher social purpose beyond simply profit”.
In 2015, Etsy’s flotation was deemed disappointing. Two years later, Etsy fired its chief executive Chad Dickerson and replaced him with Josh Silverman. It also restructured the company with the aim of increasing revenue and making the company more profitable. One-quarter of the staff were laid off overnight. Etsy operated a cultural U-turn toward a more corporate direction. Naturally most of the remaining employees weren’t happy about the change. At the time, some of them published a public petition in which they expressed their worries about “what the future holds for us as Etsy employees and for Etsy’s community of creative entrepreneurs”.
Also it was later revealed that most of the sellers on the platform earn less than $100 a year from their Etsy shops and Etsy was one of many tech companies that had to endure a backlash against the tech industry. Perhaps the promises of the “passion economy” had been overhyped and oversold? Today Etsy is quite far from the cultural utopia of its early years. Now it has more active users than ever before (4.3 million) but since the flotation, “the tension between supporting small businesses and making Etsy into a bigger business seems to be an endless battle”.
4. Google can ‘be evil’ now that it’s so big
For years, Google was proud of its (unofficial) “Don’t Be Evil” motto. As an employer, it quickly became famous for empowering its people to do creative work. Weird, original engineers were attracted to Google because the company was known to provide a stimulating work environment. Employees could even spend one-fifth of their time pursuing personal projects, which was seen as a way for the company to boost innovation. Its perks and extraordinary campus were praised all over the world. Whenever the workspace was accused of looking like a giant playground, it actually served the company’s employer brand. The message was, “Yes it’s a playground because we’re fun!”.
Then Google grew to become a behemoth whose culture looks nothing like what it was at the beginning. Since 2019, it has had more than 100,000 employees. It is one of the five largest corporations in the world by market capitalization It has grown eight-fold in a decade. Like all companies that grow to such an extent, it has become more rigid, less innovative, and less fun. Many employees who worked there in the late 2000s and early 2010s noticed the cultural shift. They say that as the culture changed, the people changed too. Understandably, a behemoth doesn’t have the same HR needs as a start-up and it recruits different people too: fewer original thinkers and more corporate executives. The people attracted to Google today want to work for a giant corporation that offers perks and security. Unlike them, the first Google employees were lured in by a stimulating environment of brilliant innovators.
A few years ago, Google (which is part of the Alphabet group now) dropped its “Don’t Be Evil” motto. For years it’s been mired in numerous controversies and scandals that concern such issues as tax avoidance, misuse of search results, violation of privacy, and the energy consumption of its servers. It has also been accused of undermining democracy. Last but not least, the Google employer brand has gone through “years of misery” with a number of controversies over its lack of diversity, ill-treatment of minorities, sexual harassment cases and sexist policies. Last year, the exit of AI researcher Timnit Gebru, who had sounded the alarm on Google’s lack of ethics and diversity, caused a stir. Google’s head of HR Eileen Naughton stepped down in 2020 but it didn’t fix the company’s internal problems.
All this has led many people to see Google as a now openly “evil” corporation that doesn’t even pretend to pursue social responsibility, diversity, and inclusion anymore. Others say it was evil all along. Google’s cultural U-turn doesn’t seem to have put the company in jeopardy, however. The fact is that Google doesn’t recruit the same kind of people it used to. The U-turn has reflected that shift.
5. Zappos quit being a holacracy very quietly
Zappos is a US online shoe company founded in 1999 that was purchased 10 years later by Amazon. In that same year, it was ranked by Fortune as one of the “100 best companies to work for”. Led by the late Tony Hsieh, Zappos developed a powerful employer brand around the concept of holacracy, which is a working model based on decentralized management and the distribution of decision-making throughout an organization composed of self-managed teams. In this model, “holons” are autonomous teams linked to the “higher entity” of which they are a part.
We owe the system to tech entrepreneur and author Brian Robertson, but Hsieh played the primary role in popularizing it. And for a long time, Zappos was probably the number one example of a holacratic organization. In 2010, Hsieh published Delivering Happiness: A Path to Profits, Passion, and Purpose in which he told the story behind Zappos’s workplace culture and the groundbreaking management principles that made it famous in the world of business. It became a best-seller. But what if all this had never been done with people’s well-being in mind? In 2015, after a buy-out offer, Zappos gave its employees an ultimatum: adopt our strategy of self-organization or leave. Many left.
Zappos quietly dropped holacracy in 2015. Little has been said or written on the subject since then. In fact many people still believe Zappos to be a holacracy. Dissatisfaction with holacracy likely played a role. But after that, Zappos dropped off Fortune’s “Best Companies to Work for list”. Other people, among them Medium founder Evan Williams, also abandoned the idea of holacracy, saying that an obsession with the process can get in the way of doing the work. Perhaps Zappos’s about-face away from that powerful idea could not be made public and justified because it is so seductive. It makes it harder to see it when there’s a mismatch between the idea and the aspirations of the people who are supposed to embody it.
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