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Yes, Silicon Valley, there is such a thing as not enough bureaucracy

Yes, Silicon Valley, there is such a thing as not enough bureaucracy

By Claire Cain Miller, The New York Times | Updated: 1 May 2014 13:32 IST

The dirtiest word in Silicon Valley is bureaucracy. Tech executives want to move quickly - a Facebook company motto is "move fast and break things" - and layers of bureaucracy, such as human resources departments, are seen as the enemy of speed and efficiency.

But there is a reason that big, successful companies have layers of bureaucracy - even if they do slow things down. And tech companies are learning that the hard way.

GitHub is an example. The Web service, for sharing and collaborating on software code, has been under fire after a female engineer named Julie Ann Horvath quit and described a culture toward women of bullying and disrespect. GitHub's co-founder and chief executive, Chris Wanstrath, wrote a blog post about the situation this week, and one sentence in particular struck at the core of the problem.

"Our rapid growth left the leadership team, myself included, woefully unprepared to properly handle these types of situations," Wanstrath wrote.

Telling evidence: Although GitHub was founded in 2008, it hired a senior human resource executive only this year.

"If there is no structure, that's actually more harmful to marginalized people," Horvath said in an interview while she still worked at GitHub.

GitHub is not unusual. Tech startups with 100 or fewer employees have half as many personnel professionals as companies of the same size in other industries, according to data from PayScale, which makes compensation software and analyzed about 2,830 companies.

At many tech startups, the role of the human resource department is to compete in the talent war for engineers and provide a Ping-Pong table, a keg and free burritos. Other personnel functions, like providing parental leave and channels to report misbehavior, go ignored. Evan Williams, Twitter's co-founder and former chief executive, said his biggest mistake at the company was an HR-related one: not hiring enough experienced people quickly enough during the company's period of hypergrowth.

The Stanford Project on Emerging Companies, a longitudinal study of 200 Silicon Valley startups during the first dot-com boom, found that tech entrepreneurs gave little thought to human resources. Nearly half of the companies left it up to employees to shape the culture and perform traditional human resource tasks. Only 6.6 percent had the type of formal personnel management seen at typical companies.

Bureaucratic HR is "loathed" by engineers because it adds costs and slows decision-making, the leaders of the study, James N. Baron and Michael T. Hannan, wrote in a paper in California Management Review.

Yet a human resource department is essential. The two found that companies with bureaucratic personnel departments were nearly 40 percent less likely to fail than the norm and nearly 40 percent more likely to go public - data that would strike many Silicon Valley entrepreneurs as heresy.

"In the new economy, as in the old one, it turns out that organization building is not a secondary diversion from the 'real' work of launching a high-tech startup," they wrote. "It might well prove to be the main event."

Not that bureaucracy should be wholeheartedly embraced. There is a reason that the most exciting innovation in Silicon Valley seems to be happening at three-person startups and not at behemoths like Microsoft. When Larry Page, the Google co-founder, took over as chief executive, he acknowledged that it had become weighed down by bureaucracy and said he wanted to regain "the nimbleness and soul and passion and speed of a startup."

But Silicon Valley needs to acknowledge that bureaucratic layers have an important purpose. In another paper that emerged from the Stanford study and might be useful to GitHub and other male-dominated tech companies, Baron and Hannan found that bureaucracy inside Silicon Valley startups also improved employment prospects for women in technical roles. Companies that leave personnel tasks to employees have a harder time diversifying because workers hire people just like them and place too much emphasis on new employees fitting in to the existing culture.

Developing a human resources plan at the company's inception is essential, Baron, who is now a professor at Yale School of Management, said in an interview. Adding or amending personnel practices later in the company's life can be helpful, but making such big changes midstream can also bring negative consequences for employee retention, profits and even chances for survival.

"I'm a big believer that the most effective approach to mistreatment in the workplace is to not exclusively frame these as issues of discrimination but to frame them as issues of bad human resources decisions," Baron said about issues like the one GitHub is facing.

Wanstrath of GitHub wrote that in addition to hiring an experienced human resource executive, the company was adding documented ways for employees to report problems and starting other personnel initiatives.

"We're very aware this is a weakness, now more than ever, and it's naive to think we won't have these issues in the future," he wrote.

It was also naive not to prepare for these issues in the first place. If the tech industry wants to stay on top, taking care of employees will be as important as moving fast and breaking things.

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