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How tech companies can succeed by going private

Rob Enderle | Sept. 27, 2013
BlackBerry, BMC and Dell are three of the latest tech companies to go private after a series of stumbles as public companies. To succeed in the latest chapter of their business lives, these firms need to undo the damage done by going public in the first place. It's easier said than done.

Public Company Management Now Focuses on Blame
When a company goes public, it tends to step up its human resources policies to ensure executives aren't pulled into discrimination litigation, wrongful termination litigation or dealing with unions directly. This desire to avoid a mass of painful employee management problems, coupled with the need to hold down employee costs, tends to force a company into doing stupid things.

Rules on manager/employee relations, forced rankings, salary averaging, peer reviews and other practices - none of which were present when the company was private and innovative - come into play, focusing management on how much people are paid rather than what they actually do.

Employees who used to work well together are forced to compete or report on each other. Both trust and creativity plummet - and executive management will chalk this up to bad luck, not a series of bad decisions made to assure that their lives were more pain-free. You've likely experienced this yourself when surrounded by policies that seem to force out the most creative, productive employees and favor the most politically oriented and useless.

It amazes me that anything gets done at the modern public company. It's structured to avoid innovation, as it's focused like a laser on blame. Innovation comes with risk, risk increases the chance of failure, and failure is a blame magnet. It's a vicious cycle.

Money, It Turns Out, Isn't Much of a Motivator
I remember Bill Gates lamenting the amount of wealth that early Microsoft employees acquired - not because they were greedy, but because it pushed many to retire prematurely. The firm lost the very skills it desperately needed as a newly public company.

Those founders who do stay inadvertently create a big disparity between themselves and the employees who come in after the firm has gone public. They look at their far wealthier peers with envy, knowing they'll never get the same level of reward, regardless of their accomplishments.

The work of Abraham Maslow and Frederick Herzberg, taken together, suggests that money isn't a motivator at all but works incredibly well as a de-motivator. Give an employee a windfall and he doesn't work harder - in fact, he may just up and quit - while the employees working around him are demoralized. They may leave, too, hoping for a similar reward from another company that they feel they won't get if they stay where they are.

Finally, folks who acquire a lot of wealth at once often don't know how to handle it and can have issues with gambling, substance abuse or expensive habits that eventually overwhelm them. Affairs, divorces and other bad behavior are all too common. All these things affect job performance, often dramatically.

 

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