Reading:: The conversational firm

 The Conversational Firm: Rethinking Bureaucracy in the Age of Social Media

by Catherine J. Turco

In this 2016 ethnography, Catherine Turco explores a fast-growing social media marketing company. This company attempted “radical openness” with its employees (p.2), a postbureaucratic vision of how such a company should work. After 10 months at the company, Turco characterized it as a new organizational form, “the conversational firm”: not an open, democratic decision-making environment, but one with radically more open communication and a more adaptive organization (p.8). “The firm ends up deconstructing our notion of bureaucratic control quite profoundly,” she adds. “We will see that communicative empowerment and decision-making empowerment are distinct, that distributing information can be used to improve centralized decision making, that workers do not always want decision rights delegated to them, and that a stable decision-making hierarchy can support the delegation of voice” (p.9).

Throughout the book, Turco examines different aspects of this conversational firm. In Chapter 2, she examines the idea of open communication, which involves two things: (1) “radical transparency,” in which management shared detailed and sometimes confidential information about their decision-making with employees, and “internal voting rights” extended to everyone in the organization, providing all employees with an avenue for sharing their information, ideas, and opinions with management (p.30). Among the company’s mechanisms for encouraging radical transparency were “mystery dinners” in which new employees met people outside their immediate workgroup (similar to the “taco club” I noted in a 2010 article on a search marketing firm!). Yet although these measures subverted the firm’s communicative hierarchy, they did not transcend it: local power dynamics still played their part (p.55). Open dialogue did not mean open democracy (p.62).

In Chapter 3, Turco examines open control. Decision rights and voice rights were not the same thing (p.68), with employees being able to voice opinions and concerns openly, but management reserving the right to make decisions (p.73). One example is the mantra “Use good judgment” (UGJ), which was frequently invoked as a principle (p.74), but made inequality visible, since decision rights were loaned rather than given to employees (p.79), and relied on common warrants that didn’t actually exist (p.82). UCJ led to self-censoring (p.100). 

In Chapter 5, Turco tackles “open culture,” described in a “culture deck” (p.105). Yet employees perceived a gap between their lived culture and the culture described by executives, as well as the fact that executives were the ones defining the culture (p.115). Ultimately, the deck was reframed as “aspirational” and valued because it sparked debate (p.125). 

Chapter 6 reveals the surprising news that the company initially did not have a Human Resources department, shunning it as too bureaucratic, only to eventually institute one (p.127). The lack of HR became a hindrance because the company didn’t have standardized performance reviews and terminations; internal job changes were handled on an ad hoc basis; and the company didn’t have a consistent maternity leave policy (p.130). This led to crisis. But Turco argues that rather than a nonbureaucratic firm, management had created a conversational firm, one that helped them navigate this crisis (p.137). 

Chapter 7 examines the conversational spaces set up by the firm, including its open-plan environment (p.142). 

Chapter 8 examines implications for theory. Turco argues that prior attempts to rethink the bureaucratic firm lacked conversational tools and expectations and were too narrow about their assumptions about authority (p.167). In the 1990s, for instance, people assumed that distributing communication entailed distributing authority (p.169). In contrast, she argues, the conversational firm works “because, even as the organization retains a conventional, hierarchical decision-making structure, the decisions themselves are shaped and shifted by the conversational environment and the employee voices within it” (p.171). 

Chapter 9 ends with advice for conversational firms.

Overall, I really liked this book. Turco did a great job of drawing on different stories throughout her 10 months with the firm. It resonated with many of my own experiences, even as Turco goes into further depth about differences between (for instance) communication style and control. If you’re interested in how organizations work, and postbureaucratic organizations in particular, I highly recommend it. 

Reading :: Launching from the lab

 Launching from the Lab: Building a Deep-Tech Startup

By Lita Nelsen, Maureen Stancik Boyce, and Sophie Hagerty 

I’ve read many practitioner-oriented books on launching startups, books that mainly focus on customer discovery and pitching. This book is different. It focuses on deep-tech startups, “new companies developing groundbreaking science and technology into new products, often for new markets” (p.1). For that reason, it seems mainly pitched to IP owners who are considering commercializing their technologies — especially PhDs and graduate students working in a university research environment. For that reason, it is very light on customer discovery, instead emphasizing intellectual property (Ch.3), licensing patents (Ch.4), creating equity (Ch.6), building the company (Ch.7), financial modeling (Ch.9), raising capital (Ch.10-12), negotiating with investors (Ch.13), and exiting the company (Ch.14). Yes, it also covers business models (Ch.2, 5) and pitch decks (Ch.8), but the main focus is explaining business details to sci/tech researchers. This is an important niche, and if I were starting a startup, I would be consulting this book often.

Not only is the book important, it’s very accessible. The authors have advised many startups, and they dip into this deep well of expertise to illustrate their points. I really appreciated how they described the thorny details — especially financial modeling, which I know from interviews is a real concern among sci/tech researchers — and walked readers through them. 

I also appreciated how they examined the motivations for becoming an entrepreneur: “If your only motive is to get rich, it’s probably a losing ambition” (p.5). 

I’m fairly well versed in how startups ideate, develop business models, try out MVPs through the build-measure-learn loop, and pitch. But I learned a lot about other topics. 

For instance, their explainer on founder equity (p.95) was valuable for understanding how founders must strategize their equity holdings. 

Similarly, the authors clearly discuss financial projections (p.137), whose “assumptions will become more accurate” over time (p.139), and they note that “for many research-based emerging technologies, a decade or more may pass before the first product is ready for full release and commercialization” (p.142). 

They also clearly describe the difference between dilutive capital (in which the founder gives equity to the investor) and nondilutive capital (in which they don’t — think in terms of financing and loans, such as SBIR/STTR, I-Corps, tax incentives, and academic incubators) (p.154). They discuss how to get advice from volunteer mentors and business plan competitions, and they wisely warn against “bad apples” such as predatory advisors who demand equity (pp.160-161). They describe various mechanisms for raising capital such as SAFEs and notes, equity rounds, lead investors, and syndicates of investors involved in a given round (Ch.11). And they list stages of fundraising, from initial friends-and-family funding to preseed, seed, series funding, down rounds, the round before an IPO, and mezzanine rounds (pp.179-182). They also emphasize selling to people who share your vision (p.188).

Overall, I learned a lot from this book. It would make a great companion to my upcoming book on entrepreneurship communication, since both books cover early-stage startups, but are nearly orthogonal in terms of what topics they cover. If you’re interested in how startups work, or you want to start your own startup, definitely check it out.

Reading :: The promise and peril of entrepreneurship

 The Promise and Peril of Entrepreneurship: Job Creation and Survival among US Startups 

By Robert W. Fairlie, Zachary Kroff, Javier Miranda, and Nikolas Zolas

In this book, written by economists who study startup job creation, the authors report results based on their dataset, the Comprehensive Startup Panel: A dataset that tracks job creation and startup survival. The authors created this new dataset because current Census Bureau data don’t do a good job of tracking startups. Although startups may eventually become employers, most startups begin life as nonemployer firms, so they had to reach across data for both nonemployer firms (NEFs) and employer firms to create a more comprehensive picture of startups (p.2). They investigated three questions:

• “How many jobs are created by the average entrepreneur?” (p.2) — and, related, “is entrepreneurship about creating jobs or about creating a job?” (p.3). 
• “Do these created jobs last or do they disappear quickly?”
• “How many entrepreneurial firms survive each year after startup?” (p.2). 

“The US Bureau of Labor Statistics (BLS) defines entrepreneurs as new employer establishments” (p.3), but NEFs represent both the majority of startups and the majority of total firms in the US (pp.3-4). Once the authors account for this by creating a new dataset, one that unites NEFs and EFs and defines a business as an entity that has revenue tax liability (p.16), they find that 

• After one year, 59% of startups survive
• After two years, 47%
• After 5 years, 33% (p.11; p.65)
• After 7 years, only 29% (p.65)

compared to the official statistics of EFs, which claim a 50% survival rate after five years — a figure that ignores startups’ previous existence as NEFs (p.27).

Many startups also have quick exits:

• Year 0, any given year, starts with about 4.1m startups 
• Year 1, only 2.4m of these survive
• Year 2, only 1.9m survive
• Year 5, 1.2m survive (p.63)

Including NEFs is important because nonemployer businesses have a startup rate of 35%, which is three times that of employer businesses (p.97). 

They use a broad definition of entrepreneur: Did someone create a job for themselves (p.100)? 

Finally, they examine startup owners: Who owns startups? Their statistics here reflect what we already know about startup owners: They are disproportionately white and male, with a college degree (p.143). 

Overall, I really appreciated this book. I am no economist, but I appreciated the authors’ clear methodological assumptions and their accounting for how they got the numbers they did. The results helped me to better understand the startup landscape. If you’re similarly interested in startups, definitely check it out.