The Curse of a New Building

At some point in my career as I began to ponder how/why startups morph from agile, “can do” companies to ones that have lost their edge. I didn’t need to look much further than the “new building” debacle I had a hand in.

Signs of Success
One of the things you do right in a startup, is you move from one cheap and cramped building to another as you grow, with desks, cubicles and engineers piled cheek to jowl.  74HGZA3MZ6SV

One of the signs of success is when you outgrow your last cramped quarters and can afford a “real” building. This happened to us at SuperMac when our sales skyrocketed.

That’s when things went south.

Lets Fix Everything that Was Broken
At SuperMac we were excited to finally get out of the crummy tiltup we had occupied since the company emerged from bankruptcy. Now with cash in hand, we wanted to fix everything that seemed broken and annoying about our office environment. We made what seemed to be a series of logical and rational decisions about what to do with our next office building.

  • Engineers were packed in cubicles or desks right on top of each other?
    Now every engineer can have their own office.
  • We can’t bring customers to this rundown building.
    The new building needs to reflect that we’re a successful and established company.
  • The lobby of the last building didn’t “represent” the company in a professional manner.
    Lets “do it right” and have a lobby and reception area that projects a professional image.
  • We had used, crummy and uncomfortable furniture.
    Lets get comfortable chairs and great new desks for everyone.  None of this used stuff.
  • The last building has stained carpets and walls that haven’t been painted in years.
    Now we can pick out carpets that look good and feel good and we can have clean walls with great artwork and murals.
  • We didn’t have enough conference rooms.
    Lets make sure that we have plenty of conference rooms.
  • Everyone left the building for lunch.
    We need our own cafeteria so employees don’t have to leave the building.

Designing the Perfect Building
Once the commitment to fix everything wrong was in place, we were off and running on the design phase. We hired an interior designer and a great facilities person to manage the process. The exec staff started meeting about the design of the new building.

The company decided that now engineers can have their own offices rather than cramped cubes. The staff got involved about what color the carpet and walls are. And there was lots of discussion of what style of furniture is appropriate.

Our exec staff spent time worrying about who had the corner office, and what departments had the “prime” location. (I was great at “office wars.”) There was lots of talk about the importance of natural lighting and maybe we needed our own cafeteria. And even better, marketing got to design the graphics for the lobby and hallway (bright and colorful neon) to better represent the color graphics business we were in.

We kept the board informed, but they didn’t have much to say since business was going so well, and a new building was needed to accommodate the growing company.

None of This is Good News
This is when things started to go downhill for SuperMac. The most obvious problem; the time we spent planning the building distracted the company from running the business. But there were three more insidious problems.

  1. While offices for everyone sound good on paper, moving everyone out of cubicles destroyed a culture of tight-knit interaction and communication. Individuals within departments were isolated, and the size and scale of the building isolated departments from each other.
  2. The new building telegraphed to our employees, “We’ve arrived. We’re no longer a small struggling startup. You can stop working like a startup and start working like a big company.”
  3. We started to believe that the new building was a reflection of the company’s (and our own) success. We took our eye off the business.  We thought that since we in such a fine building, we were geniuses, and the business would take care of itself.

While our competitors furiously worked on regaining market share, we were arguing about whether the carpets should be wool or nylon.  The result was not pretty.

The Curse of a New Building
If this was just a sad story about a single company, it would be interesting, but not instructive.  However, I’ve seen this story repeated time and again, and not just in Silicon Valley. There’s a mindset that says, “By the dint of our hard work, we are “entitled” to a building upgrade and this is our just reward.”  And on an emotional level it makes sense.  But if you are lucky you have a board of directors who have seen this before. (And they’ll take the CEO out for a trip to the woodshed.)

  1. An upgraded new building is a premature transition away from a startup culture.
  2. It’s a tipping point to a big company culture.
  3. This is a culture and values issue worth fighting over.

Letting this happen is a failure of a board. If the management team is thinking they’ve made it, the new building is just symptomatic of a company heading for a crash.  It’s a company that’s lost sight of the values that got it there.

Don’t let it happen to you.

Stay hungry, stay lean.

Lessons Learned

  • New buildings are a distraction. You should avoid them at all costs
  • Building upgrades can destroy a culture

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25 Responses

  1. this is a mistake so often repeated by companies over and over again that it is mind boggling.

    It’s probably the best leading indicator of when it is time to move on and find the next challenge.

  2. I had a similar thing happen to me. I got a floor of space in Manhattan because our company “made it” and we could afford it.

    Even before we moved in it was a distraction. I found myself dealing with architects and electricians and people who had nothing to do with my company’s mission (or my passion).

    Then, when we moved in, I noticed that we no longer felt like renegades. We were now “professional.” Frankly, as a guy who idolized business people since I was 10, I was glad our environment looked more like a hedge fund’s than a dotcom startup’s.

    But I was wrong. There’s something about working on a crappy desk that spurs better ideas and more productivity than a “professional” desk with an ergonomic chair.

    Sorry about the long comment Steve.

  3. I won’t dispute your anecdote, but I would like to add that life should be lived not in hopes of a better future. Or rather, having your own office, and a cafeteria and nice walls and a nice desk means you can enjoy your work life today.

    Think about how much time you spend at the office. Probably 3/4 of your life… Would you rather have a really nice house (where you sleep) or a really nice office (where you spend five out of seven days of your week, every week)?

    The idea that being a “startup” equates to being cheap and having a crappy desk is ridiculous. You have a crappy desk, and share cubicles because you don’t have money to buy a nice desk and private offices. Having an office with a great chair and a cafeteria at work makes me a happier person. I don’t want to be hungry and lean (nor do I want to be full and fat). I just want to be comfortable and happy and loving my work and my office.

  4. This is one of Parkinson’s Laws: “perfection of planned layout is only achieved by institutions on the point of collapse.” In the chapter “Plans and Plants” (page 61 of my copy) he makes the point that

    “During a period of exciting discovery or progress there is no time to plan the perfect headquarters. The time for that comes later, when all the important work has been done. Perfection, we know, is finality; and finality is death.”

    He looks at a number of headquarters buildings: League of Nations, Pentagon, St. Peter’s Basilica, Versailles, …and concludes that their completion mark the sunset of the organizations that they represented.

  5. Spot on indeed. Thats exactly what happened to my previous employmemt at Mindjet. When we move to downtown Sf and after spending millions on lease and renovation, we let our competitors eat away our market share. It was an odd feeling at that time, we thought we have made it and fail to stay lean and hungry. Let this article serve us reminders to founders and boards alike

  6. All of this talk reminds me of stories I’ve been told about MIT’s building 20.

  7. When my startup starts hiring, I’ll make “The Four Steps to the Epiphany” a prerequisite reading for every interviewer.

    When my startup starts growing, I’ll make this blog post a mandatory reading for everyone in the company.

    And above everything else, Steve, will you be on my board? :)

  8. [...] The Curse of a New Building At some point in my career as I began to ponder how/why startups morph from agile, “can do” companies to [...] [...]

  9. I think you’ve hit on something important here, but I just want to play devil’s advocate.

    Is it a given that the “lean, hungry” culture can actually be maintained forever? The model you’re suggesting is that:

    - It’s good to be lean and hungry, forever. Can people really take that stress for years, decades? Will they not get really sick of the stained carpet? The unhealthy posture? Do you have examples of companies that can keep that stage up forever?

    - Something active has to happen to destroy this culture. What if this is just the normal effect of being successful? It’s natural for a company (and an individual employee) to take less risks once they have assets to protect. There are some institutions where it is unseemly to display wealth and power directly, like say, Oxbridge colleges. But despite the sometimes spartan environments, one can’t say that these institutions are fast moving and progressive. They develop traditions and privileges in other ways.

    I guess I’m saying — rather than lament the loss of a startup culture, perhaps the real issue is a failure to create a healthy culture appropriate for an established company.

    And even beyond that: companies are impermanent. Who says they have to last forever?

    • Neil,
      Great points. I agree. I think it’s unrealistic to assume you can be lean and hungry forever. I think there’s a size and scale where regardless of your intentions lean and agile won’t work (looking like a grandmother in a miniskirt.)

      However, the issue I try to raise in the post was the premature and unplanned end of the startup culture.

      It shouldn’t be brought down by grabbing for the golden ring and finding it turning into ashes in your hand.

      steve

    • I loved your reply. Companies change shape as they age. Just as a bonsai is not young even though it remains small, a company can’t remain a startup forever.

      The reality is that as a company grows, headcount growth is inevitable. This leads to even more cramped quarters.

      Eventually people have to move out.

      Inevitably organisations conclude that it is better to put all these people under the same big roof. When this leads to insularity, groupthink, and the “too big to fail” mentality.

      Office space is not the only status trappings people vie for. There are also managerial responsibilities. In “Almost Perfect”, the ex-CEO reported keeping the organisation flat created bad feelings because there was no promotion in a fast growing company.

      Steve Blank is right that it is a huge distraction. Perhaps it is better to shed employees instead, virtualize and outsource?

  10. A boot-strapping startup I once worked with was actually doing some real customer development and making real money from real customers for their early, ugly product. BUT, they moved into a nice office off of Sand Hill Road. A VERY nice office. I was there one day when Mike Maples happened to drop and he said, “This looks like a C-round office!” The startup guys should have taken the hint that their burn rate was likely inappropriate (read: out of control).

    Six months later, the startup hit a rough patch and ran out of cash. The founding team had a money-related falling out and basically wrecked what was left of the company. The extra rent they were paying on palatial digs would have bought six months worth of runway…

  11. The same mechanism operates with nation-states and empires. UK gave up dirty manufacturing for posh financial services, and is next to nothing in the world league now.

    A similar thing happens when a software program is repeatedly ‘improved’ so people can “do more things”. Non-geeks are slowed down whilst they struggle, and mistakes are made.

    “If it aint broke, don’t fix it.”

  12. How did Yann Wenner of Rolling Stone magazine get from cheap newsprint in SF to glossy in NYC with apparent mega-success? Are his costs in control? Is the story over?

    The same principles operate in living as in business.
    I moved town or district of residence 80-odd times in 50 years. I only once moved into a new apartment that did not have someone else’s wear and tear to fix. That one posh place made no difference to my misery/happiness index.

    People reject simple-but-clean-home-made, thinking that art-college-designers have something better to offer. But it turns out to be expensive and problematic that quickly dates anyway.

    Sorry to butt in, as a non-biz, non-geek ordinary lazy-ass bod, but the pattern described by stevebank fascinates me.

  13. When the reasoning for the move/change has more to do with reward than need… that is the sign of doom.

  14. I remember when Wang Labs finally (at 30,000 employees) moved into a new headquarters building. The CEO, John Cunningham — the younger brother of my boss at the time at another company — said this was the first time that he had a new desk at Wang. Well, within a few years John was gone and the company was on it’s way to becoming a small shadow of itself. Even with 30,000 employees they should have avoided the new building!

  15. [...] If you change your environment, be prepared for your environment to change. “Professional” changes can move you away from the grubby-but-effective roots that got you to launch products and close deals. [...]

  16. Steve – I tell the same story about moving to the new building as the beginning of the end. Great stories about SuperMac. Thanks for the reminder.
    –Tricia

  17. Yes, I’m commenting on an ancient post. :-)

    Steve, not everyone in the new building got offices. In fact, as I recall, most of the individual contributors were in cubes very much like the ones we left. What I remember of the new building was that the common areas were much nicer, but that was pretty much it.

    Anyway, SuperMac’s startup culture was destroyed long before we moved into the new building. When I joined in 1990, if I recall correctly, the engineering department had about 19 engineers, one lead engineer (Ali), and one VP (Brian).

    When I left, engineering had about 19 engineers, several directors (I could never keep track of them all, but they sure liked to keep track of us), three VPs, and one senior VP. I don’t know for sure, but I would bet these managers were sucking down well over half the total compensation in the department while doing no useful work and actually reducing the amount of work the rest of us could get done.

    I know of far larger organizations that have a far lower level of managerial overhead. SuperMac wasn’t merely “working like a big company,” it was working like a parody of a big company.

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  18. Happened at Stardent Computer too. Stardent was the bastard combination of Ardent and Stellar when SGI was beating them both. About 6 months after the companies combined, the headquarters was moved about 20 miles north to a lovely site in Concord MA.

    We were told it was cheaper (it was) and nicer (eh) but another reason was it was next to a private airfield where the CEO could take helicopter lessons.

    The company was gone in a year – the building wasn’t the reason but the lack of focus it engendered didn’t help

  19. > We were told it was cheaper (it was) and nicer (eh) but another reason was it was next to a private airfield where the CEO could take helicopter lessons.

    Whenever a company moves its headquarters, the new location almost always more convenient for the CEO than the previous location or any of the alternatives considered.

  20. Steve,

    Your post can be taken as a warning to keep the company eager to keep producing well.

    The association between moving to a too nice building and the company starting to fail is close.

    Still I believe you have a ‘spurious correlation’. If so, then the new building was not the cause of the failure, something else was, and staying in the old building and not fixing the real cause would still result in failure.

    Spurious correlations can be bad things, ones that is cause people to pay attention to some symptom instead of the real cause.

    Here’s my guess of the cause: When success comes, the guys at the top get satisfied and quit working hard on the company.

    More generally the CEO needs to be sure people are still working hard on the real goals of the company. Having people piled on top of each other may be one way for the CEO to do that but is a bit indirect. The CEO needs to be direct. Uh, he needs to ‘know his business’, have ‘fingertip feel’.

    Uh, is it really too difficult for the CEO to know when people and the organization are working effectively and when they are not?

    For the CEO who really understands the company and what the important work is and really cares about the company even after it is successful I would look first to the founder.

  21. Why is 74HGZA3MZ6SV embedded in the article?

    • David,
      It’s the code Technorati uses when it crawls the web to index our site and the blogs.
      I had to put it in a few posts.

      steve

  22. I worked for Supermac in their QA dept. with Dave Swanson and Bill Fitz, between 1990 and the day they closed their doors. It broke my heart, I loved that job. It seemed as though the decision to close their doors was a direct result of trying to impress others about how professional they looked. They bit off more than they could chew and many people lost their jobs as a result. But Supermac was very good to me and my family and for that i’ll always thank them.

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