The technology industry is home to some of the world's greatest innovators, most profitable and valuable companies, and incredible startup success stories. But despite these achievements, it is also a space where there is a surprising lack of appreciation for qualified management.
The lack of proper management leads to the failure of many great companies and ideas. More importantly, it contributes to engineering talent shortages and, in turn, to rising people-related costs.
What works for tech monopolies doesn't work for everyone else
At first glance, you might think that some of the best IT companies are incredibly well managed. In practice, however, many of them are one-product wonders. They have discovered a product and built, some would say, a monopoly around that product.
This is evident for both Google and Meta (formerly Facebook), both of which have one primary revenue stream (digital ads) and both have largely failed to build new products outside of acquisitions (Google Maps and Android are possible exceptions, although both started out as early-stage acquisitions).
Because these companies have incredible pricing leverage in their respective ad businesses, they can continue to pour almost unlimited resources into trying to create new products and eliminate potential competition through acquisitions, all while hiring each and every engineer. that they can hold in their hands.
But this problem goes beyond these two prominent corporations. It is quite widespread among large technology companies.
There may be talk of goals and key results (OKRs) in technology companies, but often these goal-setting frameworks are just words without content.
When the bottom line hardly matters, the result is too much wiggle room and too little accountability. They are wasted resources and stalled innovation. If companies effectively used their existing talent, they could produce the same, if not better, results. There would be fewer failed products, ultimately freeing up talent to work on more impactful tasks and produce more innovation.
Many tech companies could eliminate 20% to 40% of their workforce with very little change to the bottom line. However, this would require doing the work with much scarcer resources, which, in turn, would require management (also known as prioritization; the ability to start small, experiment, and only after testing and learning, grow into a product; and greater control of product and business initiatives through profit and loss).
With better management, companies would also see a significant cut in their personnel-related costs. Engineer salaries are high and rising, and while many technology companies with high-margin businesses can afford to hire excess engineers and other technologists, they would significantly reduce their costs if they simply managed existing in-house talent better. allowing them to allocate resources to fewer initiatives and more profitable results.
Of course, not every company creating great technology suffers from this problem, with Amazon being by far the biggest and best example. It's also Amazon, of all the big consumer-focused tech companies, that has been the best at innovating new products and creating new revenue streams (Amazon Web Services, Prime Video, Marketplace, Ads, to name a few). some) outside or on top of their initial retail business.
How do you come to despise management?
This problem is not just a problem of big technology companies; It is prevalent in many new businesses. There is a widespread belief that good culture equates to having beer on tap, feeding employees gourmet food, putting on a foosball table, and, pre-COVID, having an Instagram-friendly office space.
This becomes a lack of responsibility that, from a management point of view, is easy to hide. And of course, while those are all fun benefits to many, the culture should, at its core, be a consensus of behaviors that are rewarded and encouraged.
Many founders have been conditioned to believe that they will not be able to innovate and enforce good governance and accountability at the same time. In fact, talent wars are so intense that a lot of energy is spent on making everyone feel good about their work, not on getting results. Founders have come to believe that users will come if and when they build a great product, rather than running the business through a bottom-line lens, testing and learning what that product to build can be.
However, we can, we need to hire people who are much better managers than many founders can be in their early days. It's hard to be an early-stage founder (focused on product and capital) and a manager (focused on managing people and responsibility) simultaneously, so you need to figure out where you're successful and where you're not, and then fill in the blanks. in white.
Advice is also needed at the right time. Only through good training can you recognize blind spots and determine how to address them with the right people.
Better management allows companies to do more with less
However, if great companies are still being built (there were some pretty incredible IPOs in 2020 and 2021), why should anyone care if they are well run or not? There are two reasons.
First, there is an incredible shortage of engineering talent. Innovation and the future prosperity of the economy are not being done a favor if companies that can afford it amass great talent, even if they can achieve the same results with fewer engineers. This also leads to unused and valued engineers stuck in monotonous workplaces, and talent shortages further exacerbate one of the most pressing shortages. As a result, the ability as a country to stay ahead of the global technology scene is severely limited.
Then there is the issue of cost. Wages are out of control, as is the cost of living. Many engineers are aware of the problem and use it to their advantage, as they should. But these problems continue to feed off each other like a vicious circle. This, of course, affects businesses, especially startups, who end up needing an absurd amount of capital to pay for all of this.
There is a huge opportunity for technology companies to change their mindset about management. The first step is for founders to hire and surround themselves with people who embrace management and think about business through liability and P&L. Recruit leaders who are experienced managers or seek support from a management coach or consulting firm. When the company thinks it needs another engineer, it should pause and consider whether what is really needed is a manager to get more out of existing engineers.
Second, leaders need to focus on developing and managing existing talent, such as matching employees with the right growth opportunities, reorganizing teams, setting goals, and holding leaders and employees accountable for meeting them.
It is a paradigm shift that will take time. Obviously, companies that implement better management will not change the focus of the problem overnight.
However, the workplace culture as we know it today originated and evolved from just a few companies. If, over the next decade, more well-run Amazon-style businesses are built, it would completely change the culture of startups or traditional businesses and, as a result, how they are run, the industry, and the country, in general.
