A few short years ago, Karmaloop and Nasty Gal were industry
darlings. Both fashion companies made more than $100 million in revenue before
falling on hard times in an otherwise growing marketplace. Karmaloop declared bankruptcy, and Nasty Gal endured
three rounds of layoffs before the founder stepped down as CEO.
These outcomes may not have been surprising to employees — or
those following the increasingly negative feedback on Glassdoor.
When you look at the feedback for Karmaloop and Nasty Gal,
you see common trends dating back to 2013: Both companies maintain overall
ratings around two out of five stars, with pretty desolate employee
recommendation ratings. Karmaloop and Nasty Gal could’ve taken action before
the issues became insurmountable.
The Common Thread Tying Poor Performers
Most companies can earn up to $10 million on the back of hot
products. After that, however, businesses must choose between short-term
scaling and long-term sustainability. If they go all in on the former, their
cracks begin to show.
There are commonalities among companies with poor Glassdoor
ratings. Employees often note that company advancement is based on politics,
not merit. Employees also mention a lack of systems and processes, saying the
founder/CEO has controlled key functions despite a lack of experience. Lastly,
employees say they feel overworked, underappreciated, and unheard regarding
Whether an employee recommends a company to a friend may be the
most telling metric of all. Nasty Gal’s recommendation rating is 22 percent; at
25 percent, Karmaloop’s rating is equally bleak. Companies with customer Net
Promoter Scores in this range likely won’t survive long. Nowadays, companies
must treat employees as internal customers or incur high employee turnover and
poor reviews that make hiring more difficult.
What Do Sustainable Growth Companies Do
It is possible to avoid the fate of Karmaloop
and Nasty Gal. Most high-turnover businesses don’t create core values dictating
what they stand for and how people should act. They fail to create a compelling
vision employees can believe in. They also place too many first-timers in
management roles, closing them off to feedback.
Nasty Gal and Karmaloop were focused on growth at all costs — as
opposed to smart growth. Keep the negative consequences of
quick, revenue-driven growth in mind to increase your company’s chances of sustainability.
Here are three action steps to help you focus on a more
sustainable growth trajectory:
1. Limit Venture Capital Funds
Getting too much VC money too fast can trigger high growth; as a
result, you may bypass hard choices and opportunities that are better in the
long term. Once a company takes $5 million in funding, being a $10 million
company isn’t viable. Based on investors’ exit requirements, companies will
make decisions favoring growth over sustainability and profitability.
How much you take in determines how big you need to become in
three to five years. For many businesses, top-line growth isn’t their key
metric. But you make top-line growth a necessity when you raise significant
capital. If you avoid or limit the VC money you accept, you can build a
sustainable company culture and a profitable business that can survive without
another infusion of capital or an acquisition.
Too much VC money can also fuel a surge of top-line growth that
overwhelms a company’s operational capacities. Many negative Glassdoor reviews
stem from unsustainable venture-fueled growth that stretches employees too
thin. These founders favor world-class products over world-class operations.
While the former wins in the short term, the latter usually wins the long game.
2. Create a 10-Year Vision
Growing quickly and selling isn’t a vision. One big reason for
rampant employee dissatisfaction is a focus on growth with the end goal of
being acquired. Companies need a purpose that employees believe in.
Employees who understand the long-term plan tend to be more
fulfilled than employees working solely to fill the coffers. You must hire,
fire, and promote according to your core values.
Warby Parker (a client of ours) is so focused on its long-term
vision that it has a webpage dedicated to company culture. With a 74 percent
recommendation rating and a 100 percent rating for its CEOs, its Glassdoor reviews reflect its strong
long-term goals. The company is reportedly valued at more than $1 billion.
3. Take Employee Satisfaction Seriously
Study your Glassdoor reviews. If your company isn’t listed,
create a profile and encourage current and past employees to leave reviews.
Negative feedback will give you actionable insights to improve your culture for
Ask employees for feedback formally and informally, and
proactively take action and report back. My company has made changes to our
benefits, meeting agendas, and training programs based on employee feedback.
The problems identified in your Glassdoor reviews won’t go away
on their own. Use them as predictors of things to come. If the feedback isn’t
positive, you need to create a better culture to retain your best talent. Focus
on the future, and the employees who are right in front of you will help you
Glazer, founder and managing director of Acceleration
Partners, is a customer acquisition specialist with an
exceptional track record in growing revenue and profits for fast-growing
consumer products and services companies. His clients include adidas, eBay,
Gymboree, the Honest Company, ModCloth, Reebok, Shutterfly, Target, Tiny
Prints, and Warby Parker.
Entrepreneur Council (YEC) is an invite-only
organization comprised of the world’s most promising young entrepreneurs. In
partnership with Citi, YEC recently launched BusinessCollective, a free virtual mentorship program.