“Betty bought a bit of butter, but the butter was bitter. So, she bought some better butter to make the bitter butter better.”
That’s an old tongue twister you might have recited several times as a kid! Fun, right?
Well, the current twister that Better.com found itself in was for sure, bitter and now, everything is being done to make it a tad bit better! After all, the company and it’s upcoming IPO are at stake here!
Who doesn’t know Better.com and its now infamous, 3 minute zoom call mass firing incident by the CEO, Vishal Garg who subsequently went on a “forced” leave of absence through board interjection.
Better.com is the heavily funded mortgage lender that came into existence in 2016. It started by buying a traditional mortgage bank and rebuilding it using tech to empower consumers. Goldman Sachs, Kleiner Perkins, and Softbank besides others stand proudly behind the company, having financed its way so far. In its journey to make the home buying process simpler and accessible, Better.com invested heavily in technology and people as business grew. 2020, the year of home price surges amidst a shortage of available homes is no new news to anyone and I am sure, was a shot in the arm for Better.com on its upward trajectory.
Come early December 2021, the CEO is on a 3-minute call with over 900 employees telling them they are the “unlucky” group being laid off. This was a day after the company announced it had taken $750 million in new investments. The reasons cited for laying off about 15% of the workforce were market efficiency, performance, and productivity.
Ironically, some of those laid off had recently received promotions, etc. Over the next couple of days, the CEO commented on an anonymous online community, Blind, and on a follow-up zoom call with the remaining employees that there were several employees that were unproductive and working fewer hours and in fact, all this should have occurred about 3 months ago!
Very quickly, this went viral; and with equal swiftness, the CEO sent an apology to the remaining employees and admitted that he “blundered the execution.” While some of the senior leaders decided to resign, the board sent the CEO on extended leave while it looked to do damage control. Of course, the IPO will be delayed and there is a third party looking into leadership practices at Better.com.
Toxic executive behavior has become more commonplace with the new-age companies that come with bags of cash behind them. HR, which is expected to be the backbone of a company ends up being the one catering to management that cuts the checks, and the initial blind eye ends up hurting everyone after all. As a result, employee complaints fall on deaf ears unless something happens that brings it center stage. We have seen it with Zenefits, Uber, WeWork, and now, Better.
Growth at any cost is not a sustenance mantra! Returns are important for investors but so is long-term sustenance for companies that are established, for their employees and management, and for future investors when these companies go IPO. Besides, financial diligence, leadership, and ethical diligence are also equally important and should be a part of what’s looked into before a company is set free on the public to invest.
Everyone knows that toxic workplace culture is bad for employees and also for the long-term health of the company. A lax environment where harassment, discrimination, mismanagement, and other forms of bad behavior persist unchecked can endanger the company’s long-term prospects, both financial and non-financial. Investors, boards, and management should be aware of the operational and cultural challenges that an organization faces besides just looking at top and bottom lines. We have seen time and again, how such missteps can challenge the growth of a company.
Employees are the beating heart of a company and they are the reason, clients show up and are served, they are the wheels that set the growth engine in motion. When employees are happy, so are the customers. And, this means a healthy business, growing financials, and well-served investors and management. It’s never the other way round!
Companies that plan for near term IPOs focus on:
- Building a great finance team headed by an able CFO
- Invest in the capabilities of the finance team and also in robust internal administrative and financial systems
- Building the right board
- Network with select bankers early on
- Meet with target investors in advance
- Clean up the cap table
- Communicate plans within the company
- Ensure the right accounting firm is in place
- Resolve corporate governance
- Develop long term, financial models
- Comb through P&L
- Show a growing business
- Plan metrics reporting and run an internal quarterly earnings process
- Plan over-delivery on expectations
While you can see that much of this is focused on financials and growth, there is not enough to suggest sound management practices and employee wellbeing. I believe that should be a must-have on this list to ensure that no unnecessary reputation and brand management practices are needed after the fact and they become integral to how a company is formed and grown over time to the stage when it can enjoy public presence.