This article was originally published at Yahoo Small Business
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 Together
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 their ideas.
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 Differently?
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 sustainability.
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 get there.
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