Matthew Yglesias's commenters are angry at Portfolio for hiring Ryan Avent and firing him three weeks later. And believe me, I'm not about to defend this, both because Ryan's a friend, and because, well, that should just never happen to anyone.
Nonetheless, it has happened at every startup I've ever worked at--at least the ones that went bust, which was most of them. I myself turned down a nice, stable job at Booz Allen right out of business school to work for an exciting new tech strategy company, which then laid me (and the rest of my associate class) off. I worked for several other startups where I lasted less than three months, because the whole company (or in one case, division) was shut down. At that, I've never felt too badly used, because at the first startup I worked for, one guy worked there for exactly one hour--he had finished up at his old company the night before, came in at 9 am on Tuesday morning, and at 10 am was called into the staff meeting where they told us the company was done.
(Anecdotal evidence suggests that 85% of these meetings are held at 10 am, with the remaining 15% evenly divided between 1 pm, 2 pm, and 3 pm. Not sure why 10 am is the heavy favorite. It's not like you really want to sleep in before you fire everyone who works for you.)
Yet the bosses who did this were among the best bosses I've ever worked for. I still remember that company very fondly, as did everyone else I knew who worked there. The reason: they didn't know it was coming. They found out the company was shutting down when the bastards funding us failed to wire the money for our payroll. I'm sure that was also the case with the people who hired Avent. These things happen because the people disbursing the money aren't the people running HR.
Most executives making hiring decisions don't go to the money men and say, "Hey, I want to hire someone--should I go ahead, or are you going to suddenly shut down the company and ruin some guy's life?" Nor would the money people likely tell them if they did. The money people are comfortably far away, not meeting the person whose life they're helping immeasurably complicate. And they have their own organizational problem. They haven't decided whether or not to shut down the company. Sometimes they don't shut it down. And if they say, "Hey don't hire anyone, because we might be about to fire the whole staff in two weeks", then all the other people will stop making whatever it is you make, and start looking for other jobs, and the best people will leave first, and suddenly you'll have to fire everyone, because the company's not making any money at all. A Ryan Avent who is a chess piece, not an actual human being sitting across the desk from you, seems like a worthwhile sacrifice to the greater good.
This is what hiring freezes are for. Unfortunately, when someone as central to your website as Felix Salmon leaves, it's hard to just let that slot lie empty. Luckily, Conde still has quite a lot of money--enough to undo a lot of the damage (and give themselves a nice PR bonus) by offering Ryan a really generous severance package. I hope they do.
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"Why Do Startups Hire People Right Before Going Belly-up?"
You have to differentiate between different kinds of start-ups first. Portfolio was a start-up only in the sense that it was a start-up property of an established media conglomerate. The folks at Portfolio probably hired Avent simply because they didn't know the bosses were going to pull the plug on Portfolio so soon. In a real start-up -- i.e., an independent start-up company that isn't a division of a larger enterprise -- this shouldn't happen. Maybe you worked for start-ups that were generous with OPM, but when start-ups are funded mainly by the founder and his friends & family, they tend to be more judicious in their hiring, from my experience at least.
"Luckily, Conde still has quite a lot of money--enough to undo a lot of the damage (and give themselves a nice PR bonus) by offering Ryan a really generous severance package. I hope they do."
Is that a threat? It's unfortunate that they shut down the mag, but Ryan only worked there for three weeks. He ought to be thrilled if he gets any severance.
One would have to think that anyone moving from one media outfit to another would have negotiated his severence before he started.
I could see not being in a position to negotiate if one didn't already have a job, but when being lured to another organisation it would be best to get your severence in writing before you take the position.
What good would a severance package with a start-up? Most of the time, they let you go when the investor or bank shuts off the money. All you will have is a breach-of-contract claim and a spot in line behind all the other unsecured creditors who will not receive a dime.
Megan,
Did you negotiate your severence with the tech firm while you had both the tech offer and the Booze Allen offer on the table?
Almost any startup is basically playing a game of chicken. They have to get enough money to make a product that people will pay for, enough money to market it, etc. But they don't know exactly how much money that is, because nobody has done it before. Apple or Microsoft or Ford can estimate with a fair degree of accuracy how much money a new product will take them to develop, because they have developed many new products before. The new product may very well be just a variation on an old product.
But they don't know exactly how much money that is, because nobody has done it before.
The could do some amount of market research to figure that out. It's not like there aren't a lot of people out there who have developed similar products. A couple of good consultants could give you a good ball-park number. Very few products are so unique that there isn't something to compare it to as far as development times and cost. I would say that they are more willfully ignorant, or think that they can do it for 10X cheaper than a large company because they are a small company.
Great! I now have an excuse to decline all 10 a.m. meetings!
Just about every tech company I've worked for has had flexible schedules with core hours (when everyone's presumed to be available for meetings) of 10 AM to 4 or 5 PM. Actual schedules vary, with some people working 7-4, and others working 10-7, and everywhere in between. The 10-7 schedule seems to be the most common among employees who don't have young children in school (which is most of them).
In this context, a 10 AM "the company's dead" meeting makes perfect sense. You want to schedule it as early as you can so people don't waste half a day doing work for a company that's already had the plug pulled, but if you schedule it earlier, half your employees won't be there yet.
Conde is going to give Ryan Avent a good severance package so they can hire talent in the future.
Eveeryone who interviews with Conde for the next few years is going to ask "how do I know this isn't going to be another 'Portfolio'?"; some people might be willing to take the risk if they know there will be a big severance package which will allow them a soft landing in the event their job does evaporate after a few months.
As it is, this tells me that Conde is not well-run internally, because if there were questions about whether Portfolio was doing well enough, the corporate beancounters should have told Portfolio HR people to not hire anyone until the question was resolved. In a venture-funded startup, that sort of disconnect is a little more excusable, because the money people and HR really aren't the same company. If I were in the business, I'd probably avoid looking for jobs at Conde properties in the next few years.
Why should Conde give him a severance package? Any one who knows about this won't bother trying to get a job at Conde Nast anyway. So what does Conde have to gain at this point?
Gawker had a piece last October which strongly suggested that Portfolio was circling the drain.
Do people really not know why startups hire people before going belly up?
Because startups go belly up not just from a long time at a constant burn rate, but because a) investors pull the plug, b) expected financing suddenly isn't expected, c) legal maneuvers can make a startup stand still with no prior notice, d) because most startups aren't good at communication, and e) a zillion other reasons.
In none of those cases are employees below the board privy to the information, and it's normal employees at midmanagement levels that do the hiring.
Really--of course a company that's got failing enterprises isn't "well run internally"--how many companies are and are failing?
remember, most startups go under. and they deserve to, because they all make the same stupid mistakes over and over until they finally run out of gas. The successful ones are the ones that have an idea so great, so financially great, that even the obvious stupidity that firm makes time and time again can't sink it.
and luck has a lot to do with it.
So does discipline. I worked for a start-up that outlasted a couple of much better-financed competitors, partly because it was tight with a buck -- renting office space in an unfashionable town instead of a glamorous big city neighborhood; buying used office furniture; etc. Discipline probably varies directly with the amount of founders' assets at stake in the operation. When it's mostly from VCs (as it was for some lucky young entrepreneurs at the manic stage of the dot-com boom), and the worst case scenario for the 28 year old founder is a great story for his application to b-school, there's a different attitude toward managing cash.
It is not just startups, it happens every where. Once a company I worked at laid off a person before they started. Actually worse than that, they withdrew the offer the day before the person was suppose to start (and after they had left their old job). No severance, nothing. There was a shift in power on the board of directors and the new regime implemented immediate cost cutting. Several positions were cut, not just the new person.
Hiring can take some time. From the point that the req is approved until some one starts can be months. Once the process starts, it is hard to stop it. And down turns can happen very fast. In the early 80's I worked summers in the main factory for a large oil field services company. Times were booming and they were so short of workers that I was given a job that normally would take some one 5 years to work up (since I had worked there the 2 previous summers,I was 'experienced'). But the next spring the crash had come and the lay offs started. It happened fast, within 90 days or so. The worse part was that on the first day of work for all the new hires who had just graduated college, they were marched into a conference room and let go. First job out of school and they had moved into a new town and signed leases and everything just to be let go.
For a second there, I thought Megan was going Steinbeckian in her castigation of the "money men." With writers and graphics designers as tenant farmers being run off their farms by men who are responding to demands of banks who are owned by trusts back east who are owned by insurance companies etc etc.
She pulled back just in time though. Libertarians should simply say: Mr. Avent did his due diligence, knew the risks he was taking (like any vendor extending credit to a startup), and must've felt the opportunity was better than the alternatives he had.
One obvious problem is thinking your funding is going to show up, and it doesn't for some reason. This happened at several startups I worked for over the years. I was always an "early hire", but definitely saw numerous people hired just before the funding fell through and the company shut down.