Facebook: The IPO hangover that could change it forever

February 10, 2012

Coming up any day now, there’s going to be one helluva party at Facebook. Champagne, confetti, speechifying, really loud music — you name the hoopla. And why not? Companies don’t go public for a gazillion dollars very often.

So party on, Facebook.

Just beware the day after. Actually, beware the year after and the year after that.

Because once Facebook has its massive new liquidity infusion, the company stands to get nailed by something that can hurt a lot more, and last a lot longer, than a hangover: a changed culture. That is, a culture of diminished urgency, of game-over-we-won, of not-invented-here conceit.

Now, it practically goes without saying that such cultures can (and too often do) crop up at all sorts of companies for all sorts of reasons. But most often, arrogant or otherwise indolent cultures tend to track with colossal market success, and they definitely tend to be exacerbated when a whole slew of employees are suddenly billionaires and millionaires. It’s just plain hard to generate wide-scale paranoia, passion and humility — the defining values of an energized enterprise — when everyone’s feeling fat and happy.

And after the party, Facebook is going to be feeling pretty darn fat and happy, especially the people who’ve been around the longest and control the most action — its senior managers.

Oh, come on, you’re thinking now, Facebook’s managers aren’t stupid. They’re not going to let the IPO wreak havoc with their winning culture.

And we agree — with the first part. Surely many Facebook managers are top-notch. Look what they’ve done so far.

But they’re also up against expectations, human nature and something of a split-personality disorder.

Expectations first. By that we mean that the world (read: Wall Street analysts, shareholders and business journalists) will soon relentlessly and hungrily start expecting Facebook managers to focus their full energies on strategic matters such as how the company’s going to spend its newly created equity. Should it own the social media space by buying Twitter or Tumblr or both or neither? Should it pour money into inventing the technology that finally takes the aggravation out of mobile? Should it expand its global reach organically or by rapid acquisition?

Without doubt, these are all very important questions. And Facebook managers will understandably heed the pressure to fixate on them.

Then there’s human nature. In the buildup to an IPO, employees are often at their best — bursting with ideas, camaraderie and competitive fervor. There’s a certain optimistic frenzy in the halls and cubicles; a tirelessness. With the IPO over, there will no doubt be a companywide exhale, especially by the people who profited the most richly from the transaction. And let’s not kid ourselves: Late arrivals to the office, long lunches and a lot of happy sighing over new houses and boats do not an energized workforce make.

Finally, there’s the threat of a split-personality disorder setting in. Look, after its IPO, Facebook is going to have two classes of citizens. That’s just reality. Some of its 3,000 or so employees — several hundred in number by some counts — will have significant riches in the hand. Newer hires, though — well, they’ll mostly have options in the bush.

Someone call a motivational speaker.

Or better yet, someone make sure that Facebook’s haves care desperately about the fate of its have-nots, who will only do well if the whole company continues to grow and thrive. “Someone”…meaning Facebook’s top-notch managers.

How can they do that? Well, it actually starts with a kind of campaign stumping on their part, complete with vivid imagery and gritty stories and exciting imaginings about how Facebook is going to look in the years ahead and what it means for the life and career of all company employees. Guess what, Facebook’s leaders need to get out there and say over and over again, the future around here is going to be better than the past — way better. All it takes is every last one of us getting wildly reenergized and recommitted to our mission of making the world more open and connected.

But with all this exultant “barking,” there also needs be bite — in the form of frequent, rigorous performance reviews. The facts are, if Facebook wants urgency, speed and intensity around its mission, those behaviors must be explicit values that, when demonstrated, result in bonus money and upward mobility — or not.

To further unite its culture around its mission, post-IPO Facebook might also seriously consider evaluating its people for competitive paranoia (good), sharing of ideas (also good) and a heightened sense of purpose (same), as well as self-importance, humorlessness and BMW ownership (bad, bad and just kidding, sort of).

Not to get mired in the details of Facebook’s HR process. The bigger point we’re trying to make is that good values don’t happen by accident. Like any company with its coffers full and its managers feeling a bit impervious, Facebook — without a top-down commitment to values — runs the risk of letting its guard down and inadvertently creating an organizational mess.

Mission and values — and the culture they create — really matter.

And if Facebook gets that right after its IPO, it will really have something to party about.

Jack Welch was the CEO of General Electric for 21 years and is the founder of the Jack Welch Management Institute at Strayer University. Suzy Welch is an author, speaker and the former Editor of the Harvard Business Review.


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“The bigger point we’re trying to make is that good values don’t happen by accident.”

Good values? This is the company that, by many accounts, was started when its CEO “effed” three Harvard classmates [the translation is our cleaning of the verb Business Insider reported Zuckerberg used in an IM to a friend re what he did to the Mesomorph Twins]. Doesn’t it usually take a generation or two to clean up a fortune? We’re not too keen on the future of this company.

Jack, we’d like to have you weigh in here on the loss of manufacturing jobs in the US. Jagdish Bhagwati has a piece in this week’s FT spouting some global community and Ricardo-esque nonsense [sorry to tip our hand]. We’re really not overly interested in what other economists have to say about this, even opposing views, because few of them are business people. We think most business people are economists though and you ran our leading manufacturer for so many years. If it fits with your, Suzy’s, and Reuters’s thoughts for future columns, we’d love to hear from you on this.

Thank you!

Posted by WeWereWallSt | Report as abusive

Facebook – another of those Made in USA idea that sucks up the USD from institutions that gotten the USD from funds, that gotten their USD from the Joes and Marys, working their lives off at GE,3M, Boeing, et.el
A colossal wipe out is imminent once the many billionaires from Facebook cashed out.

Posted by rissey | Report as abusive

Neutron Jack is just so 20th century analog. Please just enjoy your retirement island and let others handle the 21st century.

Posted by tmc | Report as abusive

very few have the mission drive of Steve jobs, not Google, not Microsoft, not Groupon, not IBM when they controlled the PC an likely not Mark Z

Posted by thoma | Report as abusive

I dearly hope Jack and Suzy wont agree – but I see their piece a brilliant argument for putting Marginal Income and Capital Gains taxes back up to where they were before Reckless Ronnie brought them crashing to the ground.

That is, at one time, around 90%. In fact, from 1935 to the early 1960s, they were never below 70%. But Reckless Ronnie changed all that.

He showed us how America, in one fell IPO swoop, can make zillionaires out of computer dorks. Whilst the impoverished click-away at their Facebook wall in obvious delight with hopes of yet-to-be-found Instant Popularity.

My dearest wish is for Facebook to go the way of MySpace. Which will teach us, once and for all, how Internet IPO values can and do evaporate like the morning dew.

If there was ever a slap at Egalitarian Principles, it is that of hallucinatory unearned income in a country where “the sky is the limit” – in order to indulge an hedonistic urge for Individualist Supremacy of the Alpha-males and females.

We should tax the piss outta them. Confiscatory taxation of consolidated capital and marginal incomes at 95% of all gains totaling more than 10 megabucks a year.

Which would leave all of them, anyway, a cool zillion dollars each.

Posted by deLafayette | Report as abusive

René Déscartes: Je pense donc je suis.

Jackn ‘n Suzy Welch: We have a syndicated column, so we exist.

How times change …

Posted by deLafayette | Report as abusive

I think that the responses to this post highlight a deep problem in today’s culture; that of skepticism. Without well defined values, a company will not succeed. You can certainly make criticisms of Facebook, Apple, and other tech giants, but they’ve also accomplished a tremendous amount, and they have created vast wealth for many people. Facebook does have a set of values, that of the “hackers ethos,” and it has been intrinsic in the organization since almost the beginning.

I’d also like to point out a criticism of the comment by WeWereWallSt. It doesn’t appear that Suzy or Jack Welch were implying that Facebook’s “good values” actually had to do with altruism. More likely, they mean that the values are well defined, and fit well with the company’s culture. Therefore, it’s quite reasonable to say that Facebook’s values are “good” while still arguing that Zuckerberg “effed” his three classmates. Food for thought.

If you want some more interesting articles about business values and ethics, check out my site:


Posted by BizEthicsReview | Report as abusive

Agreed! Why, FB is valued more than the combined GNP of the world’ lower 40 percentile nations, producing nothing, causing lower productivity as FB users are connected 24/7,merchandisers equally sucked into this new media hype of selling through social media platforms – most of all, the Investment Bankers of Wall Street are having fees based on valuation, “effed” the other new shareholders (by the way, they asked to be effed” because, the new shares do not rank parri-pasu to Zuckerberg’s and his exclusive club of stakeholders’ shares. How stupid can the mom & pop shareholders be – these are institutional funds willingly to punt with other people’s money.

Posted by rissey | Report as abusive