On May 18th Facebook’s IPO lumbered to close at $38 and change, barely above the opening price but valuing the firm at over $100 billion. Quite an accomplishment for a company started in a college dorm in 2004 as “thefacebook” and one “not originally created to be a company,” according to CEO Mark Zuckerberg.
We use the metaphor of the Triple Crown in horseracing to illustrate the endeavor to build excellent, ethical, and enduring organizations. So, we ask, is Facebook an emerging triple-E organization?
To us, excellent means exceptional performance, making your numbers in your chosen field. Facebook’s $3.6 billion in revenue and $1 billion in profit last year are stunning, as are its 800 million+ monthly users. But Q1 revenue and profits were down. Facebook lags in the sizzling-hot mobile market, with many questioning its ability to monetize that market effectively and find a compelling and sustainable business model. General Motors recently pulled $10 million in Facebook ads, saying they were ineffective. And 10-15% of revenue is dependent on Zynga.
To us, ethical means doing the right thing. Facebook’s mission to make the world more open and connected, building social value, is admirable. But legal issues swirl around Facebook’s privacy policies and practices. “Hackathons” are celebrated at Facebook, where employees are encouraged to build something fast, testing the boundaries. Well and good, but we can’t find any ethical boundaries or coaching ground rules for what and how they hack.
“Move fast and break things.”
–The Facebook Way
To us, enduring means standing the test of time—including operating sustainably and having a positive impact. Zuckerberg is now one of the richest people on the planet. He has pledged to give half his wealth to charities. We applaud such phenomenal generosity. Now a thousand of his workplace colleagues are millionaires. It will be interesting to see what they do with their newfound wealth.
Zuckerberg negotiated the billion-dollar Instagram acquisition recently, barely involving anyone, even his board. He has voting control of over 50% of the stock, so, even if his board wanted to inculcate the “culture of character” we espouse, would he listen?
“I’m CEO, bitch.”
–Zuckerberg’s original business cards
Facebook’s SEC filing indicates the company will post a Code of Conduct in the future. Why not pre-IPO? The executive bonus plan parameters include growing revenue and the user base, improving quality and efficiency, and international expansion. Understandable, but no word about doing so with ethical or sustainable practices.
We congratulate Facebook on its remarkable rise, impressive early performance, and its major-league IPO, creating wealth and excitement for many. And Zuckerberg has shown aptitude for developing his leadership, which started poor. He has recruited an A-list of advisors and built a top-notch leadership team, notably with COO Sheryl Sandberg, in part by firing people who didn’t cut it. But Facebook has a long way to go before it can earn claim to being an excellent, ethical, and enduring organization. So far as we can tell, it has a lot of work to do.
-Bob & Gregg Vanourek, the triple crown leaders