Human Capital Briefs

The Bonfire of Silicon Valley – Major Venture Capital Firm Wins Trial but Loses Reputation War

April 21, 2015

Last month, a California jury ruled in favor of a leading venture capital firm, rejecting a female employee’s claims of sex-based discrimination, harassment, and retaliation. As I followed the case, I wondered how the company’s principals would have evaluated a possible investment target whose senior leaders were known to engage in the behaviors described in the trial.

If nothing else, wouldn’t the organization perceive that the firm’s leaders failed to implement prudent risk management procedures intended to safeguard the time, attention, energies and image of their top leaders and business? 

For a moment, let’s assume the firm deliberately ignored the possibility that values, culture, and inclusion have any impact on performance and business efficiency and results. Even so, after learning about the kinds of behaviors described in the trial, wouldn’t the business be concerned about the risk of “people turmoil” distracting the intellectual capital upon which the essence of their investment would be based?

While in the end, the firm’s actions were not deemed illegal, these distractions helped move this lawsuit forward and spawned the daily release of soap opera details through broadcast and print headlines. And through their behavior, the company’s leaders gave the plaintiff an unnecessary fighting chance in front of the jury.

While the firm won a battle, it lost a larger business war – a war its leaders could have prevented by making clear statements and taking actions that demonstrated the need to act professionally (not perfectly but professionally). This can’t be done by polices and written statements of values; it must be modeled, communicated and enforced by the leaders. What happens when leaders fail in those responsibilities and when they do not go out of the way to welcome complaints? The stuff of legally vetted policies, annual mandatory training (as California requires), and hot lines is, for want of a better term, “compliance window dressing.”

It’s the role of leaders – the good “big shots” so to speak – to set the culture and in so doing protect as well as build their enterprises. If they avoid that responsibility, someone else will set the tone by default.

In short, despite winning in the courtroom, the company’s behavior serves as  a case study in what not to do. Key leaders and others said and did some things they shouldn’t have. As a result, the company lost much more than it won:

1) Its leaders spent time defending a case that should never have gotten this far. That time could have been better spent finding and evaluating the next Google.

2) It cost them reputation currency.

3) The leaders and others have been and will continue to have to talk about this case in the press and in front of clients for months and perhaps several years to come – more precious time that could have been better spent growing and burnishing their businesses.

I just heard a famous maxim for medical patients: stay ahead of the pain. In situations like the one this major firm went through, the pain is an unnecessary and self-inflicted wound. If your business is concerned with efficiency, outcomes, and reputations (and whose isn’t), then your leaders must model and enforce professionalism and civility. That’s how to stay ahead of the discomfort of high-profile lawsuits and the losses that, even with a jury win, the business assumes.

 

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