A Linux Pre-IPO Cautionary Tale

Date: Mon, 28 Feb 2000 16:25:26 -0800
From: Rick Moen <rick@linuxmafia.com>
To: Brad Smith <bradsmi@cisco.com>
Cc: sluglug@sluglug.ucsc.edu
X-Mailer: Mutt 1.0i
Subject: [SlugLUG] Re: Next month's meeting

Names of sundry firms, individuals, and places (below) are abstracted out, since they don't matter: The important thing is the cautionary tale herein.

Quoting Brad Smith (bradsmi@cisco.com):

> The plan I had had for a friend of mine to come in and talk about his
> experiences as a Linux IT admin at a pre-IPO startup company is going
> to have to be delayed, if not cancelled. 

The funny thing is that I could actually step into his shoes, and tell you stories about what it was like to be a Linux IT admin at a pre-IPO startup company: I was chief sysadmin (and de-facto head of MIS, for lack of an MIS department) at $COMPANY1 in $WEST_COAST_CITY, until I resigned in disgust.

But, instead, you can read this e-mail.

$COMPANY1 was founded by several guys who didn't really know how to manage a company, and funded by $VC, one of the big venture-capital firms. I was an early hire, brought aboard because the founders knew me from the Linux community. As managers, they made the classic mistake of failing to delegate, and then, when growth forced them to delegate, made a series of disasterous executive-staff hires, culminating with the one who was my last straw, one $MORON of $EAST_COAST_CITY. I had been promoted to manager after an earlier flameout by a moron executive named $PRIOR_MORON (who had been dismissed just before the EEOC complaint he inspired would have come up for public hearing), and I was then promised a raise in salary and stock options that never quite materialised, thereafter.

The company was (and is) burning up cash like crazy, and earning (at best) slender revenues, much of it from supporting the MS Windows version of $OFFICE_SUITE, under their technical support contract for $COMPANY2.

They had the problem of uncontrolled deployment of MS Windows within the firm by the stream of Windows-addicted hires they brought on-board. As de-facto MIS head, I warned them of this trend, and proposed several ways to control it, all of which were ignored. This meant that I was (by default) going to need massively more staff to deal with large amounts of MS Windows on the desktop (at a Linux company!), so I set about trying to hire more staff -- only to find my hires unofficially and silently blocked with a variety of delays and evasions, at the HR Department level.

When $MORON came aboard, the deployment of proprietary software in key parts of the infrastructure accelerated -- including servers -- and his network to date is largely based on Solaris rather than Linux, for no good reason. He hired a squadron of his friends, including his nubile secretary, and $COMPANY1 paid gobs of money to fly them from $EAST_COAST_CITY to $WEST_COAST_CITY every Monday, and back home to $EAST_COAST_CITY every Thursday. Their main goal was to spend twenty million dollars in second-round VC capital to repeat the job of building an e-commerce system of global scope, which they had done previously at $COMPANY3. (The $COMPANY3 network they built was defective, and has since then been largely scrapped. $MORON was not much respected or liked when he was there, either.) I never heard any reasonable justification for $COMPANY1 building a twenty-million-dollar e-commerce system.

As head sysadmin under $MORON, I received copies of his budgetary figures for additional sysadmins and MIS hires, and with his approval shared those with my staff. I was then being paid $65,000 per year, and $MORON's spreadsheet (in Excel, naturally) listed me as supervisor of quite a few additional new-hire sysadmins, who would be signed on at $80,000 per year. I reminded him of the founders' promises to me from when they promoted me, and he said I had a point and that he would fix the problem.

My entire staff plus a senior programmer and her manager felt that their being grossly underpaid had just gotten intolerable, and we scheduled a discussion with $MORON on the matter, for the following Friday.

On the matter of underpayment: [Begin flashback.] Several months earlier, one of my system administration staff reminded me of a lingering problem I had inherited when I became her manager: She was still being paid as an hourly, part-time employee, and neither the founders nor $PRIOR_MORON (who had just been fired, whereupon I became a manager) had brought her on full-time on salary, as had been promised.

I said she had an excellent point, apologised to her on behalf of the firm, for the delay, and said I would fix the problem. I brought it to the attention of one of the founders, who was then my immediate boss, and he blew off my request several times. I persisted, and he said "Make her an offer of $35,000." This left me stunned, but I repeated it to my staffer, who quite rightly pointed out that this would amount to a cut in pay compared to her hourly rate, and would preclude the possibility of overtime pay, to boot. I told her she was clearly right, and that I would try again to fix the situation.

That night, I sent e-mail to the founders, citing in detail three industry-standard salary surveys, to prove to them that a $35,000 sysadmin salary would be horribly inadequate for $WEST_COAST_CITY. I said that the situation was an embarrassment to me as a manager. I reminded them of their promise of more salary and options to me when they made me manager (which they did in front of witnesses), but said that I'd gladly forego some of that, if necessary in order to get my employee a decent salary offer.

They called me in, the next morning, and said it was not necessary for me to forego my promised raise, that I was right, and that they'd offer her something in line with the salary-survey numbers for junior sysadmins. And so they did: $42,000, which wasn't great, but at least not a gross insult. She accepted. [End flashback.]

So, some months later, with $MORON's princely figures in hand for the new staff he intended to hire, the generally low pay levels for us existing employees were a bit galling. ($MORON was already hiring additional friends of his at very high rates of pay, plus he intended to hire premium-priced contractors to build his boondoggle e-commerce system.) Thus our appointment with $MORON for the Friday meeting.

On Friday, we assembled at the conference table at the arranged time, and then found that $MORON had flown away to $EAST_COAST_CITY the previous day. (Tee-hee! Wasn't that cute?) The logical remedy was to hold the meeting as scheduled without him, and come up with suggested salary adjustments per his spreadsheet. $COLLEAGUE, the senior programmer, volunteered to take notes: She wrote down what each of us felt would be fair and (more importantly) in line with $MORON's own budgetary figures for our job categories. Afterwards, she e-mailed those meeting notes to $MORON since he had been unable to attend, and also cc'ing two of the founders because she had cited in passing their long-standing salary promises to me (and to her manager). My portion of her notes said I just needed to not earn less than my soon-to-be-hired staffers, and would be glad to take the difference in stock options if the company preferred, since I knew it was in a cash crunch while trying to arrange its second round of funding.

$FOUNDER1 immediately came bounding over from executiveland, angry, claiming $COLLEAGUE was severely out of line in sending her e-mail, and implying that all five of us technical employees (who participated in the meeting) had colluded to shake down the firm for more money. Overhearing this, I rushed over and clarified that (1) we were using $MORON's own salary figures that he had voluntarily shared with us, and (2) the meeting was one that $MORON himself had arranged but had been unfortunately unable to attend.

Over the weekend, I talked with $COLLEAGUE and said I was very disturbed by all these developments, and was reasonably sure that, if I continued to feel likewise, I would be submitting my resignation next Friday. I would make a point of staying on until then, because I would be the only sysadmin on-premises that week, since I'd approved my staff attending the LISA conference. (I strongly feel that one of a manager's main tasks is to help his staff's professional development. So, I stayed to hold down the fort, and let them attend.)

On Monday, $FOUNDER1 told $COLLEAGUE and me that $FOUNDER2 had urged over the weekend that all five of us be summarily fired, but that he, $FOUNDER1, had intervened on our behalf. Nonetheless, he spent several hours yelling at $COLLEAGUE in a private conference room. Encountering this, I again stressed to $FOUNDER1 that $COLLEAGUE had done nothing wrong, but just had just taken notes and correctly conveyed to $MORON the salary suggestions from the four of us that $MORON had, in effect, invited from us.

$FOUNDER1 told me, with a straight face, that the only promise ever made to me as a manager was that I'd get increased compensation if I met certain milestone measurements, notably the hiring of additional staff. (As I mentioned, my attempts to hire had been systematically blocked by $FOUNDER1's own HR Department.) I mildly replied to $FOUNDER1 that such was not my recollection -- and that there had been witnesses.

Tuesday, there were supposed to be meetings, but nothing happened. In light of not just the current debacle but also numerous prior ones, I made up my mind that I would definitely be resigning on Friday. Those prior debacles will be omitted here, but include such highlights as $FOUNDER1 firing the head of the pathbreaking, prestigious $FAMOUSNAME Project from $COMPANY1 for referring to his supervisor, $PRIOR_MORON, as an asshole. (Said asshole at the time was sabotaging company hiring policies in a particularly asshole-ish way -- and was soon thereafter himself dismissed, averting a Federal EEOC investigation of $COMPANY1. But not before $PRIOR_MORON attempted to undermine all female managers at $COMPANY1 -- and largely succeeded.)

That's not to mention the numerous open-source programmers being hired and then told they were expected to produce proprietary software for $COMPANY1. Or the CEO of IPO-bound $COMPANY1, when asked if there would be a Red Hat-style "friends & family" stock plan for open-source notables, saying "We don't have any friends or family." But I digress.

I also showed signs, Tuesday, of coming down with the 'flu, but felt I had to remain at work, in my staff's absence.

By Wednesday, I had a galloping case of the 'flu. Around 4 PM, $MORON, one of his cronies who was flown in every week from $EAST_COAST_CITY, and the HR Director took $COLLEAGUE into a conference room and told her that they had investigated claims of salary promises, and that such could not be verified. She correctly interpreted this as meaning that they were saying we all were liars, and walked out of the meeting rather than possibly saying something she would later regret. (Note that, if $MORON really had "investigated", the most probable inference is that the founders had thereupon denied the promises that they in fact had made.)

Some while later, they called her back into the conference room, and said "We need to know that you'll be willing to work with us." $MORON claimed that $COLLEAGUE's walking out had been insubordination, and that, if she were ever insubordinate again, she would be fired. Ignoring the bait, she asked when something would be done about the compensation issue. They hemmed & hawed, and then said that "There will be no salary reviews for at least six months". She replied "I find that unacceptable." $MORON said "In what way?" She said, "I simply find that unacceptable." $MORON told her they would accept her resignation. Puzzled, she said "I wouldn't resign just because I'm not happy with a lack of salary reviews!" $MORON then informed her that she was fired.

$COLLEAGUE was escorted back to her desk, with a rent-a-cop already waiting nearby. She was allowed to put her things into boxes. I assisted. Then, she was escorted off the premises.

As planned, I stayed late, ignoring a fever and sneezing fits, to complete an after-hours server migration. It was successful.

Thursday, $MORON took me for a walk, and I told him that my personal style was to work through channels when there's an administrative problem. I said that I do not attempt to change people, but rather act to change the underlying situations. I stressed that when I find myself in untenable situations, I change the situation in whatever manner is required. He expressed ritual regret over the prior day's events. I made no comment.

$FOUNDER2 came by, and said he'd lobbied hard on behalf of all five of us, but hadn't been able to save $COLLEAGUE. (This is the same person who, according to $FOUNDER1, had pushed to fire all five of us, the prior weekend!) I thanked $FOUNDER2 for his concern.

On Thursday afternoon, for the first time ever in my employment at the firm, I submitted a claim for reimbursement of expenses, totalling over $4,000. $FOUNDER1 signed it, looking thoughtful. Early that evening, he came by my cubicle, possibly noticing that I had just vacated most of its contents. He asked how my talk with $MORON had gone. I summarised it. He asked if I felt $MORON had dealt with us fairly. I said "I think he did what he could, considering the information he had been fed" (thinking of $MORON's wording about having "investigated claims of salary promises"). $FOUNDER1 thought for a moment, and said "I don't think I withheld any information from him." I said "Hmm." [long pause] "I'll tell you, $FOUNDER1, every word I've said to you here is true, but there are definitely things I'm not saying." He left.

Friday, my last major task was to ram through the hire of an excellent junior sysadmin. I confronted the HR Director, brandishing a top-management memo confirming my hiring authority, and finally got the offer letter signed and approved. The salary amount was, of course, $MORON's budgetary $80,000 amount.

At lunchtime, I called my immediate boss (who was in $EAST_COAST_CITY, of course), and told him I had wrapped up or handed off all pending projects and coordinated that with my staff at the LISA conference, but that I was resigning effective immediately. He was startled and wanted to know why. I cited bad faith from upper management, and warned him that he might be getting deliberately incorrect information from them, himself. I advised that the company immediately change all root passwords, and refer any sudden emergencies to $FOUNDER2 until my staff returned from Seattle. (In fact, I hear that an emergency did come up during the afternoon. $FOUNDER2, the Chief Technology Officer, couldn't handle it. Oh well.)

I walked into Friday's all-company meeting, waited until the end, and handed the HR Director a clasp envelope with my formal resignation letter and all my company property. I handed $FOUNDER1 a sheet on which I had printed "I QUIT!" on it in 142-point bold type, picked up my remaining belongings, and walked out.

When he realised what I'd just done, he followed me out to the street and tried to get me to not quit. I told him that, twenty years from now, we would still be friends, but there was no way in Hell I was going to work for his firm, ever again.

I had worked there almost exactly nine months, and therefore walked away from 8,000 pre-IPO options on company stock. With absolutely no regrets.

Later, they hired another one of $MORON's cronies to do half of my job (Director of MIS -- but not lead sysadmin). They agreed to pay him $325,000/year plus 2,500 fully-vested shares (not options) of company stock. I hear that he's not doing a very good job.

And, by the way, they reneged on the sysadmin's offer letter that I had gotten approved by upper management on my last day. They simply refused to honour it, and then offered her the same job at a considerably lower salary -- which she eventually accepted. But at least I can say I did my best for her.

And $COLLEAGUE? Some delicate checking with contacts at other Linux firms where she interviewed suggest pretty conclusively that upper management at $COMPANY1 attempted to get her blackballed throughout the Linux industry. However, she quickly found an excellent job, at a fine company, with much higher pay -- despite that.

What I didn't really know in all this, at the time, was that the founders had actually pretty much lost control of the firm to $VC, early in the history of the company, because they had missed all of $VC's performance targets for them, and may have had little option but to renege on their earlier commitments to employees, since they were no longer in charge. $VC bills itself as a "keiretsu" (a Japanese-style family of companies), and possibly uses $COMPANY1 as a holding area for its personnel while it finds long-term places for them. But it clearly has little or no understanding of the Linux market.

And that, folks, is what it's like working as a Linux admin at the wrong sort of pre-IPO Linux startup. If you find yourself in such a situation, do what I did: Cut your losses, and walk away. There are many, many good Linux firms you can work for.

Cheers,                        My pid is Inigo Montoya.  You kill -9
Rick Moen                      my parent process.  Prepare to vi.
rick (at) linuxmafia.com
(speaking for himself, alone)

Sluglug maillist  -  Sluglug@sluglug.ucsc.edu

Why This Piece?

Ordinarily, I would never have written the above, let alone making it available to others. I had successfully left on good terms (which should be one's goal, when departure is necessary). All that was well and good -- cleanly done, and amicable.

And that should have been the end of it.

But then, I found out, and verified, that upper management had contacted at least several other Linux firms and told them stories about $COLLEAGUE, resulting in her being effectively blacklisted around the Linux industry. (Her new job, with a greater than $20,000 increase in salary, was at a non-Linux software firm.) At least some of this whispering campaign was carried out personally by $FOUNDER1.

People under stress make mistakes: Newly minted corporate executives are human, like the rest of us. But this was a heck of a big mistake.

In this case, management were stressed because they knew they had violated Federal labour laws in their treatment of $COLLEAGUE (since she was a de-facto labour representative for four other workers), and thus $COLLEAGUE could have halted their already-shaky IPO plans by starting an NLRB inquiry. (Fortunately for them, she did not.)

But, however panicked they were, one of the fundamentals of corporate management is that you never attempt character assassination on former employees: You say, at most, "Yes, she worked here from $DATE1 to $DATE2." And then you shut up, because doing otherwise can result in defamation (and other business-tort) lawsuits against your firm, a PR nightmare, your own dismissal, and your gaining a lasting reputation as a dangerous amateur who cannot be entrusted with a company's well-being.

Which brings me to my point: Readers deserve to know that working at a firm like the one described can result in not just unpleasant and Kafka-esque episodes but also -- if you're unlucky -- vindictive, behind-your-back damage to your professional reputation. Employees at $COMPANY1 deserve to know that they risk experiencing the same treatment, themselves. Executives everywhere deserve to know that the fleeting satisfaction of such actions isn't worth the consequences that may descend upon them later. $VC deserves to know what has been done with its investment. And the open-source community deserves to know what has been done with its trust and hopes.

$MORON won't learn, because he's a moron. But the founders -- or those who come after them -- just might, which alone might make this worthwhile.

Copyright (C) 2000 by Rick Moen, rick@linuxmafia.com.
Verbatim copying, distribution, and display of this entire article are permitted in any medium, provided this notice is preserved.