Scaling startups might not be great for employees
- New research challenges the conventional wisdom that scaling startups is always great for employees.
- A study by Johan Wiklund and colleagues found that job satisfaction follows an inverted U-shaped curve in relation to company growth, peaking at around 138% annual employment growth.
- Rapid sales growth can expose weaknesses in leadership, while surging employment numbers may strain workplace dynamics, leading to challenges around diversity, eroding trust, and intensifying office politics.
- The researchers suggest that startups should scale with intention, aiming to build businesses that sustain their success and keep employees satisfied so they stay.
- Moderate growth is not a failure, but rather a strategic choice, according to Wiklund, who emphasizes the importance of recognizing different stakeholders’ needs and benefits from scaling.
New research digs into the hidden costs of scaling startup businesses.
Startups are meant to grow, and as fast as possible. At least that’s the conventional wisdom—one that Johan Wiklund, a chair and professor of entrepreneurship at Syracuse University, and two colleagues hope to challenge in a new paper.
“There’s a lot of positive bias,” Wiklund says.
“The assumption is that scaling is great, that you’re bringing new innovations into the market and creating the jobs of the future. But what we show is that it might not be great for everybody, particularly for the employees.”
Wiklund credits first author James Bort, assistant professor in the department of management and entrepreneurship at DePaul University with devising a clever method for the study. The third coauthor, Wei Yu, is assistant professor in the department of industrial systems engineering and management at the National University of Singapore.
The researchers linked two sets of data—evaluations of job satisfaction from 7,692 employees rating their current or former employers on Glassdoor.com and information on 263 startups drawn from a private company database.
They found that job satisfaction followed an inverted U-shaped curve in relation to company growth. It rose at first but declined when new ventures expanded too quickly.
“A growing firm is seen as a sign of success, it gives you new opportunities for jobs and promotions if you work there,” Wiklund explains.
“But once you get into really high growth rates, there are negative consequences for job satisfaction.”
Rapid sales growth, for instance, can expose weaknesses in leadership, while surging employment numbers may strain workplace dynamics—introducing challenges around diversity, eroding trust, and intensifying office politics. In fact, employee satisfaction peaked at around 138% annual employment growth.
The findings suggest that startups should scale with intention, aiming to build businesses that sustain their success and keep employees satisfied so that they stay.
“It’s important to realize that we have different kinds of stakeholders and that not all benefit to the same extent from scaling,” Wiklund says. “Moderate growth isn’t a failure—it can be a strategic choice.”
The research appears in Strategic Management Journal.
Source: Syracuse University
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