Yes, Silicon Valley, Sometimes You Need More Bureaucracy

At many tech start-ups, the role of the human resource department is to compete in the talent war for engineers and provide a Ping-Pong table, a keg and free burritos. Other personnel functions, like providing parental leave and channels to report misbehavior, go ignored.

The Stanford Project on Emerging Companies, a longitudinal study of 200 Silicon Valley start-ups during the first dot-com boom, found that tech entrepreneurs gave little thought to human resources. Nearly half of the companies left it up to employees to shape the culture and perform traditional human resource tasks. Only 6.6 percent had the type of formal personnel management seen at typical companies. Bureaucratic H.R. is “loathed” by engineers because it adds costs and slows decision-making, the leaders of the study, James N. Baron and Michael T. Hannan, wrote in a paper in California Management Review. Yet a human resource department is essential. The two found that companies with bureaucratic personnel departments were nearly 40 percent less likely to fail than the norm, and nearly 40 percent more likely to go public -- data that would strike many Silicon Valley entrepreneurs as heresy.

“In the new economy, as in the old one, it turns out that organization building is not a secondary diversion from the ‘real’ work of launching a high-tech start-up,” they wrote. “It might well prove to be the main event.”