Zynga’s Bad Kharma

Promotional Image from Zynga's CastleVille

Quick follow up to my recent post about Mark Pincus hitting a new low at Zynga by demanding stock back from employees on threat of termination.  NYTimes has picked up on the story in a piece by Evelyn Rusli: Zynga’s Tough Culture Risks a Talent Drain.  My point in my recent post as well as the original one was that Pincus seems to have difficulty not being a selfish *sshole and that it should, and would, eventually catch up with him.

The NYTimes story lends support to that conclusion.  Here’s a few key snippets from the article:

Former employees of Zynga describe a demanding workplace that includes loud outbursts by its chief, Mark Pincus.

Zynga’s chief executive, Mark Pincus, got an earful from employees last month…

At times, [Zynga’s culture] can be a messy and ruthless war. Employees log long hours, managers relentlessly track progress, and the weak links are demoted or let go. But that culture, which has been at the root of Zynga’s success, could become a serious liability, warn several former senior employees who agreed to speak on the condition of anonymity because of fear of reprisals… As the discord increases, the situation may jeopardize the company’s ability to retain top talent at a time when Silicon Valley start-ups are fiercely jockeying for the best executives and engineers. It could also hamper [acquistions], a critical growth engine for Zynga…

‘Zynga should be an example of entrepreneurship at its best,’ said Roger McNamee, a co-founder of the venture capital firm Elevation Partners. ‘Instead it’s going to be a Harvard Business School case study on founder overreach — this will be a cautionary tale.’

Already, signs of trouble are emerging. In July, Zynga lost a bid for PopCap, [whose] founders worried about the company’s reputation after hearing rumors of the company’s rescinding share awards and fierce internal competition… Several start-ups have also rebuffed Zynga this year, including Rovio. This summer, Rovio, the maker of the popular mobile game Angry Birds, walked away from discussions of a deal worth roughly $2.25 billion in cash and stock…

[A] heavy focus on metrics, in this already competitive industry, has also fostered an uncompromising culture, one where employees are constantly measured and game designers are pushed to meet aggressive deadlines. While some staff members thrive in this environment, others find it crushing. Several former employees describe emotionally charged encounters, including loud outbursts from Mr. Pincus, threats from senior leaders and moments when colleagues broke down into tears.

‘Mark Pincus has the reputation that he is driven to the point of a madman,” said Michael Pachter, a Wedbush Securities analyst. ‘Zynga is driven because it has a gigantic competitive advantage right now.’

But Zynga could face a serious reaction… ‘We’ve learned that when companies treat talent as a commodity, the consequences are severe,” said Ms. Toledano of Electronic Arts. “It takes years to repair a reputation.’

There are also a number of pre-IPO reports that Zynga’s growth is slowing and that their ability to wring more and more out of their current formula may be tested in the days ahead.  Reigniting growth in situations like this call for the creativity of an engaged and motivated workforce.  Pretty sure that is not what Zynga has been building.

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