Episode 81 – The Paternalism Trap for Startups

NOVEMBER 1, 2022

Most small businesses owned/led by men still operate in a paternalistic fashion. They are family businesses, after all, and ‘Dad’ is often the owner.  For the average local restaurant, this rings true. We’ve seen Dad behind the counter or in the kitchen, keeping the family business alive. Non-family employees do sign up, but the family controls the company. 

When the small business IS actually a family enterprise, I’m not going to criticize Dad for being a Dad. Not here anyways.

But I continue to see paternalistic work cultures inside consumer startups where the employees are not blood relatives. LIke, none of them. I’ll call it fictive paternalism. And, I should add, I’ve worked in such a fictive paternalistic company myself, years ago. 

And, the workplace research I’ve reviewed indicates that paternalism undermines performance in a fast-moving, quickly evolving organization. And I’ve seen it up close too.

Let me define this term first, blending a variety of sources. 

Paternalistic work cultures are ones where one male person makes ALL the big decisions and pushes execution down the chain. These are command-and-control working environments. Papa essentially makes all the large-sized and medium-sized decisions with or without you involved. He rewards loyalty with explicit or implicit benefits. It takes a hell of a lot to get fired unless you anger Papa. Tons of second chances are given without clear performance criteria and no performance-based incentives are offered.  ‘Leaders’ do not have hire/fire authority. They may not even control their budgets independently. Even when they manage millions in spending. 

Papa Bear will take care of you but you won’t have autonomy working for him. And your career development is of no concern to him really. To him, the company is the only place you would ever want to work, so why would you leave? Only a loser would leave. Leaving Papa is betrayal.

Paternalism operates on a continuum from benevolent to malevolent. The former attracts women, lots of women with self-advocacy issues, socialized to submit to male dominance. The malevolent kind attracts no one, of course, but rarely do you know which it will be until you join. 

Malevolent paternalism is the origin of the ‘toxic workplace’ articles you read about. Malevolent paternalism is autocratic, mean, petty and narcissistic. It’s Darth Vader. Most people who remain can’t find a way out, but it’s not for lack of trying. 

I’ve seen groups of co-founder friends operate a paternalistic work place, with one of the friends playing the Papa role. Weird. Super weird.

Social science on paternalism in the workplace is surprisingly not well developed. But what we do know, and what I’ve seen, is that paternalism leads to underperformance in a fast-growing company. In other words,even if growth is good, it it could be doing even better, but no one realizes it. 

Regardless of their talent or intentions, everyone sends everything up the chain for approval. And Papa likes the attention. He undermines delegation and autonomy by making most decisions with you, some for you (like a lightning bolt). He deflates ambition with his paternalistic lack of trust. You are in the position of a teen-ager basically. 

So, lots of time is spent ‘framing’ things for Papa in order for the insecure teen to look good. Everything slows down because these decks and conversations and pre-meetigs chew up valuable time that could have been spent on executing things. 

Slowing down decision-making is the single most uncompetitive thing you could allow inside your startup. It’s potentially disastrous if it leads to you missing an opportunity to pitch a major chain, for example, which is often only an annual opportunity.

Paternalistic cultures solve problems really, really slowly unless Papa notices them. If he doesn’t, they fester, and then Papa gets mad. But paternalism doesn’t encourage anyone to surface ‘problems.’ Nope. It encourages them to bury them, especially if Papa has a problem managing frustration. Knowing this, Papa may even employ one leader or even a consultant to go find problems.

As recent sociological work has also surfaced, paternalistic leaders also consistently undermine female executive autonomy the most. This is changing with younger generations, but today’s female leaders are still mostly 45+. And they’re used to paternalism by now. They were primed to accept it as a trade-off for access to the corporate kingdom. This tolerance does not change in any way how paternalism affects their performance. It just keeps them from quitting in the first six months.

Employees ultimately become children, not independent, proactive, and resourceful problem-solvers. Everything requires permission. Initiative disappears because it is punished more than rewarded. 

Perhaps the most devastating weakness of paternalistic leadership is that it defends the status quo operating culture as irreplaceable, even when rapid growth means the company needs to chase a new state of operations, i.e., after you hit $50M or $100M.

There is simply no way for Papa to manage 100 people like this, for example. The paternalistic model works ideally in 2-25 person companies. 

So why do people remain at these kinds of startups? Well, the same reason paternalism actually attracts some workers. Yes, it does folks. Look, fatherhood hasn’t vanished, and so paternalism probably won’t either. 

Paternalism is attractive to employees who are professionally immature, like a teenager. These folks want to outsource responsibility for their results, because they are insecure and lack confidence. Why deal with the stress of autonomy and accountability?

Paternalism is also attractive to folks gifted at manipulating leaders, or sociopaths who enjoy screwing with their heads. I’ve seen the latter up close too. 

Paternalism also attracts and retains those who aren’t ambitious or hard-working and don’t want to be pressured into better performance. 

If I were to sum it up: Paternalism attracts and rewards mediocre individual performance (not incompetence) from folks who could achieve so much more but a) don’t know they can or b) don’t want to work that hard. 

Men led the attack on paternalistic work cultures for perhaps obvious reasons. Men feel more culturally entitled to autonomy, especially since Gen X entered the workforce.

I should note that paternalism doesn’t kill businesses. It has even scaled multiple consumer brands before. When it’s benevolent, some folks love the environment. But, as Gen Z enters the workplace, though, I can warn you that it is leading to massive churn among the minority of very high performers that founders want inside their company if they want to Ride the Ramp. This is especially true among Gen Z women. They are not putting up with it. 

If you want to grow fast, encourage rapid decision-making and maximize employee happiness AND achievement, paternalism is something you want to avoid at all costs. 

And the primary cost? Ego. And, yes, women can reproduce all the dynamics of paternalism, especially if it’s all they’ve ever known during their career.