‘Let’s Move on,Please’: Trust and Employment Relations in Early-stage Start-ups

Introduction: Peeling Away a Hype

In recent years, increasing domestic and international media and governmental attention has been given to the Portuguese entrepreneurial sector, and its attractiveness as an emergent start-up industry geo-player is increasingly acknowledged (Ernst & Young, 2017; Franc, 2018; Startup Europe Partnership, 2015; Startup Genome, 2017). Despite the peripheral position that tends to characterise (and present) Portugal (CB Insights, 2016) in the European context, different factors have contributed to the country, proportionately to the size of its economy and gross national product (GNP), gaining prominence as a reference in the European start-up context, a model to be followed, a rising ‘start-up nation’ (Oliveira, 2016). Key factors that have been systematically pointed as major competitive advantages of the Portuguese start-up industry include the governmental direct support, a well-developed IT infrastructure, technical work force quality at affordable cost, advanced linguistic abilities, relatively low rents compared to other EU countries, and perceived high quality of life (Butcher, 2017; Franc, 2018; Robinson, 2017).

In effect, in Portugal, an evolving hype has been promoted in the recent years mainly by national and international business press and national governmental agents and agencies, around the national entrepreneurial ecosystem. Descriptions vary, but a laudatory golden-collar (Cappelli, 2015) appeal is maintained. Contradiction surfaces, however, when the abundance of stories that describe open, fun-filled workplaces, enlightened management practices and extravagant employee perks exclude mentions to employment management issues, such as high turnover rates, aggressive poaching strategies and low levels of organisational commitment, that can be observed within and between established and incumbent, start-up companies (and individuals) (Mateus, 2016).

Considering the existing empirical evidence and bearing in mind the attention and public investment originated by the recent emergence of the start-up phenomenon in Portugal, if one tries to peel away the hype, it is relevant to try to understand this entrepreneurial activity in its different dimensions, complementing the prevalent macro and meso perspectives in studies made in Portugal about start-up organisations, centred on analysing the impact of public policy agendas and private agents’ industrial strategies, and the role different economic agents play as facilitators or engagement stimulators in the formation of local, regional, national and international innovation clusters (Baptista & Preto, 2011; Rocha, Simões, Mello, & Carneiro, 2017; Urze & Abreu, 2015).

Despite empirical evidence of risk, uncertainty and remote hypothetical success, public investment, tax incentives and mediatic endorsement of start-up ventures are rising and increasingly expressive, since 2015, in Portugal. Among other dimensions, high expectations are created regarding the chance of having new jobs and employment streams created by these entrepreneurial ventures, but existing empirical evidence of this is still rare. Due to the substantial public financial endorsement of an activity moulded by risk and uncertainty, grasping if new and differentiated jobs and employment streams are in fact being created, can be considered an analysis of quintessential relevance.

This is the core research problem arrayed by the present article: the nature of the employment relations created by new start-up ventures in Portugal, in an (entrepreneurial) context where a high degree of uncertainty and limited shadow of the future (expectation of future interactions and outcomes) involved in the continuity of recently created organisations, can mould employment relations and individual work situation attributes of recently created ventures, as suggested by Hwang and Horowitt (2012).

The key goal of this article is therefore to explore the employment arrangements that are currently observed in the rising number of start-up organisations based or co-located in Portugal. Being subject to the effects of uncertainty, temporariness and temporary organising (Bakker, 2010; Bakker, DeFillippi, Schwab, & Sydow, 2016), particular (inter)action and managerial rationalities may arise in these organisations, moulding the nature of existing employment relations, internal management capabilities and overall performativity conditions. To address this goal, a theoretical proposition is adopted as an analytical lens: due to the high degree of uncertainty involved in its continuity, a start-up can be conceived as a social context and an organisational form that produces specific work situations and relations of a temporary nature (Bakker, 2010; Bakker et al., 2016; Burke & Morley, 2016; Lundin & Soderholm, 1995), introducing organisational and labour management nuances in the socio-economic environment (Davis, 2016).

Temporality in Start-up Ventures

For authors such as Blank (2010), a start-up venture constitutes a temporary organisational form, whose central focus of action and attention concerns the search for an innovative business model or object which is repeatable and scalable. A similar formulation is suggested by Ries (2016 [2011], p. 23): ‘The aim of a start-up is to find the right thing to build – what customers want and will pay to have – as quickly as possible, in extremely uncertain conditions’.

A temporary organisational form consists of ‘a type of social system that is designed to disintegrate within a predetermined time frame’ (Bakker et al., 2016, p. 1705). These organisational forms may not have a single fixed date of disbanding, but existing internal and external relations explicitly or implicitly imply their short-term nature, with no notion of open-ended permanency being tied to managerial intentions. Depicting a start-up as an organisational form of a contingent and temporary nature can, therefore, constitute a perspective that allows us to shed light, both theoretically and empirically, over its social, organisational and employment-related specificities.

As stressed by Bakker et al. (2016, p. 1708), being temporary does not mean having a short duration: ‘In the end, what is short and what is long is rather arbitrary and context-dependent (i.e., the corresponding threshold remains unclear), and any brief organisational endeavour, be it by design or by chance, could fall under the temporary organisation label that way’. Authors like Bakker (2010) or Burke and Morley (2016) attempt to be more precise about the temporary nature of temporary organisational forms, stating that they arise from the existence of a pre-defined period (ex ante) of time, which distinguishes, limiting (in time), the activities, practices and relations formed by and within the organisation. Temporary refers, in this sense, to predetermined, finite, duration, whether at the outset the time boundaries of an organisational process or venture are explicit or not. For these authors, it is relevant to consider that new ways of organising socio-economic action are fundamentally temporary, with time and temporariness being important sensitising concepts in analysing the structures and social and institutional forms characterising the organisation of contemporary work.

Whereas in projects and events, temporary structuring and institutionalised termination appear as guiding principles, other forms of temporary organising, such as hiring contract or agency workers as used by an increasing number of firms, as in start-ups or start-up accelerators and incubators, are actor-centred and tend to provide only temporary employment or temporary organisational membership (Bakker et al., 2016). In this sense, temporariness can be arrayed not only as an organisational attribute, but also as a specific interaction constrainer, for both organisations and individuals.

It has been established that in temporary systems, groups of people often operate under constraints of high uncertainty (e.g., Jones & Lichtenstein, 2008; Lanzara, 1983; Meyerson, Weick, & Kramer, 1996), a circumstance that has important implications for the behaviour of individual and collective agents within social systems. Due to this, temporary groups and teams have been proposed to be different from on-going, enduring collectives and teams, because members do not anticipate future interaction, and do not tend to be concerned with existing processes long-term efficiency (Saunders & Ahuja, 2006). A dimension that is particularly affected by the duration of temporary organisational forms is trust, understood as an employment relation attribute. Specifically, when temporary organisational forms are perceived as short in duration, there is not enough time to develop processes such as personal relations, regular trust (Meyerson et al., 1996) or a shared task-relevant knowledge base (Lindkvist, 2005). Lack of trust and social continuity emerge as potentially negative consequences from both an organisational and an individual perspective. There are specific social regulation mechanisms at play, such as swift trust (Meyerson et al., 1996), different from the ones that can be found in enduring organisations. As Meyerson et al. (1996) suggest, this is a crucial issue for teams and individuals in temporary organisational systems, since temporary organisational forms depend on interdependent sets of diverse skills and knowledge sets, yet they lack the time to engage the usual forms of confidence-building found in enduring organisations.

Saunders and Ahuja (2006) suggest that it is possible to decompose temporariness employment relations conditioning effects, with respect to specific two dimensions: (a) the relation individuals establish with management practices, task requirements and work contents and activities; and (b) the relation established among individuals, peers and elements of work teams, within the organisation. Concerning the first dimension, related with management practices and modes of work organisation, having in mind the key goal of the research reported by this article, it is important to consider the empirical evidence that indicates that intensive exploration, error and experimental action tends to be a significant part of the praxis and the ethos observed in start-up venture contexts, particularly in the early years (one to five) of their existence (Hwang & Horowitt, 2012; Ries, 2016[2011]). This relates to organisational logics and management cultures that aim or need to aim for radical, disruptive innovation (McLaughlin, Bessant, & Smart, 2005), and are based on organisational structures oriented towards capturing new knowledge, tolerate risk and ambiguity, and foster openness and decision questioning. As for the relations established among individuals within the organisation, it is observed that in a group or organisation where temporariness and a limited duration is foreseen, the focus of action and social practices tends to be placed on the immediate present (Eriksen, 2001), with groups working on a different kind of trust and social reciprocity, which swiftly emerges presumptively, rather than building slowly over gradual experiences (Meyerson et al., 1996). The temporality of existing employment relations can be therefore directly tied to the expectation that the collaboration either within or across organisational boundaries will (soon) terminate (Bakker et al., 2016; Burke & Morley, 2016).

Material and Methods

Empirical investigations of temporary organisational forms such as start-up ventures face specific research challenges: the characteristics of temporary entities observed during early-stages can change during later stages and features and attributes observed during later stages may say little about earlier stages characteristics. But, as suggested by Bakker et al. (2016), temporary organisational forms have unique features that can enable stronger research designs: for instance, they offer unique opportunities to capture and map long-term relations evolution, based on frequently repeated activity and relation cycles, within relatively short time periods (Majchrzak, Jarvenpaa, & Bagherzadeh, 2015). Hence, temporality and temporariness not only create challenges, but also imply opportunities for research design.

Empirically, a focus on time and temporality calls for longitudinal research designs (Bakker et al., 2016), and requests to take time and temporality seriously (Bakker et al, 2016; Langley, Smallman, Tsoukas, & Van de Ven, 2013; Orlikowski & Yates, 2002), making time a central variable of interest, as opposed to consider it as a control, boundary or modulating condition. This article is based on a study of a longitudinal nature, over 12 months carried out in 2015, in one of the Portuguese start-ups presenting the greatest growth and visibility in the last 3 years (Medeiros, 2016). In its methodological orientation, the research took the form of an intensive analysis of a restricted field of observation, by considering one particular entrepreneurial context as research case (Flyvberg, 2006), with the purpose of empirical, longitudinal, scrutiny. This research design is deemed to be suitable to seek understanding of a specific dimension (employment relations), which are yet little explored, and where time and time-constrained practices and activities are suggested to play a significant role.

In selecting the case to be considered in empirical terms, the aim was to be consistent with the overall cognitive goal underlying the research plan: to challenge the sense of undisputed obviousness associated with a specific entrepreneurial and organisational reality, subject to different normalisation efforts in the eyes of the public, media and politicians. In this selection, totality and typicality criteria were aimed for, as the considered case should represent a total situation, an expressive whole, in relation to the studied subject (Ragin & Amoroso, 2011). Being start-up ventures an emerging entrepreneurial phenomena in the Portuguese socio-economic context (Startup Genome, 2017), and being this context characterised, at the time of beginning the empirical research, by the prevalence of early-stage organisations (1–5 years of formal existence), born or co-located in Portugal (in Lisbon, more specifically) that were using the country as a gateway hub to develop technology-based products or solutions (Startup Europe Partnership, 2015), case selection was consummated by identifying a technology-based Portuguese start-up, co-located in Lisbon and in London, that was at an early-stage of organisational development (3 years of formal existence; two closed rounds of private, seed stage funding).

Different empirical material collection techniques were used: direct work practices field observation, in-depth interviews, and secondary statistical (CB Insights, 2016; Startup Europe Partnership, 2015; Startup Genome, 2017) and documental sources analysis (mainly web sources and newspaper articles) (Blank, 2010; Butcher, 2017; Franc, 2018; Graham, 2012; Kriss, 2016; Oliveira, 2016; Ramos, 2017; Robinson, 2017; Santos, 2016).

Through direct field observation, the aim was to come close(r) to the realms of immediate experience of a specific social situation, seeking to bring the theoretical space of a sociologically influenced empirical enquiry to the tacit, intangible dimension associated with the subjective experience of specific employment conditions and working contingencies. An immersive observational strategy was adopted (and allowed), aiming to identify and investigate possible repeated activity and relational patterns (Majchrzak et al., 2015), requiring the researcher’s explicit intervention and daily assumption of a formal role (‘Head of HR’), throughout the period of direct observation.

The in-depth interviews aimed essentially to collect data about the start-uppers’ perception of particular aspects associated with the start-up’s organisational practices and working and employment conditions. Three topics guided the interviews: (a) strategic orientation and managerial coordination structures; (b) employment and work activities management modes and human resource management practices being used; (c) management practices and working conditions as a subjective, personal, lived experience. A total of six interviews were held: two with managers and founders of the start-up, and four with employees working in the start-up for at least 6 months. Concerning the statistical and documental sources that were collected and analysed, their main use was to provide an overall contextual background, regarding the operating environment of the considered start-up organisation.

Self-reflection notes (Cunliffe & Karunanayake, 2013) arising from the 12 months of direct observation, and the information gathered from the interviews allowed the elaboration of a field diary (Czarniawska, 2007). The empirical material contained here was subject to thematic analysis and categorisation using specific software (MaxQDA v.12). Being the research centred on analysing a single organisational context, mainly based on empirical materials of a qualitative nature, a research design key point was to ensure that a degree of control of the analysis’s reliability existed. This goal was ensured introducing different loci of methodological reflexivity (Johnson & Duberley, 2003), by reviewing intermediate analytical products with academic peers, getting back to interviewees, in order to challenge preliminary empirical data interpretation, and discussing preliminary finding with the start-up founders, scrutinising them before submitting proposals for articles to conferences and scientific journals.

Two directions of interpretation of the collected empirical materials were identified, partly inspired by the analytical model proposed by Saunders and Ahuja (2006): (a) the relation individuals establish with their employer organisation (strategy, management practices, tasks and work activities, employment temporariness) and (b) the relations established within the organisation (immediate relations established by individuals with managers, peers, external partners and their working or project teams). One narrative was drawn up (Cole, 2013; Czarniawska, 1997) as a vehicle aimed to condense and illustrate empirically observed social relations. The presented narrative is itself considered to be a vehicle of knowledge, a condensed research empirical result available to be challenged, discussed and interpreted.

Results

The key idea or motivation lying behind the start-up analysed in this research emerged from a need felt by its founders in identifying accommodation alternatives in Portugal, after studying in different locations worldwide. Their intention was to create a business together, somewhere in Europe. The difficulty in finding accommodation for themselves brought them to a market yet to be explored: long-term accommodation solutions for university students.

Over the period considered for the empirical observation (the year 2015), the start-up increased its team threefold (from 40 to 120 employees), launched two versions of its product (an electronic e-commerce platform) and extended its headquarters in Portugal (Lisbon) and in the UK (London). Its operational income increased fourfold, its international presence fivefold, along with a multiplying number of active users of the solution provided. Despite these figures and multipliers, the observed results were considered to be below the threshold seen as desirable for the period in question. In this period, the employee turnover rate was always in two figures, something found to be recurrent (and normal) in abox start-up environment (Ries, 2016 [2011]).

From the analysis that was made, one narrative (Let’s move on, please) is presented in Box 1, aiming to illustrate, as empirical support, observed work-related relation recurrences and specificities. This narrative support is subject to discussion in the following section, using excerpts for empirical elucidation of the argument presented at each moment.

OPEN IN VIEWER

Box 1.

‘Let’s Move on, Please.’

On 10 November 2014, the period of daily observation and intervention in the organisation began. On the first days, from the raised voices, the sharpness of the majority of matters presented, the impression of sophistication felt, I assumed I was facing a context where there was management resident experience, relatively stable practices, defined objectives, a vision of/for the future. I perceived this shortly after beginning the observation: experimentation, in particular, in the management domain, was incessant, a modus vivendi which was part of the very nature of that start-up, of start-up organisations at an early-stage, as was frequently mentioned in the research interviews. Experimenting was understood as a congenital part of the start-up’ s identity. It was a palliative argument, a justification for pretty much everything. ‘This is a start-up: start-ups experiment’. Practices changed on a weekly, a daily basis, on the same day if necessary, if someone made that decision. Definition of an activity, a project, of success itself, was essentially contingent, situated, changeable, evanescent.

My first task involved the creation and presentation of a budget for the area of human resources, in 2 days, to account for the expected growth in 2015. I did not know the organisation, its practices, its past. Knowledge lies in the individuals rather than in the organisation. Trust seems to be swiftly imported from individual past experiences: ‘This guy worked in multinational X, led 30 engineers there’; ‘She created and directed Y’s digital marketing department during the last year. She’s amazing’. New senior hires are vital, in a managerial perspective: a new hire constitutes a new trust source, a source of legitimacy and credit. People learn from their peers, from existing leaders, particularly from those thought and credited to be knowledgeable, until they cease to be so, until the interest (the novelty) fades. That budget was therefore less of an instrument of internal regulation and control, and more of an instrument to manage impressions in the eyes of investors, relevant to guarantee the legitimacy of operations and decisions to be taken internally. A budget proposal was handed in the next day. It was discussed for ten minutes with two of the (three) founders, at one end of a table. And that is where it was approved. Sending it off by e-mail (to the investors) was celebrated effusively (by the founders).

In daily life, there is no time to think. There is action. What this start-up is or does is essentially uncertain, floating, ephemeral. It is not so important to define what it ‘is’, what the start-up ‘is’, what each area or function ‘is’, what matters is that things happen, that something is always happening or just about to burst. The start-up does, therefore it exists. Effectiveness and waste are in a secondary position and are made invisible in terms of decision making and priority definitions. First comes the need to do, to ‘grow’, the quintessential seme of all managerial decisions. On various occasions, a decision is presented as being already made and communicated by the ‘person in charge’. A dismissal, an international expansion to a new city, an idea a founder had (‘Let’s go to China!’), a recruitment decision a founder made the day before (‘I hired that guy yesterday: we were looking for someone, he looked amazing’). For every decision made this way, there is a distancing effect, a sense of indifference that is produced but unspoken.

Decision processes are often badly timed, involving a partial quorum and limited participation. Involvement, consensus and reciprocity seem to constitute managerial secondary by-products. There is a transactional element, which in this context tends to give form to working relations. Under 10% of the team has a contract for more than 12 months. New elements stay for 6 months, 3 months, 1 month, 1 week, 1 day. Their own choice, the organisation’s choice, a choice from ‘the person in charge’. Relations particularly at management levels seem to be marked by distrust. There is an individual reluctance to assume weaknesses, personal vulnerability. Egos are much in evidence, there is a great deal of ‘finger-pointing’, artificial harmony, the use of aggressive language. Conflict tends to be avoided, neglected, deprioritised. It is an incident, a minor detail. ‘Let’s move on, please’, is often heard at internal leadership meetings. Nobody really seems to know how to deal with conflict, with bad examples, inflated egos resulting in aggression. Low institutionalised reciprocity is often evidenced: ‘If I don’t do it, it certainly won’t be done well’, is often heard at project follow-up meetings. Similarly, there are problems of assuming responsibility, conciliating responsibility (for a delay in a ‘delivery’, an inconsequential financial expense) with the ever-latent uncertainty, with the declared intention to maintain managerial minimalism, encouraging ad-hoc organisation and practices based on individual self-regulation. Generally speaking, relations seem to be marked by an instrumental dimension, a rationale of immediacy, a sense of loose, hyphenated commitment to the organisation’s objectives and its future. People remain in the start-up as long as they are learning, as long as this seems to represent an (individual) advantage.

Source: The author (extracts from the field diary).

Results and Discussion

During the field observation period and while analysing interview data, a number of possible specificities regarding the relations formed with and within the considered start-up organisation arise (Saunders & Ahuja, 2006). Having in mind the key research question (uncertainty and limited shadow of the future as constitutive attributes of employment relations developed by and within early-stage start-up ventures), three of these aspects were highlighted, due to their empirical recurrence (Majchrzak et al., 2015) and practical relevance, and will now be discussed in particular: the prevalence of task and action-focus managerial arrangements; low levels of trust and institutionalised reciprocity; conflict deprioritisation.

Conclusion

Employment relations and overall management arrangements developed by the venture subject to analysis in this article seem to be significantly restricted by time and temporariness, and the linear use of time as a finite resource. Temporariness perception, evidenced by prevalent task-focus managerial arrangements and short-lived social relations, and coupled with underpinning low levels of trust and institutionalised reciprocity, suggests the reduced likelihood of a shared future, for both the organisation and individuals, constituting a relevant modulating component for both the existing labour environment and overall entrepreneurial efforts effectiveness and performativity. Resulting from this modulation, inter-personal conflict is conceived as a minor managerial concern, and task-focus managerial arrangements appear both as a normative uncertainty symptom and palliative. In the considered case and context, in what can be considered a significant empirical evidence, temporality as a relational conditioning axis is usually hidden, omitted or left unstated in discursive terms, but present and active in material terms, as illustrated empirically in the narrative that was presented.

A key practical contribution of the study that was made is therefore this: the portrayal, from an inside-out perspective, of the role time and temporality can play as a modulating factor of employment relations established with and within entrepreneurial organisations, such as the one considered by the research. A balanced analysis of early-stage employment relations should consider its temporariness as a possible constitutive element. The research carried out has limitations. This is a study centred on the analysis of a single organisational context, a start-up in the early years of development, with the empirical scrutiny being based on mainly qualitative empirical materials, and the collected information being presented and condensed in a particular way (a narrative). Different loci of methodological reflexivity (Johnson & Duberley, 2003) were introduced in order to control and enrich empirical materials discussion. It is important to confront the analysis and the interpretative directions that were taken, by carrying out multiple case study designs (Eisenhardt & Graebner, 2007), in different geographical regions, that articulate different techniques of collecting empirical data (e.g., quantitative surveys, individual diary of critical incidents, practitioner shadowing), in start-up organisations of a greater size and with greater organisational maturity (e.g., scale-ups).

Task and action-focussed managerial arrangements, low levels of trust and institutionalised reciprocity, ephemeral, short-lived relations where conflict is considered a minor concern, signal the existence of particular employment practices and cultures in early-stage entrepreneurial operating environments. For emergent entrepreneurial national economies like the Portuguese or isomorph ones (e.g., Spain, Ireland, Italy) (Startup Genome, 2017), this constitutes a significant fact that should be critically considered while endorsing these endeavours with massive public funds and expecting the creation of new stable and enduring employment streams from these investments.