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Tuesday, November 29, 2011

Is Zynga's 'Evil' Corporate Culture Now a Business Liability?

Posted By on Tue, Nov 29, 2011 at 3:00 PM

Doing evil?
  • Doing evil?

In a business sector known for cutthroat, amoral maneuvering, social-game developer Zynga stands out as, well, particularly cutthroat and amoral. At least that's the view of many of its competitors and former employees, some of whom we interviewed for a September 2010 SF Weekly cover story, "FarmVillains."

As one former senior Zynga employee told us at the time, workers at the company behind such hit Facebook games as FarmVille liked to joke that their unofficial motto was "Do Evil" -- a playful twist on Google's "Don't Be Evil." Back in 2010, this looked like a recipe for runaway entrepreneurial success. Now it's starting to look like Zynga's toxic corporate culture might be imposing limits on its potential for continued dominance of the social-gaming marketplace.

That's the gist of a New York Times story, published yesterday, asserting that Zynga is facing an imminent talent drain because of employees' dissatisfaction with CEO Mark Pincus' tough management style.

The Times reports:

Led by the hard-charging Mr. Pincus, the company operates like a federation of city-states, with autonomous teams for each game, like FarmVille and CityVille. At times, it 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 deal-making, a critical growth engine for Zynga, which has spent about $119 million on acquisitions in the last two years.

The newspaper quotes venture capitalist Roger McNamee opining that Zynga will be a "cautionary tale" and "case study on founder overreach."

Zynga has come under serious scrutiny as it prepares for its IPO, with observers of the tech industry questioning its sky-high valuation and declining customer base. The latest grumblings from within the company could further shadow the IPO, with the Times reporting that workers are planning to cash out and depart once the company goes public.

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Peter Jamison


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