shopify, sports teams, and culture memos

In August 2020, Tobi Lütke wrote a memo to the leaders of Shopify (copied below in full, source) to reiterate the purpose of the company and address some concerns he had with trends he was seeing.

These types of memos are becoming more and more common as leaders communicate with an activated workforce. The best covered memos appear to be like Lütke’s. That is, swimming against the trend of a growing role of employers in the lives of employees, arguing that the proper role is more limited in nature. That companies are institutions that bring individuals together to achieve a stated goal or mission and nothing more.

Before diving into why I struggled with this particular articulation of this vision for a company, I should preface, I have a lot of sympathy for this view. I think my priors tend to support this view. Additionally, everything I’ve heard and read about Shopify up to this point sounded like the kind of company I would love to support. I have to make this caveat because this memo seemed to miss the mark and not by a little.

To begin with, for Lütke’s memo to make sense, he needs to define family so that he can juxtapose it with his vision. In doing so, he chose a very narrow definition of family - blood relatives:

The very idea is preposterous. You are born into a family. You never choose it, and they can’t un-family you.

The issue is that the union that creates a blood relative for you almost by definition came together and chose one another. To speak directly: your parents chose one another before you came into the world.

Also, to go the other way, there are increasing numbers of ways to “un-family” whether that’s divorce or emancipation. Whether you agree with these routes (or acknowledge they’re sometimes for the best), the fact is they exist and they’re clear examples of the disarticulation of a family unit.

Lütke continues:

The dangers of “family thinking” are that it becomes incredibly hard to let poor performers go.

The reason that family thinking makes it difficult to let anyone go is because it’s hard to part ways with people you know, trust, respect. In order for letting someone go, poor performer or not, to be easy requires a detachedness between people that I might argue prevents a team from truly coming together to do their best work.

Additionally, this concern seems like putting the emphasis in the wrong place. As a leader it seems odd to prioritize making it easy to part ways with colleagues on the chance that they end up not meeting your standards and not being able to rise to the occasion.

This is a point Lütke seems to acknowledge implicitly in his next breath:

We literally only want the best people in the world. The reason why you joined Shopify is because - I hope - all the other people you met during the interview process were really smart, caring, and committed. This is magic and it creates a virtuous magnetism on talented people because very few people in the world have this in themselves. People who don’t should not be part of this team.

If the company only hires the best, then why are you so focused on parting ways with poor performers?

I do agree with Lütke’s acknowledgement that there are limits to what a company can do:

Shopify is also not the government. We cannot solve every societal problem here. We are part of an ecosystem, of economies, of culture, and of actual countries. We also can’t take care of all your needs. We will try our best to take care of the ones that ensure you can support our mission. Shopify’s worldview is well documented - we believe in liberal values and equality of opportunity. Sometimes we see opportunities to help nudge these causes forward. We do this because this directly helps our business and our merchants and not because of some moralistic overreach.

But, who is “we” who have these views and see opportunities to nudge these causes forward if not the people who comprise the organization? My point here is that in order for the folks at Shopify to see these opportunities and do something about them (even if they’re focused only on areas that make sense as a business), the team needs to be able to talk about them (which he acknowledges toward the end of the memo when soliciting help for working with the talent team to implement the ideas he lays out in the memo).

We will always have compassion for team members in truly difficult situations. For example, those who find themselves suddenly becoming primary caregivers or those who are struggling with mental health issues. There are also second chances, especially for those who have been top performers before. Outside of those cases we need to remind everyone that like any other competitive (sports) team, it matters how you show up every day and contribute to the team’s success.

Here Lütke seems to identify the very few reasons that he’s willing to look beyond performance. If it’s not on the list, then the employee had better deliver. This coming immediately after a paragraph where he argued that everyone needs to improve 40% annually to keep pace with the goals of the company or risk losing their job.

Beyond straight performance output, everyone that engages in endless Slack trolling, victimhood thinking, us-vs-them divisiveness, and zero sum thinking must be seen for the threat they are: they break teams. Teams survive and thrive on the actions of the collective, and the cohesiveness of the whole. Poor performance and divisiveness cannot be tolerated.

I don’t have the context on the behaviors or what trolling, divisiveness, zero sum thinking led to the writing of this memo, but this feels divisive and threatening. Who decides what trolling is? What constitutes us-vs-them? More than anything, this makes me worried about a culture of fear — which will not result in a cohesive whole and rarely results in a high-performing team.¹

In general, I think the focus on whether a company constitutes a family or a team is missing the point. The goal of the unit is to achieve a stated purpose. In focusing on who should be part of the unit and which behaviors are acceptable instead of focusing (exclusively) on the goal, I fear that Lütke alienated people who might otherwise agree with him and created his own divisions.

Furthermore, the writing and sending of this memo is a choice that reveals something about Lütke’s beliefs. The takeaway seems to be that he is singularly focused on achieving growth targets and cares about his employees, the team members who will help him achieve that, only in so far as any problems they might be having would prevent the team from achieving its goal. There’s no rapport or camaraderie, features I would imagine would be present on high-performing teams.

Ultimately, I have to believe Lütke was acting in a way that he felt would get the most people aligned with his vision of what a team looks like. Along the way, however, he seems to have devalued individuals on a team into commodities that are inputs into a machine that churns out growth. I hope I am misreading this memo and am mistaken about the implications of this memo. I’d love to be proven wrong. On the other hand, if I’m right and the goal of the memo was to accelerate a sorting of employees between those who agree with this approach and those who cannot, then there’s little to critique in Lütke’s approach; I have to imagine that this did just that.

Team,

Leadership is tough. Leadership through times of crisis and ambiguity is doubly tough. Leadership through times of multiple compounding global tidal waves can seem impossible. To refer back to my Summit talk, Shopify is in a new box that we don’t understand yet. The world is in a new box that it barely understands yet. We’ve only mapped out a small corner of this box and have just started exploring the rest of the vast dark patches. It will take some time.

What’s more, our team members need us more than ever. The best thing we can do for them is not add to the ambiguity. Shopify hasn’t historically been great at setting clear expectations across the organization and I think this is starting to cause an enormous amount of managerial debt that’s ballooning out of control.

I can’t tell you how to do that in your various departments. But a good start would be to remind everyone that we are a business. More importantly, we are a hugely ambitious one. We are trying to create a world class product that gives superpowers to the merchants that we are obsessed over. Everything Shopify does is to accomplish this, and everyone at Shopify should be able to describe how their job, through a series of direct or indirect steps, furthers this mission.

To help you make this more clear to your team members, here are some pointers about what Shopify is not:

Shopify, like any other for-profit company, is not a family. The very idea is preposterous. You are born into a family. You never choose it, and they can’t un-family you. It should be massively obvious that Shopify is not a family but I see people, even leaders, casually use terms like “Shopifam” which will cause the members of our teams (especially junior ones that have never worked anywhere else) to get the wrong impression. The dangers of “family thinking” are that it becomes incredibly hard to let poor performers go. Shopify is a team, not a family.

We literally only want the best people in the world. The reason why you joined Shopify is because - I hope - all the other people you met during the interview process were really smart, caring, and committed. This is magic and it creates a virtuous magnetism on talented people because very few people in the world have this in themselves. People who don’t should not be part of this team. This magic and magnetism is a product of tight performance management that I expect all of us to get back to.

Shopify is also not the government. We cannot solve every societal problem here. We are part of an ecosystem, of economies, of culture, and of actual countries. We also can’t take care of all your needs. We will try our best to take care of the ones that ensure you can support our mission. Shopify’s worldview is well documented - we believe in liberal values and equality of opportunity. Sometimes we see opportunities to help nudge these causes forward. We do this because this directly helps our business and our merchants and not because of some moralistic overreach.

We want to build one of the best companies in the world. We obsess about our merchants. We want everyone to have a shot at bettering their lot through entrepreneurship. We want to make and keep Shopify, the product, world class or die trying.

Only way to do this is through having incredible people. Some of them we hire on future potential, and we help them but expect them to grow into their potential. Some of them we bring in further down their careers. But we all have to re-qualify for our jobs every year. The red-queen race of Shopify’s historic 40% or better growth is that everyone has to show up at least 40% better every year to qualify for our current jobs. I expect you to hold yourself and your teams to this standard. Judge this improvement based on having a growth mindset, deepening the craft, taking risks, making better decisions, and doing what it takes to better support our mission and our merchants.

We will always have compassion for team members in truly difficult situations. For example, those who find themselves suddenly becoming primary caregivers or those who are struggling with mental health issues. There are also second chances, especially for those who have been top performers before. Outside of those cases we need to remind everyone that like any other competitive (sports) team, it matters how you show up every day and contribute to the team’s success. Beyond straight performance output, everyone that engages in endless Slack trolling, victimhood thinking, us-vs-them divisiveness, and zero sum thinking must be seen for the threat they are: they break teams. Teams survive and thrive on the actions of the collective, and the cohesiveness of the whole. Poor performance and divisiveness cannot be tolerated.

If this sounds at all surprising, this is because we somehow lost something. Shopify has always been like this. I feel that a lot of these core beliefs have been muddied over recent years. So in my capacity as the one person who has witnessed every minute of Shopify’s existence, I want to reiterate some of these core principles. Shopify is as successful as it is right now precisely because of the downstream effects of those early ideas. Currently we are successful despite the muddying. This will not work for much longer. Let’s get back there.

Despite all the external buzz around Shopify (market cap, biggest company in Canada, …) we are still really early. We are in the big leagues amongst the biggest and baddest companies in the world. When we succeed in our mission, millions of merchants do better. Millions of people find employment. We have the opportunity to make that tens and even hundreds of millions in the future. I’m here for this potential, and I need you to be here for that too.

---

OK, that’s a lot to take in. You might be tempted to take what’s up there and run it through some kind of lowpass filter and translate it into your own language before discussing it with your peers and your leads. Don’t. Above is what I need everyone to understand. It’s important not to muddy a message that fights against the muddying of principles. You are responsible for reinforcing these lessons and holding your teams accountable to them. The Talent team will follow up with next steps in the coming days. Even better, actively help them with ideas and opportunities to implement those ideas. This is what leadership in action looks like.

• tobi

Footnotes

• ¹ The “Culture of Fear” is a reference to Camille Fournier, which she described in greater detail in The Manager’s Path and this conference talk on building high-performing teams.