What VCs need to learn from the Ellen Pao trial

Janine Yancey is the CEO & President of Emtrain — an organization dedicated to creating user-friendly, memorable and scalable ethics and harassment prevention training for the workplace.

All in all, Kleiner Perkins got off easy with respect to Ellen Pao’s lawsuit against them for gender bias and retaliation. For those not following the workplace drama, Ellen Pao was a junior partner for several years at Kleiner Perkins and in December 2011, she accused the company of sexual discrimination and bias and creating an unequal playing field — one set of rules for men and a second, more difficult set of rules for women to succeed.

After a month-long trial, the jury gave a verdict for Kleiner Perkins, but not before airing some disturbing workplace practices at Kleiner and sparking a dialogue about the treatment of women in tech. While Kleiner probably spent $5 million or more on defense fees, it could easily have been hit with a judgment in the hundreds of millions of dollars.

Pao was trying to prove bias, which is much more difficult to prove than harassment or outright discrimination because it’s more subtle and it doesn’t show itself in obvious management actions or remarks. But just last week, two other women in tech filed gender bias lawsuits against their employers, Paymentwall and Jawbone.

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Based on employment litigation trends for the last 20 years, I believe this is the beginning of a new wave of employment litigation: bias and discrimination claims against male dominated tech employers.

A need for change

The lawsuit against Paymentwall describes a work environment that’s young and predominantly male with an informal hierarchy lacking rules or policies.

According to the lawsuit, there are lavish parties, a company Porsche, and opulent lunches served every day at the workplace. Yet, there’s no human resources manager, handbook, discrimination policies, or complaint procedures.

Similarly, Ellen Pao’s lawyers told the jury that Kleiner Perkins had no real HR function and didn’t provide any HR training:

“I want to address something Mr. Doerr said on the stand, that he’s a big proponent of women — how easy would it have been to just have some training? They could have. If you’re really committed to having a workplace free of discrimination, you put your money where your mouth is. You don’t just give it lip service. And they are one of the most well known VC firms in the world.” — Therese Lawless, attorney for Ellen Pao

Kleiner Perkins, much like other VC firms, is at the center of the tech community — helping technology teams grow and evolve into successful companies that employ hundreds to thousands of people worldwide. Most venture capital firms provide mentoring, guidance, and contacts to help grow their portfolio companies.

You can bet they give a list of recommended recruiters, PR teams, and marketers to help get each company off and running.

But what about HR guidance? More often than not, HR is left out of the equation. Payroll and benefits, yes. Recruiting, yes. But those are transactional. They help build the structure for the organization, but fail to address how people get along within that structure.

Why HR is needed

When you work with just a few people you know really well, it’s probably safe to “wing it” and not invest in an HR function. But as soon as you have 20+ people who are not all good buddies from college, graduate school, etc., it’s a different story.

You’ll start to have employee relations issues because people are different and have different communication styles, expectations, perspectives, etc. In short, when you get people together, you’ll get issues and it’s up to the company management to figure out how best to navigate and resolve those issues.

That’s why a freelance or part-time HR resource is so essential at this stage in the company lifecycle. At the same time, investing in quality workplace training makes a whole lot of sense. You expect employees to hone their coding or marketing skills, right?

So, why wouldn’t you expect them to invest time into developing their workplace skills? Particularly if there’s a solution that allows people to ask questions of top industry experts.  The ability to communicate, shift perspective, and problem solve differences is just as important as any other workplace skill.

Corporate Responsibility

Not providing any workplace training is equivalent to promoting someone to a management role and not providing them with any management training. You can go about it that way, but trial and error is a very painful way to learn. Learning workplace skills through trial and error usually means you’re litigating claims that could’ve been avoided.

The Kleiner Perkins workplace drama is a great example. From their perspective, they had someone they didn’t enjoy working with and didn’t want as a partner. Perhaps there was some unconscious bias at play, perhaps not.

Either way, they really could have set up the facts more strategically than they did. They could have been more savvy to appearances and perceptions and taken a little extra effort to define what it means to be successful at Kleiner Perkins and what they were looking for in a partner.

At trial, they were arguing that they only wanted partners who demonstrated teamwork and would “have their back” and that Ellen Pao was all about “Team Ellen.”

But in 2010-2011, Kleiner Perkins had an opportunity to be more transparent and give more detailed examples of when Ellen Pao didn’t exhibit teamwork and didn’t have their backs. And, most importantly, they could have differentiated her actions from the actions of others to demonstrate their critique was legitimate and they weren’t applying one standard to her and a very different one towards her male peers.

They simply didn’t give enough detail to demonstrate this internally, and then at trial, what was really going on with Ellen Pao. In fact, their performance reviews of Ellen Pao was strong evidence indicating bias.  

As a 20+ year employment lawyer, let me just say that Kleiner Perkins could have saved itself millions of dollars in legal fees and a horrific PR nightmare had their partners been a bit more experienced and savvy when it comes to workplace skills.

It’s not that difficult to navigate around the drama and conflict if you have some essential understanding of how it unfolds and how it appears to a neutral third party. All you need is a little training and guidance.

VCs have a great deal of influence and tech companies will listen. Whether it comes to how they should operate and which vendors or service providers they should use, tech companies look to VCs to provide guidance. If a true HR professional (not a recruiter) isn’t on the list of recommended providers coming from the VC, the HR function probably won’t be on the tech company’s radar.

So by it’s own actions, the VC ends up influencing the playbook of all the startup tech companies that they help capitalize. And when that playbook omits an HR function or training — you get people working together who lack workplace skills and inevitably, creating messy workplace dramas that derail teams.

Kleiner Perkins made some basic HR blunders. They could have saved themselves an enormous amount of time and resources had they integrated some training and HR guidance into their workplace. The tech industry should learn from their example.

VCs and their portfolio companies should invest a few dollars and a few hours to create a foundation for a fair and respectful workplace culture and promote their efforts both internally and externally to show everyone they’re trying to do the right thing and they’re committed to promoting a level playing field.

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