The pandemic hit Airbnb hard. The company lost 80% of its business in March 2020, and people were questioning its ability to survive. Barely two months into the pandemic, it laid off about 1,900 people, or a quarter of its employees.
Fast-forward to today and not only did it weather the crisis, but in June Airbnb made its debut on the Fortune 500 list of top U.S. public companies by revenue, coming off its first-ever profitable year.
The turnaround wasn’t easy. Airbnb had to completely reorganize itself. “We shuttered most of the divisions,” CEO Brian Chesky said on a Wednesday episode of The Social Radars podcast.
That move was something Airbnb needed to do anyway, he said—as do many startups that have grown into larger organizations, he believes.
For a startup, he explained, it’s tempting to “divisionalize” in order to move faster, since decision-making can become a bottleneck at the top of the organization. But while that might work at first, he added, in the long run it can slow a company down.
The problem that the pandemic forced him to face, he said, was that “we had this culture where everyone could do anything. People could own their own projects.” There were too many divisions, or “fiefdoms,” he said, such as ones focused on luxury, pro hosts, a magazine, transportation, and so on.
Airbnb had followed a common line of thinking in Silicon Valley, he said. It goes like this: “Basically you share the values of the company, you democratize data, you hire smart people, and you assume that they’ll make the right decisions for the company.”
But, he added, “that is all wrong. It sounds great, and it’s right for some people, but it was wrong for us.”
Chesky studied how Steve Jobs revamped a struggling Apple when he returned to the company he’d cofounded, noting how he “shuttered most of the divisions, and he went from a divisional structure to a functional structure.”
Adopting a similar strategy, Chesky got rid of the unnecessary divisions at Airbnb. A few core ones would remain, but from then on, he said, “Everyone’s gonna work on everything together. There are no longer swim lanes. There’s one road map, and no one ships anything unless it’s on the roadmap. And then I’m gonna review every single thing in the company before it ships.”
He noted that he was not advocating for a CEO to become a tyrant. “I’m not there to micromanage as much as I’m there as an orchestra conductor to make sure it plays one cohesive sound,” he said.
Instead of giving people “different priorities,” he explained, the top 30 people in the company “work on everything together. We’re not gonna do anything we cannot personally focus on. So if I can’t personally focus on it, we won’t do it. And that means instead of pushing decision-making down, I pull it in.”
Airbnb had made the same mistakes that many growing companies make, he said: “People raise too much money, they hire too many people, they go in too many directions, they have too many projects, and they defer too much to their team.”
Chesky isn’t the only one to see the problem of fiefdoms.
In May, former Slack CEO Stewart Butterfield addressed over-hiring in the tech sector, which ultimately led to large layoffs earlier this year. He described a behavior among supervisors that quickly becomes problematic for well-funded startups facing few financial constraints.
“You hire someone, and the first thing that person wants to do is hire other people,” he told the Odd Lots podcast in May. The reason, he explained, is that “the more people who report to you, the higher your prestige, the more your power in the organization.”
“It’s a very powerful incentive,” he added. “Every budgeting process is, ‘I really want to hire,’ and that to me is the root of all the excess.”
Chesky made similar comments, noting that for supervisors “the way to get ahead is to get headcount and get resources—you know, the fiefdom.”
Founders can fall into the trap of catering to these fiefdoms, he suggested: “I think if I asked people what they wanted, they’d say, ‘Be less involved. Let us go in more different directions. Give us more headcount. Give us more money.’ And so what I did was the opposite of every one of those things.”
Leadership, he continued, is about presence, not absence: “So many leaders are absent because they think that’s what people want, because they call that ‘empowerment.’ And I put the word empowerment in quotes because if you empower people by leaving them to their own devices—which sounds great when you’re an entrepreneur—in a large organization, what you’re really doing is letting them manage their own bureaucracy and politics. And that’s like Game of Thrones. That’s actually not fun.”
