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Deborah Ancona is the Seley Distinguished Professor of Management at the MIT Sloan School of Management and the faculty director of the MIT Leadership Center.
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LinkedIn: When the party ends

This piece is part of a roundtable with Post columnist Steve Pearlstein and four of our On Leadership expert contributors about LinkedIn, and life after an IPO.

LinkedIn’s recent IPO is generating tremendous buzz in the world of high-tech and the financial markets. Doubling your stock price doesn’t happen every day, so company euphoria is completely understandable. In fact, passing around the champagne and caviar is a good thing. Company employees should be able to party when good news abounds; celebrating success helps build morale and team cohesion. It also lays the groundwork for accelerating the momentum on existing projects. High energy and positive emotions are catching, so right now the whole company is probably motivated to go. The leaders at LinkedIn should encourage the revelry, mark this key event in the history of the firm and pick up the party tab.

But like many great parties, the highs of this event will likely give way to letdown, exacerbated by many possible post-IPO events. First, though LinkedIn’s stock price skyrocketed, no one knows if such levels can be maintained. Often this next period is one of great volatility until the price stabilizes. Second, much of the jubilation is based on paper profits. Third, some economists believe that there is a high-tech bubble in social media, and that stock prices might come crashing down at any time. Given such uncertainty, LinkedIn needs to be ready to hand out the much-needed aspirin and post-party reassurances. They should remind people not to get totally caught up in any one particular moment, because the company has to be in it for the long-haul. 

Now that the champagne is gone and the hangover remains, employees may begin to realize that being part of a publicly owned company has its down sides. The party favors haven’t even been picked up yet, and already analysts have started to question whether LinkedIn’s revenue growth is sufficiently high. Those long-gone days of relative independence may seem like paradise. Again, LinkedIn’s leadership needs to step in to reassure people inside and outside the company that they are on the right track—that they understand the marketplace and are making the right moves to keep pace with technological innovations, to make customers ever happier and to build a multifaceted business model that serves multiple interests. LinkedIn executives have already been talking about expanding in China and other growth markets to keep the party going. This kind of talk should continue. As a public company, there is a greater need to keep control of the external narrative and take a stand with the analysts.

But perhaps the biggest risk of all is that employees will come to believe that all the current party hype is real. And the result? Hubris. Successful companies often have executives who think they have nailed the answer, come up with the solution and built the great company of the moment. Such a belief system often leads to inertia and an inward focus. Whereas once the company had a mission of innovation and change, of reaching out to test the pulse of customer reactions, of testing new products and new solutions, now there is the hint of complacency and a tendency to rest on one’s laurels.  Such a shift in mindset and behavior can be a disaster. 

The current festivities should be an invitation to Andy Grove’s mantra, “Be Paranoid”. Great companies keep changing—keep staying ahead in the innovation race. Now is the time for LinkedIn to remind its own people that if they stop to take a nap, other networking companies will run right past them. Even Google has to worry about overreliance on their golden-egg search engine. So go ahead and party, but sober up fast and get back in the competitive game known as business.

Click here to see our full discussion page, or dive straight into another expert’s perspective by following one of the links below:

Roger Martin: Those poor folks at LinkedIn

Alan Webber: Is it LinkedIn, or is it the zeitgeist?

Seth Goldman: The startup that loved me

Steven Pearlstein: LinkedIn, meet the two rules of blackjack

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Deborah Ancona  | May 13, 2011 11:45 AM

 
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