Is The Environment At Zynga Too Toxic For An IPO?

It appears that an initial public offering by Facebook game developer Zynga is just days away, but will the IPO aftermath include exodus of the company’s most talented employees? And would that prospect taint pricing on the capital markets?

The New York TimesDealBook posted a detailed look at the culture at Zynga, the rampant employee dissatisfaction, and the fact that recruiters are already targeting staff at the video-game developer.

DealBook reported that upper management at Zynga relies heavily on weekly reports and performance data, pushing its employees hard and demoting or firing those who don’t meet expectations, with some being offered new positions at the same salaries, but with smaller equity packages.

The environment can be toxic, as “emotionally charged encounters” with senior management, including Chief Executive Officer Mark Pincus, occur frequently, according to DealBook.

And Znyga’s competitors are taking notice, as about 150 employees received cookie baskets from a recruiting firm.

In contrast, employees who perform well receive gifts including vacations and $100,000 in vested stock. Following a Mafia Wars milestone two years ago, its entire team was sent to Las Vegas, with Zynga springing for 80 plane tickets, hotel rooms, and $500 in cash for each team member.

The company’s culture of arrogance has also cost it potential deals with mobile game company PopCap and Angry Birds creator Rovio, as well as conflicts with MyMiniLife, which developed the technology behind FarmVille and several other Zynga games.

DealBook said MyMiniLife reluctantly agreed to become part of Zynga, but the stressful working conditions led most of its staff to threaten to leave unless Zynga replaced the general manager overseeing the group.

Gabrielle Toledano, head of human resources at Zynga competitor Electronic Arts, told DealBook:

I expect a lot of game and tech companies will begin recruiting Zynga’s talent after their equity becomes liquid. Competitors will make the case that they offer much more compelling opportunities for creative people. We’ve learned that when companies treat talent as a commodity, the consequences are severe.

Readers: Do you think Zynga is ready to go public?

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