Peter Thiel, a venture capitalist in Silicon Valley, co-founder of Paypal, and the first outside investor in Facebook, has harsh words when it comes to the leadership of Twitter (NYSE:TWTR). "It's a horribly mismanaged company," Thiel said recently on CNBC, "probably a lot of pot-smoking going on there." Ouch. In a nutshell, Thiel is suggesting Twitter is not meeting its potential and needs a cultural shift to improve its performance.
Thiel isn't the first to criticize Twitter's CEO, Dick Costolo, and other leadership at the company. In July, for instance, The New York Times highlighted Twitter's supposed struggles to attract new users to the platform, although this critique was largely put to rest after Twitter's strong second-quarter numbers (where monthly active users increased 24% year over year to 271 million).
Still, is there merit to Thiel's criticism of Twitter? Below are three areas I consider to be key when it comes to assessing Twitter's leadership and culture. The more I explore Twitter's leadership and culture, in fact, the more I doubt what Thiel and other naysayers are saying about Twitter. Let's take a deeper look.
1. Twitter's Glassdoor rating
On Glassdoor, Twitter employees rate the company at 4.3/5, 80% would recommend the company to a friend, and CEO Dick Costolo currently sits with a 93% employee approval rating. Those are not easy ratings to achieve (more on this below).
2. Purpose-driven culture
Twitter's 10 core values are worth keeping in mind, especially in light of the Glassdoor ratings mentioned above:
1. Grow our business in a way that makes us proud.
2. Recognize that passion and personality matter.
3. Communicate fearlessly to build trust.
4. Defend and respect the user's voice.
5. Reach every person on the planet.
6. Innovate through experimentation.
7. Seek diverse perspectives.
8. Be rigorous. Get it right.
10. Ship it.
I also return to this quote from Costolo, which outlines the purpose-driven nature of Twitter:
We think of revenue like oxygen. It's vital for life; it's vital to the health and success of the business, but it's not the purpose of life. You don't get up in the morning and think, "I've gotta get enough oxygen today."
Twitter earned the second-highest Glassdoor ratings from employees of companies with more than 1,000 employees. While this alone doesn't necessarily mean management is entirely competent, it does say something (positive) about the company's culture. I see this as evidence that Twitter is indeed following through on its core values; employees are clearly engaged with the company based on the excellent reviews on Glassdoor. This has to count for something when we discuss the effectiveness of management.
3. Accelerating sales growth
It is great to see Costolo's focus on purpose and employee engagement, but investors are especially interested in strong growth. Twitter grew sales at a pace of 118.5% annually between 2010 and 2013. Sales grew 119% year over year in the first quarter this year, and 124% in the second quarter. To achieve these growth rates and accelerate those rates over time is not something to overlook. I have a hard time believing this level of growth -- now accompanied by positive free cash flow production and a growing base of monthly active users -- happens by accident, or as a result of incompetent management.
Foolish bottom line
Twitter is still a relatively young and rapidly growing business with very ambitious plans to become a global communication platform. There are bound to be hiccups and shifts along the journey, but I struggle to find a basis for the barrage of criticism that has been thrown the way of Costolo and company since Twitter's IPO last year. The level of employee engagement and sales growth that we see with Twitter do not strike me as byproducts of struggling leadership.
At this point in time, I see little reason to doubt the competency of Twitter's leadership. Few companies have both the growth and culture that we see with Twitter, which is part of the reason I am bullish on the stock. Tread carefully before writing off Twitter or the company's leadership.
David Kretzmann owns shares of Twitter. You can follow David on Twitter: @David_Kretzmann. The Motley Fool recommends and owns shares of Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.