Canva Co-founder Advocates for "Wartime" Approach in Staff Performance Management

Cliff Obrecht, the co-founder of Canva, has emphasized the need for a "wartime" mentality in managing staff performance, stating that poor hires have cost Canva valuable time without yielding significant benefits. He urged other business leaders to adopt a similar attitude towards eliminating underperformance.

The graphic design company, valued at approximately $39 billion, has expanded to more than 4500 employees worldwide as it prepares for an anticipated public offering. Despite its growth, Canva continues to rank staff on a performance scale that could lead to the departure of those in the lowest tier.

Cliff Obrecht acknowledged that while Canva has built a reputation as a generous employer, providing amenities such as gym access and an on-site chef at its Sydney headquarters, it has also faced challenges, including settling unfair dismissal claims and losing senior executives. Speaking at a keynote address to potential investors in Sydney ahead of a likely public offering within the next year, Obrecht described Canva's strict performance standards as a strength.

“A lot of companies don’t think with a wartime mentality in peacetime,” Obrecht remarked at the Morgan Stanley Australia Summit. He explained that during periods of extensive hiring, poor performers often remain unnoticed, but leaner times necessitate deeper cuts.

Major technology companies like Google, Meta, and Amazon conducted significant layoffs between 2021 and 2023 as interest rates rose and the need for AI investment increased. However, Canva did not follow suit. Obrecht emphasized the importance of consistently monitoring and managing low performers to maintain high performance standards, stating, "You need to constantly be looking at low performers and actively managing those people out of your company in order to keep that performance bar high."

Canva's investors and leaders have briefed associates about the company's likely public offering next year in the United States, although no specific date has been confirmed. The potential public listing is significant for the Australian technology market, as it could inject substantial cash into an industry that has been starved of returns due to a lack of IPOs.

Obrecht clarified that unlike General Electric under its famed former CEO Jack Welch, Canva does not stack rank employees by percentages in performance categories. He asserted that the company's approach has remained consistent over the years, stating, "It’s always been part of our philosophy."

Reflecting on the advice received from venture capitalists during the boom years, Obrecht recalled, “In 2021, investors were saying, take on more money. You should be spending like another billion dollars on marketing, blah, blah, blah.” Canva chose to dismiss this advice, focusing instead on common-sense financial management. Obrecht noted, “It turns out [that you should] just use common sense. Don’t burn money on stuff. Make sure you’ve got profitable growth.”

While Obrecht expressed criticism towards parts of the US technology sector, Canva has not shied away from accepting American investments. One of its pivotal early investors was Bill Tai, a well-connected veteran venture capitalist. Canva's shareholder register includes major names such as Franklin Templeton and Coatue Management, a fund backed by numerous American technology luminaries.

Looking ahead, Obrecht is optimistic about Canva's goal of reaching 1 billion monthly users, a target that is more than five times its current user base. He identified the pillars of Canva's growth as its widely used tools for the education market, expansion into adjacent sectors like human resources and marketing, and growth in emerging markets.

However, Obrecht noted significant variance in the company's penetration into foreign markets. In Spain, for instance, one in nine people use Canva, translating to over 5 million users in the country. In contrast, in China, the figure is about one in 500, and in India, it is one in 250. Obrecht highlighted the need for a targeted focus on different geographies to drive further growth.