The CEO of e.l.f. Beauty on Maintaining a Startup Culture While Scaling

In 2024 e.l.f. Beauty became the company with the top-selling mass cosmetics brand in the United States, as measured by unit sales, surpassing all its legacy competitors. It was a big milestone, and in one of my weekly notes to our 500 team members, I congratulated everyone on reaching it. But we didn’t pause for a big celebration. Instead we immediately asked ourselves, How quickly can we get from number two to number one in dollar sales, as well? That ambition, focus, and speed has been a part of e.l.f.’s culture since its founding, two decades ago. Even as we’ve become a major player in the beauty industry, we’ve continued to operate like a startup. We’re driven by a clear vision, mission, and values. We act as one nonhierarchical, passionate, high-performance team. We live as one team with one dream. And we’re constantly exploring how to improve and grow. This commitment to keeping our small, scrappy mentality as we scale up has hastened our success. It’s why we’ve posted 22 consecutive quarters of net sales and market share growth and why our net sales exceeded $1 billion in fiscal 2024. There’s no question in my mind that organizations of all kinds can learn from our approach. Size does not have to dictate speed. Big companies can move faster than they do. And industry leaders can meaningfully innovate. Consider our story. Beginnings The founders of e.l.f. were a father and son, Alan and Joey Shamah, who were focused first and foremost on affordability. Alan had been in the private-label apparel business but wanted to start a new venture with his son upon Joey’s college graduation. They knew nothing about cosmetics but couldn’t understand why the price points in the category were so high and thus considered it ripe for disruption. Their crazy idea was to sell products for eyes, lips, and face (e.l.f.) for $1 each, and they worked backward to figure out how to generate healthy margins by manufacturing for a third to half of that cost. The resulting cosmetics were not just inexpensive but also of good quality. Dollar General declined to carry the products, saying no one would buy makeup that cheap. But when the Shamahs sent one of their eyeliners to an editor at Glamour, she was ready to give it a rave review. So in 2004 they built a website and started selling directly to customers. The brand soon went viral, and by 2014 the company had 120 employees, national distribution at Target, and $100 million in net sales. That’s when the private equity group TPG Growth acquired a large stake in e.l.f., and I took over as CEO. My background is a combination of entrepreneurship—through the motels business my family started with all their savings after they immigrated to the United States from East Africa—and experience in the consumer packaged goods industry at Procter & Gamble and Clorox. When I was 14, my family bought our first motel, a distressed one in Alexandria, Virginia, that we felt we could turn around. Everything I know about the fundamentals of business—from cash flow to economic profit to how you treat people—came from helping my dad with our motels. I was president of my high school class, but I went to only one football game (homecoming senior year) because most Friday nights I was working: making beds, engaging customers, taking care of whatever needed to be done. After earning undergraduate and business degrees from Duke University, I began my career at P&G on the team that relaunched Pantene hair care, helping grow its revenues from $50 million to $2 billion. I went on to manage brands for both P&G and Clorox in categories ranging from home care, laundry, and paper goods to food and pet care. That was like a finishing school after my early education with my parents and my MBA. But I missed the autonomy and the pace of a smaller business, where everyone’s work has an impact on performance and results. I realized that my sweet spot might be fast-growth mid-market companies, so 14 years ago I agreed to take the helm of another TPG Growth acquisition, Schiff Nutrition, a vitamins and supplements company. Over the next two years the team and I increased enterprise value from $190 million to $1.5 billion and then sold the business to Reckitt Benckiser. At that point it was time to find another company still in startup mode that could be scaled up without sacrificing its special sauce. By the time TPG and I started considering e.l.f., it had already broken through. In a highly fragmented sector (there are more than 1,900 cosmetics and skin care brands in the United States alone) it was one of only 26 that had hit $100 million in retail sales. But what sold me on the company was my diligence call to Target. The head merchant for beauty told me that she loved e.l.f. not only because it had brought a younger, more diverse cohort of makeup enthusiasts into Target’s stores but also because it was so good at launching new products that it had already vetted with its online followers (proactively refreshing 20% of its assortment each year). She added that it was her most productive brand, not just on a unit basis but on a dollar-per-foot basis—impressive when it was still selling at bargain prices. We knew the company was ready to move to the next level. The e.l.f. Ethos The vision of e.l.f. is to create a different kind of beauty company by building brands that disrupt norms, shape culture, and connect communities through positivity, inclusivity, and accessibility. The Shamahs wanted to delight consumers by investing more in products than in marketing; to find unique strengths, such as being digitally native; to do the right thing; and to execute with speed. When I joined as CEO, I knew that continuity on all those points was critical. They were the hallmarks of a successful entrepreneurial culture that I and the rest of the management team needed to support. However, we quickly saw ways to take e.l.f. to a wider audience. For example, at the time, the average price of one of our products was about $2. But why couldn’t we build out our R&D capabilities and supply chain to engineer products of even better quality at prices that were still relatively low compared with those of competitors? What followed was a wave of innovation designed to better serve our customers. For instance, when we saw a prestige brand selling a putty primer for $54 or a light-filtering foundation for $49, we set out to make similar versions that now retail for $10 and $14. People who see value in buying expensive cosmetics still do so. But the millions who don’t, or who can’t afford to but still want to look good or treat themselves, can turn to e.l.f. Initially our gross margins were thin by industry standards, but through this focus on innovation, we’ve more than doubled them. What’s more, our community of e.l.f. consumers both points the way to new offerings and builds our brand through word of mouth. Here’s a recent example: One prestige lip oil retails for $40. Our community asked us to provide a more affordable alternative. So we studied the oil (not analyzing and copying its formula but creating our own, with the same glossy effect but more hydration), added a larger applicator, and sold it for $8. We didn’t have to advertise it anywhere. Almost immediately after launch, TikTok was full of videos in which people favorably compared our lip oil with the prestige one and said they preferred ours. e.l.f. products from left to right: Bronzing Drops, Power Grip Primer, Halo Glow Liquid Filter, Glow Reviver Lip Oil Kelsey McClellan Every day we listen to what our community wants and then endeavor to bring it to the members at what we call “e.l.f. speed”: considering new ideas, making decisions quickly, pivoting when necessary, and going all out when we think it’s important to make something happen. In December 2023 our chief marketing officer and I did a TikTok Live, and the chat lit up with questions about when we could release a value version of some popular prestige bronzing drops. I knew we had such a product in our pipeline, which typically stretches about three years, so I called our head of innovation to ask where in the calendar it stood. She said it would be ready in 18 months. I asked if her team could do it faster. We released it six months later. Sometimes our decisions are challenging. For example, by 2018 the company had opened 27 e.l.f. branded stores. But we soon realized that they were all located in malls that probably wouldn’t see a better day. Although they all had long-term leases, we knew that the right decision for the health of the business was to shutter them so that we could invest further in digital and external retail. Like any startup, we make forward motion a priority. We don’t overanalyze every aspect of a move before making it. We discuss and debate ideas but then we decide and commit to a certain product or path, knowing that if we get new or better information, we can always make corrective decisions later. Our launch plan for Europe is a good example: We recently moved Germany ahead of other countries on the basis of new data about various markets. A less nimble company would have balked at changing a sequence that had been established for several years. We did it on the fly. Being clear about our vision, mission, and values also allows us to push decision-making down into the organization. The most complex and hardest decisions rise to the executive level, but all our team members know that if they can answer yes to the questions “Will this delight our community? Does this build or leverage our unique strengths? Is this doing the right thing? Is this helping us execute better and faster? Is this making us more innovative, inclusive, and accessible?” they should feel empowered to approve or press on with that work. One Passionate, High-Performance Team People may join a startup because they are inspired by its mission, vision, and values, but they stay and give you their best only when they also have a voice and an ownership stake in the venture. I learned that from my parents. They couldn’t afford to pay their motel employees the highest hourly wages or salaries, but as they expanded into multiple locations, they created paths for people to work their way up to the managerial level, gave them the training and the autonomy to run those motels, and if they hit certain targets, financed them in purchasing their own properties. At P&G and Clorox, brand managers had a lot of control over their respective lines of business, but pay and equity stakes accrued to only the most senior levels. The attitude was: “It’s our job to make those people a lot of money so that one day we’ll reach those levels and others will make us a lot of money.” I always felt that was backward. My preferred incentive system is one that makes everyone an owner as soon as possible. When I moved into the chief executive role at Schiff, I insisted that TPG give me stock awards and options based on performance incentives to free up equity for our employees. That approach paid off: The team boosted the company’s value more than sixfold before its sale to Reckitt Benckiser. So when we acquired e.l.f., there was no question about whether we would give shares to everyone. And even after our 2016 public offering, we continue to increase those stakes. Each team member is awarded stock annually—which, I believe, makes us unique among the approximately 270 publicly traded consumer companies. Annual grants start at $15,000 for the most junior employees. Because e.l.f.’s market value has risen by a factor of 10 over the past five years, that has meant significant wealth creation for the team. Just as important as incentivizing commitment is removing disincentives for collaboration, so all bonuses are tied to enterprisewide—not individual or team—performance. Our operations team members aren’t trying to hit their own goal while their colleagues in sales and marketing aim for another. We’re all in it together, and for the past five years the result of such unity has been a payout of twice the bonus target across the board. We emphasize the “one team” idea in our communications and language, too. From the earliest days of my tenure, when we were transforming our supply chain operation, I made it clear that our production teams in China were just as critical to our success as the C-suite, R&D, technology, and retail teams at headquarters. The same is now true for our Europe-based colleagues. Diversity of all kinds is prized at e.l.f., and we are proud to have a multicultural, multigenerational team from the most junior members to the boardroom. The executive team and I welcome input from all corners. The company’s every-other-week product review is open to anyone at e.l.f. for comments in the group chat; it regularly attracts more than 200 people from all levels and functions, who freely share their opinions. During the Covid-19 lockdowns, I started a weekly employee email, and I’ve continued it (it’s into week 236 at the time of this writing), not just to share my views with the team but also because it’s an opening for our people to write back to me. Each week I get one or two dozen responses, always from different e.l.f.z (as we affectionately call our team members) about their lives and work and ideas for the company. The larger an organization gets, the harder it is to truly know everyone in it the way the leader of a startup would. But I try hard to do so. I schedule major decision meetings in chunks, whether I’m gathering my executive team or doing product or sales and operations reviews. That way I’m able to keep large swaths of time open to think and connect directly with team members, by walking the halls of our headquarters; regularly traveling to New York, Shanghai, and London; and doing one-on-ones not just with my direct reports but also with associate directors and VPs. My wife and I regularly host what are known as Afternoons with the Amins—we fly a group of team members from different geographies and business areas, along with their significant others, to spend some time with us at our home. We encourage all our people to get to know one another on a personal level and to engage in ways that will help the team succeed. Members of the executive team conduct orientations for new hires, introducing them to the e.l.f. way. Everyone takes a Myers-Briggs Type Indicator test, which provides us with a shorthand for understanding and discussing our own work preferences and those of our colleagues. We also conduct training on how to give effective real-time feedback and manage healthy conflict. See more HBR charts in Data & Visuals As a result, every day, across the company, we’re having frank and productive conversations about how to individually and collectively improve, rather than waiting for an annual review cycle to talk about and implement those changes. We routinely praise one another for good work and note what we admire about one another. But we’re also comfortable pointing out when we believe that certain behaviors are limiting someone’s effectiveness. And if people are not willing to work on themselves, or are simply not working out, we don’t waste time putting performance-improvement plans in place. Instead we respectfully discuss the disconnect and help them find a better fit outside e.l.f. Fostering the kind of passionate relationships that permit constant, constructive feedback in all directions frees up managers to lead their teams. They have more time to spend with reports discussing how to build and leverage their strengths and what opportunities at e.l.f. they might want to tackle next. The Future One of my top priorities since I took the helm at e.l.f. Beauty has been to maintain the close-knit, mission-driven, values-led, committed, and collaborative culture that the Shamahs created while also transforming the company into a beauty-industry powerhouse. That takes intentionality and focus, and we actually measure our success not in our revenues or share price growth but in employee-engagement results. More than 90% of our team members tell us that they are very or extremely engaged, and 98% of them say that they would recommend e.l.f. as an employer. In 2023 we were able to add more than 30 people to our workforce, acquire the skin care brand Naturium, and build out our London team for European expansion—all without seeing those employee-engagement scores change in the slightest. If we can continue to get our culture right, other achievements are sure to follow. Our company mantra is “Anything is e.l.f.ing possible,” and our accomplishments are driven by our people and our unique culture. As we continue to take our business global, we will stay rooted as one team, one dream.

The CEO of e.l.f. Beauty on Maintaining a Startup Culture While Scaling

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