Sometimes difficult times call for difficult measures. We are now in a difficult moment. Many leaders are wrestling with a dramatic shift in financial realities. You may be evaluating how to cut costs for your organization and struggling to see how to keep building after that’s been done.
Sadly, when the markets get rough venture capitalists get hesitant. Often that means that startups need to stretch the funding they have, which can mean layoffs. Startups have an inherently passionate, trusting culture and downsizing can be much more damaging to the cultural foundation than in larger companies. It is vital that this process be handled in a way that reassures the remaining team members and supports them in doing good work moving forward.
This requires two strategies:
Use this moment to reclaim clarity on the company’s essential strategic focus and the progress it MUST make in these leaner times.
Reorganize or layoff the right people, in line with that strategic focus, with respect, compassion, and sufficient support.
In order to accomplish both of the above, the first step is reclaiming a tight strategic focus. Do the critical thinking (and dialoguing) to ensure strategic priorities are crystal clear and shared across the leadership team. Then, ensure that all activities are lined up against that focus. This may mean pausing unprofitable projects, reassessing resource allocation, or redefining roadmaps. This can be hard, as personal attachments to work streams can cloud judgment - it can be helpful to bring in outside support (like us) to increase objectivity.
Once you have a game plan for how to focus on what is essential, then it is time to assess your teams. Who would be the best working on which project based on a realistic assessment of their skillsets? Are there any existing dynamics that are not working and might break under more pressure? Is this an opportunity to restructure cross-functional dynamics that have persistent friction? This is another area where outside help can be immensely beneficial since startups are often built from such tight teams, even groups of friends, and it is difficult to be objective in these considerations.
After the company has refocused and completed the needed layoffs, team confidence may be damaged. It is vital to immediately start rebuilding trust. This is the time to acknowledge the truth of the situation, how hard it was for everyone, AND the importance of being able to move forward together. Here are a few other steps to help your teams recover and move forward from this reorganization.
Bring your team together. Especially if your company is somewhat remote after the pandemic. Reconnecting at an offsite is a truly important next step - it serves to remind everyone of our collective humanity. It helps us realize that despite hard decisions, we are still people with feelings, who long to be part of a thriving team.
Set your teams up for easy wins at first in this new model. Celebrate a new partnership or a successful product or feature release. Empower and encourage people with expanded responsibilities by ensuring that they are getting the support and feedback they need to succeed.
In the early 2000’s my startup Listen.com had grown rapidly before the dot-com bubble burst. We had 140 employees and needed to reduce it to a lean 50-person team in order to make it through some very difficult times. There were many heart-wrenching decisions we had to make for the company to survive, including cutting a lot of promising but unprofitable initiatives and people we cared about deeply.
The first thing we did once the dust had cleared was get the remaining team together, walk through our new, more focused strategy and give each of them a choice: recommit to the new plan or gracefully exit with a package. It was a hard message to receive and deliver but ultimately people appreciated that they were being treated like adults and that we weren’t trying to paper over the pain and doubt that the downsizing had caused.
Of the 50 we retained, all of them stayed and signed up for the refocused effort. And, within months we launched Rhapsody, the world’s first on-demand music streaming service. In retrospect, the downturn had provided us all with the discipline and focus that it takes to launch a groundbreaking product - something every team member feels proud of to this day
If you only take one thing away from this article, remember that the primary strategy to get your organization through financially tight times is to focus the company, not just cut costs. We hope this helped clarify your next steps during this worrying time and if you need support, we’re here to help.
Refocusing is a tall order, but here are some questions to help shape your priorities:
What are your superpowers? What is it that you do that only you can do? And even more important in these times - what can you give up?
What do you know about your customers and their needs? What is it that they most value about you/your products and what are passion projects that can be shelved?
What is your competition doing and where will you gain the most strategic leverage when boom times return? As hard as they are, downturns are when many companies cement their leadership positions.
We offer an Identifying Market Opportunities workshop if you need some expert support in figuring out the most valuable area to focus. Book a consultation here.
Remember, we are all surfing these same rough seas, and it will be the best navigators that will prosper through these times.
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