The hardest conversation ever
From hyper growth to layoffs
I've tried to write this post as a note, stopped, expanded, asked for feedback and had to put it out as a form of catharsis. I've added a detailed chapter to my book about hyper growth, layoffs and tools that hopefully won't need to be used.
We lived two significant events in the last years that impacted tech organizations: the 2020 pandemic and 2022 War and VC funding crisis. Before that we talked a lot about hiring. “Hiring is hard”, “How to build pipelines”, “How company X hires” and “Hiring is the most important thing we do”.
Hiring under hyper growth is a life changing experience that changes us all - as mass layoffs. You got to build the process, collaborate with HR, attract candidates and tune your salary and benefits to the market the same. But most important, you have to support the folks that got out and as a leader understand how you got there.
The bend
Mass hiring was so ingrained in last decade's culture that we were not prepared for times like the pandemic in 2020 and VC winter in 2022. Throughout 2021 companies did IPOs or got fat rounds that prompted them to prepare for growth in the next years. But 2022 told us “no way” and that's what we have for dinner.
Innocently we think that there are options to deal with a certain extent of red in your balance (reduce burn rate) without letting people go:
Negotiate new pricing with vendors
Look into revenue opportunities that are not fully explored
Execute new product ideas
Reduce expenses.
BUT - they are all considered but you won't have time or bandwidth to plan and execute them at crisis mode. If the money you have in the bank won't get you at least 6 months of expenses, it is a problem.
Cloud, Vendors, Facilities and Payroll are ranked close or in the top 5 expenses. If you factor compensation structure (not only for product or engineering but for strategic and managerial functions), taxes, obligations and competitiveness triggers, payroll is the first target seen as a burden - right after it was seen as a strategy of growth and value for the company.
Working the payroll in any form can lead to a layoff. You will hear of silent layoffs, fragmented layoffs or mass layoffs. In essence they are the result of an effort to reduce headcount and consequentially quickly improve the burn rate.
Layoffs
Layoffs are a delicate subject, there is no way to talk about it without a sense of dread within companies. But we have to remember that folks that were let go feel way worse, their livelihood and family support may be at risk. No pictures of executives crying in social media will help, that's about real human beings that trusted a company.
You will hear layoff stories from outside of companies with varying level of details - honestly way more guessing than facts as a lot of decisions are not widely discussed. Sometimes these cases will go to the extent of exposing people, names, roles, internal memos and more. Save your mental health, don't go for them.
What I will write below is a summary of how I've approached one of the hardest moments of my career, respecting that what I felt was nothing compared to who was let go in the layoff.
The fact is that if hyper growth teach us a lot in technical terms, layoffs fast track us in strategic and human terms.
Strategic because if you were not let go, you probably have to make the after layoff company work and live with decisions that were imposed upon your company.
Human because no one likes to do it, it is grey, sad, hard, all bad nouns. You grow in a weird way and there is a lot on your mind, people that you loved to work with won't be there, objectives are weird.
No one is prepared to do it. We barely talk about budget and how unfeasible it is to predict a full year. No consultant can help on this, and in most case they may make it harder. That's a place where ownership counts.
Outline
You need to know in no certain terms the target: money, headcount and payroll, how much you can influence on it, which other levers there are. Look for absolute values, not headcount, no percentages. Also how do you got there ? What is the rational or lack of ?
Don't settle for emergency decisions with one or two days call. Don't get scared because people will tell you that you have no time to do it, and that it is too hard to do a bottom up planning.
Review all active and planned initiatives: if you run a lot of work in parallel, most will have to go. This is where lack of synchrony between business and technology hurts the most. An average C or D series startup with more than 2 products is doing something wrong. Don't forget manual toil and technical debt that runs the business.
This is a time of obsessive and pragmatic prioritization. If you need a framework, use my “Journeys and team staffing” template to illustrate where you are and where you have to go. I've written more about it in my article about team sizing. Everything outside of the basics is extra and no moonshot miracles will work in the last minute.
I say that because if you are laying off people but not fixing what brought you there, you are really just letting accountability from executives go away. The PR line of doing Layoffs, investments and innovation at the same time is just that, a PR thing.
Make a short list:
Initiatives you will stop
Initiatives you will slow down
What needs to speed up
How each one of the above is impacted by manual work or tech debt.
Make sure that revenue, expenses, EBTIDA, expected burn rate and everything in between are aligned with this list. Check it twice. Grow your stop list and annotate the associated impact.
That list will help your team to understand focus and help you with teams and people associated to it. You will have to structure a reorg - any people change is essentially a reorg and you won't let full teams or single levels out. You need to staff up and make sure no team and important initiative is unattended.
It is a sensible subject but I strongly suggest that you bring in your direct reports - current and future, to help design this reorg. It is a confidential and critical moment for the company but you don't want to miss out the opportunity to gather support within the team. They will shoulder the impact square helping you roll out the plan.
With a draft of how the teams will be structured, why they are like this and the initiatives assigned to them, establish compromises:
No one is to get overworked.
Prioritize aggressively before, during and after the change. Keep managing it closely in the forthcoming months. New product investments will be hard or impossible to do but expected to happen if you don't account for the day to day toil.
Speaking of day to day toil make sure it is not lost within the initiatives, state clearly how it will affect team's bandwidth.
Some people will leave. Others will try to cover all bases, business may not be fully aligned and so on. Reinforce the compromises of prioritization all the times, no shortcuts, no lunchtime favors.
Discuss out when/if you will need a replacement policy: will people that leave afterwards be replaced or the position will be closed ?
Run a training to all people that will have to let people go. It is an extremely delicate time and the wrong wording can cause a lot of pain on both sides. New leaders never did that, they will need support, examples of what to say, where are the information people will need, how to enable and use their packages.
Day 0
Brace for impact and do it on 1:1s, to give support and information about severance. You and your team have to to be there. Make sure to run a war room where you can fix things quickly with HR, Finance, Operations, Tech, IT, all hands on deck.
Keep an eye on people that are leaving and the folks that are giving the notice. This will be a bad day for everyone.
Day 1
Everyone will be in shambles. Build a network of senior people that can talk and listen in 1:1s. There will be senior leaders that will behave randomly.
Run an all hands to talk about what comes next to the company, then to your team. With all the data you have, but with support for what you don't know: numbers, local laws, confidentiality and personal information protection. Be careful to not expose or imply anything related to performance or personality of anyone.
Take questions, and they will be the hardest questions ever. Some you will answer, others are more a statement than a question and you should pass. Use the time for a postmortem respecting information that you can't share and belong to people that left.
A week later
Gather to talk about strategy, what comes next, how to unfold the discovery of what initiatives and savings will go on. Also use this time to educate everyone on indicators, metrics, concepts and what is coming for the near future.
A month later
Communicate progress, impact and so on. Two months later assess what is not working, how people are coming back to behaviors that won't work with how you are organized and fix them. Find metrics, information, deal with people that decided to leave and work to build confidence.
There will be churn, there will be traumas and the culture will change because of that. There will be new leadership, new culture and hopefully new opportunities for the company. Or not - there are companies that won't recover for such movement because how they got there in the first place.
In the age of terms as “Bossism”, it is hard to discern survival measures from cargo cult in some places, so communicating well afterwards is key for your team and for you.
If you can't build a message your team trust, if what is said internally changes all the time or if you can't establish a partnership with your boss and peers in the following months, start thinking about your next step. A layoff may impact your mental health as well as your connection to your job and feedback into other health issues.
If you were let go: if you feel I can help, drop me a line and I can fix you with a copy of my book, which can be helpful for your new gig. Remember it is not if, it is when you get a new gig.
Also remember that being fired should not make you ashamed because that's not your fault in these situations. Find help, reach out. Let your community help. Drop me a line.
Disclaimer: I've joined a company that sadly had to do a layoff. The folks that were in this layoff got new jobs quickly thanks to their competency and skill, and also that the community that was bought to send referrals, pointers and support afterwards. It was an experience that changed a lot of what I think about my career and company culture.
I wrote a book called The CTO Field Guide, where I talk about happier and harder times. If you feel like getting it, please check https://ctofieldguide.com/. Thanks.