One of our company managers sent a note to shareholders the other day that included an ask for advice.
Several underperforming team members had recently resigned and he was considering removing a few more. In his words:
Some people need to be removed from the business. With some of our recent resignations, it has been a good thing for the business either financially or because they were not adding enough value to the business. How do you manage through these times without having the other people on the team feel like they should also be seeking job security outside
How do you remain transparent with the changes that need to be made while still inspiring people to stay together?
My number 1 focus on the business is to get our revenue growing again. Is this the wrong focus? What do I need to keep in mind?
Not surprisingly I have strong opinions on this matter. I’ve been through it in my own companies and worked through this problem with a number of CEOs over the years. But never taken the time to write out my thoughts.
Running a company is a hard job. It’s a lot easier if you meet challenges head on and approach your employees with a sense of respect and directness. Problems are problems. You have them whether you talk about them or not. Great CEOs meet them head on.
A few days after I sent the email the CEO encouraged me to share my response publicly.
I wanted to comment on the latter part of your email. I’ve been through this scenario a number of times as a CEO and also as an advisor to the same. It’s a tough but incredibly shaping experience. These hard moments truly define who you are as a leader and a company.
A strategy that has worked for me in a number of scenarios is to be open with the team about why you are doing what you are doing. Leaders are people who do hard things before they are forced to do them because they want the company to be more in control of its destiny.
A leaner company is, by definition, a less expensive company to operate. So when you make decisions to part ways with underperforming team members you do it for two reasons:
- To reduce unnecessary costs so that the company is more in control of its future than it was before and,
- To make it clear to continuing employees that your company has a standard of performance that must be upheld at all times.
So when you speak to your staff you have two goals:
Stave off fears that the ship is sinking.
You do this by tackling the issue head on, ideally in front of the whole company at once. We are a strong company. And we are stronger as a leaner company. We also have to work harder as a leaner company. With fewer people, we have less slack. We also have less friction in the system (lookup Netflix’s experience with early layoffs…they were more productive after than before).
When I advise CEOs on how to handle these situations I use a line that’s been powerful for me in the past: “We took the action we took so we could be stronger, not because we were forced to or because we’re freaking out. Your job is safer because we took this action.”
Energize your top performers.
If you have sub-par performers, you can bet your top performers are wondering why those people still have jobs. You are expressly communicating to your company that a B player can earn what an A player can. A-Players have no incentive to hustle.
When you convey this to our company you don’t want to crap on the people you let go, but you can say things like “we need to be a company of top performers, and we think the company we are on the other side of this action is that.”
When an employee is fearful about the company’s future you can only tackle that with motivation. Facts about burn rate, etc. don’t matter because you took an action that is freaking them out just a week or two ago. So in their eyes, you could do it again.
You have to show them that your decisions were focused on building a strong company. Not just on disaster aversion.
On your revenue focus, it’s your job to decide what the most important focus is for the company. Revenue is either the driver of growth or a measurement of it.
The risk of solely focusing on revenue growth is that you lose sight of revenue quality, cultivating current customers, etc.. I don’t know enough about your business to have a strong opinion here, but I encourage you to think hard about how you can properly break down the contributors to revenue so that individual teams can feel a sense of agency in driving it. Otherwise, salespeople can be the only thing that matter and the company can become reactive. Those approaches often lead to problems.
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This post originally appeared at Zach Ware's Notebook.
Also published on Medium.