Podcast: Reductions in force -- Truth, not therapy

In this episode of Fintech Thought Leaders by QED Investors, QED Managing Partner Nigel Morris is joined by Bambee CEO Allan Jones, Tribal Credit President Duane Good and organizational and strategy consultant Seamus McMahon about the lessons learned from conducting reductions in force.

Show Notes

Tune in to learn:

[10:47] How the best founders thrive under constraints. "Constraints drive creativity and they rob you of optionality.”

[13:20] How founders think about the balance of keeping once versus cutting too deep.

[16:10] The key considerations around how you message the layoffs to employees

[18:56] The importance of taking a retrospective look back at how you grew and where mistakes were made.

[22:31] Why honesty is the only thing that matters when you're forced to execute a RIF.

[47:44] Helping team members understand how you came to a decision.

[50:01] The role of leaders in helping people navigate change.

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‍Nigel Morris is the co-founder and managing partner of QED Investors, a fintech venture capital platform focused on disruptive, high-growth financial services companies. QED has made numerous unicorn investments, including Credit Karma, Nubank, Avant, SoFi, Klarna, GreenSky, and AvidXchange.
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Nigel is the Chairman of ClearScore and Mission Lane and serves on the boards of Remitly, Quinto Andar, Bitso, Amount and Current. Additionally, he serves on the board of Ideas42 and Scotia’s Digital AdvisoryCouncil, and he works in an advisory capacity with General Atlantic and Oliver Wyman. Nigel previously worked on the boards of Capital One, The Economist, Brookings, National Geographic, Klarna, Braintree, TransUnion, and London Business School. He frequently keynotes at industry-leading conferences, including Money2020, Fintech Nexus, Finance Disrupted and the Bernstein Annual Financials Summit.
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Prior to QED, Nigel co-founded Capital One Financial Services in 1994. Under Nigel’s leadership as President and Chief Operating Officer, Capital One pioneered an information-based strategy that transformed the consumer lending industry.
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Although Nigel grew up mostly in England, he takes immense pride in the fact that he is at least half Welsh. He has an MBA with distinction from London Business School, where he is also a Fellow. Nigel was recognized as a Top 100 Venture Capitalist by CB Insights in 2019 and Midas List member in 2020 and 2021. He is an avid cyclist, but he is happiest when he is at home in Virginia with his wife, four children, and three grandchildren.

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Allan Jones is the founder and CEO of Bambee, a new type of business built on the innovative premise that every small business should have a dedicated HR Manager. This concept was derived from Jones’ previous experiences working with—and growing up around—small business owners.

A two-time founder, Jones is focused on building an HR powerhouse at Bambee, the first empathy-driven outsourced HR compliance solution for small businesses. Bambee’s automation technology keeps more than 10,000 U.S. businesses HR compliant, and it is the one firm that offers a dedicated HR manager for a cost as low as $99 per month. In March 2022, Bambee closed a $30 million Series C round, taking its total funding to $65 million. Bambee doubled its revenue in 2021; it is on track to repeat in 2022.

Jones’ past successes growing multiple successful teams include his era as CMO of ZipRecruiter; prior, Jones was Head of Product at DocStoc (acquired by Intuit). He is passionate about finding creative solutions to complex problems through product, and is squarely focused on doing just that by delivering employment equity to the market and removing friction in the workplace.

In October 2021, Goldman Sachs celebrated Allan Jones as one of the 100 Most Intriguing Entrepreneurs at its Builders + Innovators Summit. For three years running, Forbes has named Bambee a top startup employer in the U.S., and in 2022 it announced Bambee as a Top 5 Company in Los Angeles.

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Duane Good is co-founder and president of Tribal Credit, a business founded to empower emerging market SMEs to grow and compete in a global economy. Tribal is a Visa Fintech Partner and has earned recognition as “Best B2B Platform” by Juniper Research and “Best Banking Card” by TearSheet. Since its launch in 2019 Tribal has helped thousands of corporate clients scale through a foundation of integrated payments, financing and expense management tools.

Duane has worked extensively in global banking having previously served at Silicon Valley Bank, HSBC, MBNA (Bank of America) and Experian. He is passionate about the global startup economy and was a founding member of Aingel, Route1Partners, RiskThought, MBNA International and eCapital Financial. Duane holds a MBA/MSE from the University of Pennsylvania and B.S. in Business Administration from Bucknell University. Outside of work, Duane is an avid surfer and is based in Monterey, Calif.

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Seamus McMahon is an organizational and strategy consultant. Seamus helps individual and corporate clients with executive coaching, team development, succession planning and strategy development. He has had leadership roles in large and small organizations: he ran the global financial services group at Booz Allen, was the CEO of TD Bank USA, led HSBC’s U.S. expansion program and co-founded Novantas, a data analytics company. During the 2008-2009 economic crisis, Seamus was an advisor to the U.S. congress on the Troubled Asset Relief Program, and he has served on several non-profit boards, including the National Council on Economic Education, American Lung Association of New York and the National Ability Center

Seamus’ academic background is in economics and statistics with a concentration in technology-driven strategy. He has taught at NYU, Fordham Law and Trinity College, Dublin.

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Full Transcript

Nigel Morris:

Hello everybody, and a warm welcome. I'm Nigel Morris, and I'm the managing partner at QED Investors. For those of you who don't know, QED is a FinTech global specialist focused on helping build disruptive companies from pre-seed all the way to IPO across the FinTech universe. And in the today's FinTech thought leaders series, we're going to talk about the delicate but really important issue of layoffs. Over the last 18 months, QED portfolio companies have really gone through a difficult return to normalcy time where many of them, scores of them have had to reduce their expense base, and with that reductions in force. RIFs as they're known, euphemisms for layoffs, given the abrupt change that occurred in the FinTech market over the last 18 months. And I'm sure many of you saw the rather infamous videos of how not to do it, remember the Dumb Dolphins video.

But what I really want to focus on today is get beyond the headlines of here's Company X, who's done a RIF and laid off N-thousand people, but really talk about the experience of doing it, how to do it well, how to learn from the experience of it. And then with our participants today to really try to pull out some pearls of wisdom should you need to be in a position where you have to do it, here's some practical tips, advice based on the experiences of the people on the call today. So I'm joined by two terrific QED portfolio leaders. We've got my dear friend Allan Jones, the founder and CEO of Bambee, and Duane Good, the president and co-founder of Tribal Credit, as well as my long-term, long-time colleague and friend, Seamus McMahon, an organization and strategy consultant to QED and a coach to a number of our portfolio company CEOs.

Now both Allan and Duane had to make the difficult decisions on the size of their team and right-sizing their team. And Seamus has been instrumental in working closely with a number of our portfolio companies on how to pull off reductions in force in the right way. And gentlemen, I really, really appreciate you coming along today. To Allan and Duane in particular, thank you for agreeing to share your thoughts and insights, and to do that on a topic that's incredibly personal and poignant and emotional, having gone through it myself in my Capital One days when you have to let people go, people that you care about, it's not something that you do lightly. So as we get started here, I'm going to ask each of you to give our listeners a quick 60 seconds on who you are and what your company does, and then we'll jump straight into some of the thoughts around reductions in force. So Allan, can I start with you on Bambee?

Allan Jones:

Of course. One, thank you guys for having me. Thank you for asking to be on. I'm Allan Jones, I'm the founder and CEO of Bambee. I've been building technology companies for the last 18 years. Previous for this I was chief marketing officer for a company called ZipRecruiter in the early days, been building Bambee for the last almost, this will be our seventh year, which is mind-blowing that I have all of my hair, for now. And look, I think we've grown really fast. We've done some really great things. We later stage Series C raised about 70 million bucks, almost 200 employees, all based out of Los Angeles. And we provide HR services to America's small business. So that's who we are.

Nigel Morris:

Thank you, Allan. Duane, would you do the same?

Duane Good:

Yes, thank you. And also great to be here. Thanks for including us. Here at Tribal we empower emerging market SMEs with modern payment rails, credit, expense management tools so they can grow and compete. And that's really what we set out to do. We're a team of about 270 people. We raised our Series B earlier last year, and we have colleagues working in multiple countries kind of matching where our clients are. We have a couple thousand clients and our people are in Mexico, Columbia, the UAE, Egypt, and of course here in the US. And we also grew very fast. We were growing quite quickly when we first entered the market. And as the markets change last year, we recognized the need to reduce costs and tighten the focus of the company. And we conducted our first RIF in July of last year. And then for reasons I'll address later today, we actually conducted a second one at the end of last year.

Nigel Morris:

Thank you Duane. And then Seamus McMahon, a not known secret, Seamus, a young Irishman at the time and myself, a young Welshman at the time were unleashed on Signet Bank in 1988. So I got to know him then when he was working for Booz Allen. And we still sound the same like we did all those years back, but we have a whole lot less hair Allan, thank you for referencing that. But Seamus McMahon.

Seamus McMahon:

Thanks Nigel. Yeah, I spent most of my career in consulting, but I did have a couple of rounds in banks, didn't rise to the heady levels of Nigel, but in fact Duane and myself were colleagues at one point. And unfortunately I've also had to do RIFs both in startups which I had initiated and then in a couple of banks. So I've gone through this a couple of times myself and I've now worked with probably two dozen young companies over the last 12 months, 15 months on this topic.

Nigel Morris:

An amazing reservoir of experience. Seamus, thank you for joining. So let's go to Allan to start to kick off and jump into RIFs now. So when you look back on making that decision, walk through the process if you would, what brought you to the conclusion you had to do it? What other things did you consider? And just a little bit about the flavor of the buildup toward it.

Allan Jones:

So I have a lot to say on this topic, which is why I'm happy you asked me to be here. So I'm in the unique position I think to speak about this primarily not because we've had to make changes in our organization, but also because Bambee services other small companies across the United States who are also making considerations about what to do with their workforces. So we kind of see it firsthand here and with our peers and we also see it in our consumer and our customer base. So couple of things, couple of truths. One, we always think about every single year we ask ourselves, even before the market had changed, do we have the right people in the right seats? Are we being as creative with our resources as possible? Are we overspending or being in denial about something that we keep saying is going to eventually start to perform, but the original deadline for performance was three months for the pilot, but we're on month nine. Were we starting to lie to ourselves?

And even for the most, I think focused, honest, high integrity, whatever word you want to call it, founder, those little lies, you end up starting to excuse why something can go on for a little bit longer in its current state and condition. Now, what's a multiplier effect to that level of, we'll call it rose colored glasses is when the markets are hot, right? Because you're thinking well look, yeah, sure, maybe it's six months, we say going for two months, but we could just go raise more money and we've already invested all this thought and learning, why turn it now? The win is right around the corner. And so we as a muscle in an operating team have the discipline of knowing that we do that. And so asking ourselves once to twice a year, are we still doing that in any pocket for the business? Now the level of clarity is heightened when the market starts to shift. The risk of being dishonest is even higher. And so I'd say the first big change we made was last year.

And we have a couple principles when we think about making those changes, which is can we make changes that we truly believe are better for the customer? Can we make changes that we think are truly better for the business? And I think July of last year we looked up and we had hired a bunch of leaders who we didn't think were right for the organization, and we were whispering about it but not actively talking about it to each other directly. Those leaders had built cultures inside of the organization that we thought were kind of the anti-culture, not really aligned to how Bambee really does things, whether it be pace, scope, thinking about quantitative impact over qualitative impact. And we got honest, and we said, yeah, we think not only can we make some cuts, we think the company can perform better if we do so. At the end of the decision, we always try and ask, do we think the company will perform better after these changes or worse? Fortunately for us, we've always got to the yes on that.

Nigel Morris:

Allan, how big was your RIF? And to what extent, I'm listening to your sort of excuses and lies and the whispering and the multiplier effect. To what extent did the environment and how hostile it has been to tech and FinTech the last 12, 18 months, did that create cloud cover? Did that encourage you to take the action, or would you have done it anyway if the environment would've been much more benign?

Allan Jones:

Oh, such a good question. So the best founders thrive under constraints. They do, constraints drive creativity and they rob you of optionality. And so without question, the market changes constrained us, which started to rob us of optionality and forced creativity. Anyone that says otherwise is probably not being totally genuine. I think I'll start with the end of that, which is would we have got there anyways? Yes. Now it would've taken us triple the amount of time. A decision we made in two months would've taken us nine months with no different result in beneficial outcome to the business, but a complete inflated OpEx throughout that duration of time. So yes, we would've gotten there, three to four times as slow.

Nigel Morris:

And the size of what you did, Allan, for our listeners?

Allan Jones:

Yeah, yeah, I think we did about 18 folks.

Nigel Morris:

18 folks on a base of...

Allan Jones:

On a basis of, what does that mean?

Nigel Morris:

Oh, 18 on how many people?

Allan Jones:

Of at the time, 125.

Nigel Morris:

Okay, okay, good. Yeah. Okay. Duane, a little context on what you had to do.

Duane Good:

Yeah, I think in many ways we faced some of the same questions and challenges that Allan shared. So it was quite similar. And in our case, we recognized that we had grown a little too quickly, we had some gaps in terms of where we needed to perform the best. And so the real challenge that we were looking at was how to go about it. And the toughest part of that was really the human aspect of it. That's where we really struggled the most. We had worked really hard to build talented team to bring a lot of people together, but we recognized that there were places where we just didn't have the fit or we weren't seeing the performance or we had just extended into a market where it really did a segment that just wasn't working out as we wanted it to. So the part I started with the most with was really the impact to our people regardless of the performance contribution, just really thinking about the impact and what it meant to them. And so we worked through that.

We're all very wired to be loyal and support each other, and we often ask ourselves, can we turn this around? Can we help this person? But the reality is I think maybe consist of what Allan was saying, we need performance now. We need people who are in roles to carry the company forward. And so the focus was very much on that today. And so we reached a conclusion on the reductions we were going to make. And the difficult part was then really very much around the execution. So the kind of questions we really struggled with was whether the cuts were deep enough or were they too deep. We wanted to really think about what the unintended consequences would be and whether at the end of the day, the changes we were making were going to resolve in a stronger, more effective company.

And that's again where we came to a similar answer. Yes, we did. And that's the decision point that then we went into execution on. And I wouldn't certainly say that doing the reductions is something that we've mastered. It's something that's hard, we lose a lot of sleep over it, but I think we learned a lot through the process and in the end I definitely feel like we're a lot stronger and more focused than we were going into it.

Nigel Morris:

Pretty deep. Yeah. And one of the things about the phrasing of RIF is that some people will use RIF and it'll be largely a performance-oriented action where you take out two, three, 4% and you're all familiar with the old sort of Jack Welsh model of doing that. And some people do it on a regular basis, but others are phrasing RIFs where they're taking 30, 40% of the cost structure out. Seamus, you said earlier that you've worked with a couple dozen companies, a lot of pattern recognition there. There's some sort of rules of thumb, conventional wisdoms that exist around rifts such as you look go deep and go early and don't procrastinate. I'd like to reflect on some of the summary points coming out of your experience to frame up how you thought about this. And I know that you've also being the good strategy consultant that you were anyway, you've thought about this in terms of the stages of it, the planning of it, the execution, and then the post action. But how should listeners think about it Seamus?

Seamus McMahon:

So I would make two points here. First of all, the more reasons you have to do a reduction, the more complex the decision process gets and the harder it is communicated. So unfortunately simultaneously you can run into a situation where your markets have gone sideways. You realize no matter what the markets have done, you grew too fast. You have, as Allan put it, people in seats or anti-culture. So you've got performance or fit, you might also have adapted a new technology, Duane, this might be something you want to talk about which has actually changed the way you want to process. You might be centralizing, decentralizing. The reality is there are 6, 7, 8 reasons you could be facing the need for a sizable reduction. And the senior management team has to get together and decide any good story, which are the one or two most important components to discuss and communicate.

And I would say what complicates this one step further is getting the tone of that narrative right is very complex because the audiences plural, deserve, expect different tonality. So the people that are leaving expect a lot of sympathy and empathy and no joy and not too much bragging about how you still have lots of money left. I've had to work with some companies on messaging to reassure the people who are staying that there's plenty in the bank, doesn't sound good to the people who are leaving. On the other hand, competitors, investors need to know you're definitely not out of the game. So sorting through why you're doing it and how you're going to tell the story is number one if you get that right. Then the second topic could be of the three phases, planning, execution and follow-up, which is most important, and this is a little bit like which of your kids' question.

But forced to the sword of Damocles here I would say planning and follow-up. If you don't have an incredibly thought out plan, it happens so fast that you won't on the day of execution, excellent execution will catch you up and you will make mistakes in execution. You just will. That's going to happen no matter how carefully you planned. But if you have a good plan for follow up that starts within an hour of the action and continues through the next several weeks, then I think you can make up for it. That source can cover up some defects in the execution.

Nigel Morris:

Very helpful. I'm sure we'll touch on this as we have the conversation, this distinction between levers and stairs and getting the tone right across the two of them is really, really important. And then the narrative as you said it, the more complicated, the more reasons to do it makes the narrative slightly more complicated. To you, Allan, as you planned and as you executed and then as you followed-up, reflecting on some of Seamus's comments, what were some of the things that you think you really did well and maybe a couple of things that if you have had to do it again, I hope you don't, but what would you do differently?

Allan Jones:

First of all, I'm like dancing in my chair, there's so many things I want to say on this topic. So I think a couple things are true. If you can't look back in a year after decision making and find where you've made mistakes in the organization and where you can save a bit of cash and help the company improve and optimize OpEx, then you probably didn't go fast enough throughout that year, right? Then you were probably operating too slow.

So the point I'm making is at the pace in which we need to operate to make companies like this actually successful, mistakes and areas where you just not been as thoughtful and as disciplined and as prudent as you otherwise should have been should naturally already be in the organization. You just have to with humility take a retrospective and look back without pride if you were the one that made that decision or not. So almost always in hyper growth in my view, and on a year-over-year basis, if you have to look back, you should be able to find an opportunity for OpEx cleanup. Otherwise you're moving like a fucking turtle. Oh man, I don't know if I can curse. I'm sorry. Bleep it out. It's a kids show.

Nigel Morris:

It's totally you Allan. It's authentic. I'm good, I'm good with that.

Allan Jones:

Okay, so that's one. I think that the other thing is I met with this company, I met with someone recently and I'm not going to say who it was, and he said, "Well, we're not a layoff culture." And I was like, what does that mean? What does it mean? There's no pride to me in not being able to look back and identify if you've made errors in the company and you think that... There's no pride, there's no such thing, what that means is you're unwilling to look back at things that you believe might actually be harming the organization where the company could be performing better, but you have too much pride to acknowledge that. Therefore you're saying things such as I'm not a layoff CEO, insanity. And then the last thing is what did we get right? And I'll spend this time talking about narrative. First of all, my general motto is always tell the truth.

So especially when you're playing kind of eight dimensional chess with the reasoning as to why you had to make cuts, find the thing that is the most true inside of all eight dimensions and speak to that. And so sometimes it doesn't matter what stimulated the activity, it doesn't matter what the catalyst was to start looking for the changes, what matters is why ultimately you decided to make those changes altogether. And so sometimes I think founders get into the game of oversharing and I find that to be sometimes unnecessary and a little unnerving for the more junior folks in the organization. And so for us, so I talked about the one we made last year. We just made some changes this year and this year we know we locked arms and said, look, we have a service that services small businesses. Do we believe our CSAT and our NPS is as high as it should be?

The answer was no. Then the question was why? And then we said, well look, here are the 34 reasons as to why we think that that is true. And we said, okay, how long will it take us to engineer our way out of those issues? And we said, we think it'll take 24 months. And we said, okay, fine. Is there a way to reimagine the structure of that team to knock out 80% of those issues and dramatically correct pre-CSAT. It could have been that the answer would've been no to that question, but because of how fast we moved, the answer was yes. And so we just did a restructure of our entire kind of service delivery team, which is dramatically skyrocketing our NPS, while reducing headcount by about 30% in that particular group. And so I think kind of creativity and humility are really important and honesty is the only narrative that people really respect.

Nigel Morris:

And did you get it right when you did it last year?

Allan Jones:

Without a doubt.

Nigel Morris:

Good, good. Duane? Thoughts?

Duane Good:

Yeah, I think in our case, I mean that all resonates. We had multiple reasons to make the reductions and we really evaluated whether to do once and done or to just stagger it out. And it's one of those things where I don't really think one size fits all. There are a lot of benefits to being able to do a single RIF, go deep enough, make sure that you don't have to do it again, but you never know when exactly conditions are going to change. But as we looked at the situation, we were really identifying what were people working on, what were the objectives we were moving towards? And then use that to help guide our decision. So when we were in the planning stage, we were really evaluating what part of reductions could we make by just general belt tightening, right?

People who maybe weren't performing, weren't necessarily a strong fit, weren't contributing. And then we also had maybe markets or segments that we had entered that we really weren't working out the way we expected, so we were going to contract and make a strategic decision to focus in one area versus another. So the resources were maybe misallocated. And then we also had some major initiatives. We were in the midst of a significant platform upgrade. We were migrating from our MVP platform, which we grew with initially onto a new 2.0 platform that was architected and really the core of how we expected to build a business. And so we knew that if we went with a single cut all at once and tried to go deep, it would actually be counterproductive to those goals that we were really trying to achieve, which is to make the business stronger and make sure on the other side we had a stronger, more focused, more successful business.

And so we ended up having to go with a plan of multiple cuts, which is I think is difficult. These are always difficult, but having to do it twice is particularly hard. So I think in the first cut we worked very hard to be transparent, attentive, we talked to people very quickly, made sure that as best possible, we were always trying to make sure that the impacted employees heard about it first from their manager. So they got the message first from the person they knew the closest in the organization that could deliver that message. And then we had planned significant communications with what we called the state team, the core team that was carrying forward to make sure that the state team really understood the objectives we were trying to achieve, the rationale behind the decisions, and how we're thinking about it. And then that kind of helped us paint that future and I think build some trust around where we were going and why we had to make the decisions and how we went about it.

And I think, again, I don't know that we got it 100% right. I think we got better from the first cut to the second cut, and I think we did minimize the amount of distraction disruption, and I think we're stronger and more focused today than we were at that time. But in our occasion, it was very much around thinking about what were the outcome from different cuts that we needed to make and what we were trying to achieve and then tying it to those things. So our second reduction was really tied to the completion of a major initiative, and then letting some resources go that just weren't going to contribute in a meaningful way to the future of the company.

Nigel Morris:

So much in that Duane and so many insights to pull out. I'm struck by how much harder it is to do multiple waves of RIFing rather than single. Conventional wisdom again, Seamus would say, go early, go deep and declare it over, take the stress out of the system. But as all three of you know as CEOs, it's very hard to make any such declaration because you are always looking to improve, Allan, restructure, reorganize, get better. And also you are dealing with a volatile market out there where you don't control all the variables.

Seamus, back to the couple of dozen examples. Some things that have worked really well across the board, and some things that people did that they could have done better. Down to some very sort of mechanical things. Do you do it on a Thursday or do you do it on a Friday? How do you use video for remote people? Duane mentioned the messaging coming from the person's supervisor. I think that would be obviously better if you could do it, but what if you can't? Just sort of do a bit of a landscape perspective on your thoughts there.

Seamus McMahon:

Well, and I again defer to the practical experience wisdom of Duane and Allan here, but this landscape is shifting a little bit. What we did growing up was you met with someone in person but in a virtual organization and now this little bends on the company, you may not physically not be able to do that, especially if you've got people spread all over the globe. So I think the sentiment around, I want to tackle this one first, in-person or virtual is really changing and changing pretty fast. And one of the best practices is if you can do this to get feedback from the people that you let go about how they perceived it, remember they're all friends and maybe family members of the people you keep. So it's one thing to survey the people you should keep a very close tab on.

Did the people who were let go feel their dignity was respected? How did they feel about the process? And very often what I've heard is what might make me go into the office for 10 minutes to fire me and then ignominiously walk me out. So I would challenge the original conventional wisdom on this. It also reduces frankly a downside of a you're, you're going to have online flareups and social media flareups outside your own email platform. You can't avoid that. That's a reality, but at least you want to have it in a physical situation. And I have come across situations where that can happen. A very practical downside is good luck getting your laptop back or other equipment as regards timing. Obviously in some countries there's this almost like you'd be crazy to do it before the winter holidays and there'd be versions of that around the world.

Whatever you're saving you'll, you'll probably never recover in terms of the perception of could you not have waited four or five or six weeks? Yep. Time of the week. If you were to just say, look, what would you do? I would say Thursday. And the rationale for that is it gives you Friday for town halls, for small group meetings and so on and so forth. And then it gives you the weekend for personal informal outreach to the key people that you want to hang on to and reassure or ease their passage on the way out. I would not do it over a long weekend. I literally found that third day or fourth day is probably too me too much much. So I just reflect also on what do you do for the people who stay and having that plan and as Allan said, level with them, don't sugarcoat it, keep it simple, keep it short, listen to them. And the third L would be lean into their development, and we can talk about that.

Nigel Morris:

Some great thoughts though. As I've listened to videos and read press releases of CEOs going through this and we are seeing somewhat of an avalanche of tech layoffs occurring now across the planet. There's a variation, there's a lot of variance in how much personal accountability the chief executive takes. On the one hand, some people say, look, we thought the market was great, it was great, it's not great anymore. So we have to cut in order for the company to survive, much more exogenously driven motivation. Others say, "Look, it's on me. Buck stops with me. I made a mistake, I overhired, and now we have to do it and I'm really sorry, it's my responsibility" I'm sure you all wrestled with that. Duane, how did you think about that and where did you land?

Duane Good:

Boy, I think that's exactly, that's a tough one because I think we actually took both of those. I think we did acknowledge that the markets had changed considerably as we explained what had happened. We had grown very quickly when market share growth was very much rewarded and we were expecting to monetize much later in the cycle, but we also fully recognized that the buck stopped with us. We did acknowledge that we had made some decisions and we took accountability for that. So we were very transparent. We spent a lot of time talking with folks about it. We probably spent maybe even more time than... We didn't sugarcoat it, but we probably maybe talked about it even more than we needed to in the first stages by open hand, through extended all hands meetings, especially with the state team, the folks who were affected, we tried very hard to be compassionate with, we tried to be their agents and helping them find their next roles and helping them move on.

And then for the stay team, the core team, we spent a lot of time making sure they knew how we treated both the people who had left and were no longer with us and trying to support them, but also then really focusing on what needed to change, where we needed to go, what kind of performance we were looking for. And I think we did maybe on a Wednesday Seamus, but I think in hindsight on a Thursday on a, we totally agree, there's a lot of sense in that practical aspect of the timing so that you have that time to make the action, have the communications, let then people kind of decompress. We often let folks need that time to then come back the following Monday ready to go. And at that point we were very focused on resetting our objectives and OKRs and just basically picking up and moving forward and trying to move through that transitional period as fast as you can to get back to really high performance focused on the fundamentals that are driving the business.

Nigel Morris:

And be stronger for it. Allan, how did you deal with the trade-off of sort of internal/external motivation for the action?

Allan Jones:

Yeah, one, your chief people officer is your greatest multiplier generally and in moments like this. So I think that has to be said. So I have a phenomenal people team and we ask ourselves three questions, are we being fair? Are we doing this in a way that is keeping, is it a dignified process and are we being honest? So for all the people that are leaving, those are the three questions we ask in terms of thinking about packages and timing and duration of time to pay severance, et cetera. And then I think the other thing here is what's the accountability level and then what's the internal/external messaging? I have a hot take on this one where if you're not a public company, I don't think you need to do a blog post about letting people go. I think A, because the only people that you owe a narrative to are the people that work for you. None of the people on the streets have any access to your business at all, not on your cap table, et cetera. So I think it feels arrogant to me when people do that.

The second is most people externally don't care if you say, this is on me. In fact, they're going to kind of hang you up, hang you drive for that one, your team might. And if you are going to say, this is on me, then you cannot do a binary, this is on me message. Then nuance the message to talk about specifically what mistakes you made so that we can actually tell that you're truly applying introspection if you want people to really believe that you are accountable and your leadership team is accountable. But the general extra credit, this is on me, I'm the leader message. I think it's falling on deaf ears. I think that same message is true for the team internally. Sure. They don't want to just hear it's on you. They want to hear what the learnings and the insights were from the process of how you got there in the first place to make sure that at least those mistakes won't happen again.

And that's what true accountability is. It's not like, I'm sorry. It's I'm sorry, here's what I did wrong and here's what I'm never going to do again. I think that those are my thoughts.

Nigel Morris:

All right. Seamus, you've seen lots of people approach this in different ways. How would you react?

Seamus McMahon:

Well, I agree with Allan. I think there's been a bit of a trip down ego lane here with some people. Basically it's cell therapy and just it's not only fooling on deaf ears. I think Allan, I agree with you. I think what a way to rank the audience is plural where I think there are some exceptions. There are some markets, the US might not be so true, but Ireland, Chile, some other markets that I've worked with, they're smaller companies that are doing well are a source of national pride. The press will take an interest. There are other founders, it's a Israels like this as well. There probably needs to be more of a peer-to-peer, an anticipation of the media general kind of conversation. Now how you deal with that, those tactics are nuanced and you don't want to overplay it. That's the only grace note. Allan, I would add for external management.

Nigel Morris:

I'm sure you've got the question, Duane, when you did it. You've done one, you've done another one. When's the next shoe going to drop? Is it going to be rolling RIF when you get that question from the floor, particularly from remainers in the organization? How did you deal with it? And I'm going to ask you the same question Allan, but Duane, how did you deal with that?

Duane Good:

Yeah, I think we acknowledged the reasons that led to those decisions and I think we used those to support how we answered the question. So it was really a recognition that we had to do the RIFs because certain performance wasn't there or certain markets we weren't going into or certain programs didn't work out. And so when we talked about would there be other RIFs, we certainly tried to provide some assurety that were working very hard to avoid future RIFs, but we were very clear that there was no commitment, that there wouldn't be future ones.

And we really then focused on what results needed to occur. These are the objectives we need to get to in terms of runway revenues, burn rates in order to control our destiny so to speak. And so I think we brought the team much more into the criteria that we were assessing and using to guide us on whether there would be future. And I think we had to let that uncertainty settle with the team. We weren't able to take that out of the equation. We're not able to give that assurance that there are no future RIFs, but what we did is try to bring them closer to what we were struggling with and help them appreciate it.

Nigel Morris:

It's very interesting. In anticipation of this videocast today, we reached out to a number of our portfolio companies at people like you, Allan and you Duane had been through this. And a common theme that I saw was as a result of explaining the why behind what we had to do and the introspection, as you said Allan, we brought people closer into the business model and what our objectives were. And one person said as a result of going through the reduction force, we now in a town hall meeting on a regular basis talk about our performance in terms of P and L and OCRs in a way that we didn't do in the past, because we felt like the authenticity process of having to take these actions has to be dependent on them understanding the underlying business heuristics. So it brings the organization closer to what really matters. That make sense?

Allan Jones:

Total sense. Yeah. I think for the last 12 months we've been doing a public markets and CPI update in our town halls to educate the team on some of the proxy metrics that can drive investor interests in later stage businesses. And then we've always also updated them on the company's performance so that they can logically see how certain decisions may or may not be made over time and to really save them of the shock that may come if I run around the company saying everything's great, everything's great, everything's awesome, everything's awesome, and then all of a sudden we've got to make a change.

Well something seems afoot. And so my message to the team is always nuanced, Hey, ARR is growing really fast but we don't have a path of profitability yet. Or ARR is growing really slow but with what profitability is around the corner or everything is great, however, the markets are frozen up and not investing in companies and here are some of the things that could mean that we're not there yet. And so my job here is to help folks view the world is to help frame how to think about the future and to assume that the teams are smart enough to be able to do that with enough context.

Nigel Morris:

Very good. I'll switch gears slightly. Thank you Allan for that. I think that makes so much sense. It's such good business to lay out where your company is in the way you think about it in that nuanced way with the people all the time. Too often we either say it's too much trouble to tell them if we tell them they won't understand it or somehow it has to be mysterious and kept secret because it's confidential. The role of consultants, the role of third parties, the role of the board in the process, how useful were third parties, Duane, as you went through this and what advice would you give to counterpart CEOs who are maybe staring at having to do this?

Duane Good:

Well first, the board was super helpful discussing the trade offs, getting able to go back and forth and have another party to review the plans with and the approach was very helpful. We didn't really use a lot of external consulting during the process itself. We primarily did that ourselves. We identified one person that led it as a program. So we approached it very much as we would with schedules, timelines, identified accountable parties for different actions as we developed the criteria and then evaluated that criteria and then set timelines and managed against that.

And so I think we identified our own lead within that. I think we did scour a lot of the research and articles are out, there's a lot of material out there on best practices. But at the end of the day, I think we just took from that what we thought was right for our company. I think since then we've worked very closely with folks like QED to help us look for key talent where we actually saw a gap and we wanted to bring new people in. And so things of that nature where we've used additional help to build where we needed expertise that we didn't really have, but it wasn't as much in the actual planning or execution of the reduction that we use third parties.

Nigel Morris:

Allan.

Allan Jones:

Yeah, same. I mean my general rule of thumb here is [inaudible 00:42:39]. I think it's your job to think about. I've got two groups of founder friends, friends who have, who've resisted making changes and have to be kind of pushed from the folks who are responsible for governing the business, their board and then eventually had to make changes anyways. And then the other group is folks who saw around the corner and brought those changes to their board probably months before the board was ready to make that request or show interest there. One of them is a lower internal friction path for a founder and the other one is held. And so if you can get there first I think and find a way that is authentically good for the business and the changes you're going to make and present that to the board, that's the best option. So that is how we did it. Yeah, we did not use external consultants. We came up with a plan, we talked to the board through it, we iterate it on that plan for two weeks and then we execute it.

Nigel Morris:

We've certainly seen both models from my perspective at QED where RIFs have been CEO-led and Cal galvanized and catalyzed and dimensionalized and situations where there's been a good deal of reticence and concern, particularly when the company's doing so well. This is what makes it so difficult. If you had missed your targets and you weren't growing and you were on life support in terms of your runway, that's one thing. But if your company's doing really well and you have to do this, it makes it doubly difficult. Seamus, have boards been by and large useful, neutral or destructive in the process that you've seen?

Seamus McMahon:

Yeah, I think useful when there's leadership from the CEO or the founding team. And I think they can lean in, they can help with messaging, they can, if you have people on the board that you feel close to, they can give you some counsel about how to deal with other board members, et cetera. I have seen a couple of instances where board members forget they're not running a business and maybe get too close to it to be honest. The two gentlemen here are smiling because I think they've probably recognized this.

Allan Jones:

Never seen that before. What do you mean?

Nigel Morris:

Let's be clear. This is not about me, this podcast, okay.

Seamus McMahon:

I would say if you were to ask me to say, Hey, if there's one thing that is worth having a third party look at other than the legal aspect et cetera, would be just the messaging, right? You can get so close to it. I mean I have gone through this myself and it's useful as someone to say maybe that's too much. Typically it's telling too much. So that would be the one place I would say might beautiful.

Nigel Morris:

Well we heard that. So we heard, you mentioned oversharing earlier as a worry and Allan then Duane, you talked about how you may have gone too much into the narrative and self-flagellation, if you like, my phrase not yours in the process. I'm watching the clock. I'm going to move us on here. I'm very interested in how you re-recruit the stairs. And post the event, how you get them animated, excited. We've been through this. It was traumatic. Sorry we had to do it. But look, the company's much more healthy, now let's go charge the machine guns. Talk a bit a little bit how you did that Allan.

Allan Jones:

Can you guys hear me okay? Yes, right. Yeah. We've got construction happening in the building and they decided to drill right above my office. I apologize for the noise. So I'll go back to the thing I said at the top and then close it to answer the question properly. But the truth is always the best thing. And so usually, in Bambee's circumstance, every time we've made a change like this, it has truly been because we thought it was ultimately going to be more beneficial for the business. That's A. B, something I say to the team all the time is it is my job to make sure your equity is worth something. You guys have all chosen to follow me to build this business, to build a behemoth of a company. And I normally survey the crowd, I do this a few times a year, say, how many of you have worked at a company where you've gotten equity and it turned out to be worth nothing? And 70% of the people raised their hands.

And then the last bit is my job is to do hard things, in spite of their difficulty when I believe that they are right. And so that kind of one three punch is normally enough to get people's hearts and minds to open. That's enough to get the hearts and minds open. And then I walk them through the logical plan. Usually if you have followed logic to get to a decision and you show logical minds how you got there, they will end up in a place where they say, if this were me, I probably would've gotten to the same conclusion. And so our job is to show you how we got there so that we can align. Not to convince you, we want you to re-recruit yourself, and my job is to help you understand how we did the decision. So that's kind of been our philosophy.

Nigel Morris:

Duane, re-recruiting the stairs.

Duane Good:

Yeah, it's a hard balance between acknowledging where we made mistakes and the difficulty of having to make cuts with all the things that we also accomplished over that period of time and what we see in the future of the company. And so it was really being very candid on both of those points. We talked specifically about why cuts were made where we made mistakes. We tried to create much more of a culture of accountability and we spent a lot of time also talking about the values of the company. We reviewed the values, we communicated those and then also we revised the strategy exactly which customers we were targeting, why we were targeting them. And we showed where we had our best performance.

So we tried to balance both pieces of that so people saw both that. And I think since that time we obviously lost some people there that we were sad to see go. But we have been able to bring in other key talent that saw that future. They see where we have the ability, where they have the ability to grow and succeed and hit what we're trying to achieve. And that was really the key was just being authentic about the good things, but also acknowledging where we have weakness.

Nigel Morris:

Makes good sense. I'm watching the clock. My last question, a brief answer from all three of you. One, the biggest takeaway if to a listener in this conversation who is contemplating or thinking about doing a RIF, what's the biggest piece of advice you want to give them? Allan Jones.

Allan Jones:

Oh, of course you come to me first. It's a popcorn round. So I'll say the thing that has been in my head the last few minutes. I think people want to be led through change and sometimes we have the tendency to let folks marinate in the difficulty of a moment. And sometimes leadership is helping them quickly get through that difficulty. And so when we think about if I do this on a Thursday or a Friday, or I normally like to do these things on a Tuesday or a Wednesday to give the team multiple days to see that the world keeps operating, things keep moving and then a weekend on the side to have a little bit of brief about what happened because their friends are no longer here. So I think not only the accountability is one thing, but the way that makes these, what really matters is how you lead people out of it and the posture you set and the momentum you build on the way out. And so that's one thing I would leave folks with.

Nigel Morris:

Got It Allan, thank you. Seamus, your biggest piece of advice.

Seamus McMahon:

Said it earlier, reiterate it, make sure the entire management leadership team is on the same page with the same story and won't ad lib.

Nigel Morris:

No Adlibbing. Got it. Duane.

Duane Good:

Yeah, Seamus stole my point. Same thing. We brought our team together, spent a lot of time aligning around the key message, coordinating the details. We sweat the details probably a bit more than maybe we needed to, but at the end of the day it set us up then to execute the reduction effectively and then build from there and build forward.

Nigel Morris:

Terrific. So look, I was just playing with two or three different titles for this conversation listening to that we would use to frame it when we release it. I've got the RIFs are truth not self-therapy. I've got coming out stronger with Rifts. And then the last one I just wrote down was leading through and out of RIFs. So they're the things that we're playing with those ideas. So look, can I say Duane, Allan and you Seamus, look, this is why you guys are such great professionals. This is why you are just, you're building such great companies because this is a really hard thing to do. And if you do it in a very simple and linear and non-con contingent basis on where your organization is and you're going to have all kinds of problems, are you going to destroy value? You're going to destroy, destroy morale.

You're going to lose momentum. And bringing and RIFs are part of the business and bringing people into the business of what you do, bringing them closer, helping them understand the trade-offs that you're going through rather than, as you mentioned earlier, the sort of self-therapy. So I want to thank the three of you for this really great discussion. There's not enough of this kind of discussion out there in the marketplace. It's really clear. It's all headline based and it's conventional wisdoms being thrown around. And I just really love it how sensitive and thoughtful you've been in looking after your teams and your culture and your business models. For listeners look, RIFing is hard, but it is part of the business and it's something you have to, it's part of becoming a, I think a senior executive that you learn how to do it and bring your organization through it.

It can lead. There's often anger and confusion and sadness. Sometimes there's even a loss of innocence that occurs for the first time you have to do it. And there's no perfect answer. I stress this truthfulness, this authenticity. And I think that's really, really so important. I remember lying awake at night, staring at the ceiling, knowing what I had to do the next morning when I had to do it. It's never easy. So the planning is really important. HR groups are really important. Getting the legal boxes ticked is really important. Being aligned with your board is important.

And for CEOs, for you to lead the process rather than feel like it's being done to you. Because when you get up in front of people and tell them that you're doing it, if you in your heart believe you were forced into doing it, they will know. No matter what you say, they will know. So leading the process is a really key part of it. So with that, I'm going to let you run Allan, and I know you got up really early. I know you are traveling. Duane Seamus, thank you very much. And look, just really terrific to be able to stand on the shoulders of the experiences you have. And I hope the listeners get something from this. It's on a very important and difficult topic. Allan, thank you Duane. Seamus, all the best. Take care guys.

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