November 9, 2022
This is the second article of a four-part series on how founders can help their businesses navigate downturns.
The global macroeconomic environment suggests that we are in a moment to be thoughtful about what it means to be an organization that can weather a storm. It is indisputable that the considerations and decisions made now will impact businesses for years to come. We asked the members of the Oak HC/FT CPO Guild for four tips on how to navigate a downturn.
Here’s tip number 2:
Focus on efficiency and core business growth.
Rethinking Organizational Design
Rethinking core business growth with people at the center of the strategy is key. One of the best ways to grow during challenging times is to find your best managers and shrink the organization around them. Usually, 20% percent of your existing managers will outperform the remaining 80 percent. Reward managers who are performing exceptionally. Be sure to also ask your managers to dig into team members’ previous experiences and goals. This may present the opportunity to nurture an employee’s career and encourage them to take on new/different workloads of interest that will help you drive efficiency and do more with fewer resources.
Normal distribution vs Power law
Your upcoming 2023 planning session presents a great opportunity to look for star leaders and reward them generously with whatever salary and equity budget you have. A fair and efficient performance process is essential but distributing rewards cannot follow a bell curve. You are better off applying the power law and ensuring your best talent is also disproportionately rewarded. Actions speak volumes, and rewards are closely watched.
Headcount planning, and the Core Vs Contextual debate
The FAANG companies figured out early on that while annual planning must be done, only releasing headcount for part of the year allows you to plan for an unpredictable year ahead. Consider taking a page out of their book here. Additionally, break down your roles into core and contextual. A “core” role has direct impact on your roadmap and hence may require a full-time employee, while a contextual role might be better filled by a contractor or a vendor. Spending a few hours with your executive teams on what roles are core versus contextual is time well spent and has a direct impact on your OpEx, Cap table dilution, and fungibility of talent.
Non-Linear Results via Managers
Most industry-dominating companies share a common trait: they repeatedly produce non-linear outcomes through their people managers. Managers are expected to act as coaches and build strong managerial infrastructure by designing their teams lean, setting clear stretch goals, recognizing and rewarding top performers and making quick moves when someone isn’t cutting it. They are then expected to inspire their teams by being several things: hands-on, a subject matter expert, a developer of talent and a guide when things get tough.
Early stage companies generally do not have a well-defined “how” on producing non-linear results, let alone a playbook on what their managers need to do. If you want to build non-linearity, define it, write it, publish those behaviors and poll the team on how managers are showing up. This will push your organizational capability to the next level almost immediately.