Another Sunday, another Raider loss. Got out of town for 24 hours up to Grass Valley — my 5 1/2 year-old is insistent that she should be able to ride a horse without me (or anyone) holding on to the rope along the trail. Ah, the fearlessness of Kindergarteners!
Got me thinking about fear in general. Most notably, the fear sweeping the Valley — heightened a bit by the doom and gloom messages (see Sequoia’s RIP piece here…I’ve included the photo from the last slide at the bottom of this post — does this imply to have a Martini after reading thru 55 slides of “the sky is falling”?).
So what is my take. Well, first, I am always for fiscal responsibility. Anyone who has actually managed people and P&L’s with profit target requirements knows the bobbing and weaving you have to do to “hit your numbers”. Inserting this discipline a bit in to early stage companies isn’t a bad thing.
Second, if you need to make some expense cuts to add months to your life, headcount is the obvious place to look. And doing a big enough cut once is always preferable to doing a bunch of bite-sized chunks over time. Get it over with, get the team back focused on the path to profitability. We ended up somewhere in between these two in 2001 at Shutterfly. In hindsight, might have been better to make one swipe early in ’01 vs. the two smaller ones that really didn’t get the remaining team focused on the road ahead.
But now the cautionary note. In every company — big or small — it’s not a cliche, it’s a fact: people make or break how well you do. Whether it’s raw talent, passion and effort, or the best scenario where you combine the two, you have to be really good at judging talent and keeping talent engaged. This seems even more the case in today’s start up environment where the cost of the operation outside of headcount is a smaller percentage (in many cases) of the overall cost base. This means cutting too deep, or cutting the wrong people and functions can cause irreparable harm. Especially at the point where a start up is still trying to get it’s product right, it’s customer proposition figured out and it’s business model refined.
I love spending time with companies — again, big or small — looking at this part of their equation. Maybe it’s the old player and coach in me saying “let’s look at the roster, who are your starters and who can come off the bench?”. So as you hone in on how to throttle back your burn, be really diligent about your org chart — go player by player, identify your “5 tool” players and your “stars”, and think about the right combinations that will maximize “team chemistry”. Think about where you want to be in a year (or whatever your “profitability” date is) and get your team to about 80–90% there now — with the balance coming from new, good hires who will be eager to join over the next few months.
Originally published on Medium on October 26, 2008. This Substack version is maintained as the canonical archive.