uncertain economy The situation in 2022 has left companies and their founders between a rock and a hard place.
Many CEOs simply cannot afford to exist within the framework of the status quo they have enjoyed as part of an optimistic 2021. At the same time, they are also struggling to raise new capital. Navigate down-round cultural complexities.
Unfortunately, many companies have to cut headcount instead to increase the runway. This headcount reduction (or RIF) is a more permanent version of layoffs where the required budget change cannot be resolved by a temporary change in headcount.
A number of QED portfolio companies have had to perform RIF. Many companies that haven’t yet are deliberately discussing whether they should. Especially when we’re cutting marketing costs and cutting back on both R&D programs and pet projects.
As experienced ex-operators, we have experienced these dynamics in the past. Frankly, we are in a somewhat enviable position to be able to help founders navigate these choppy waters.
Our best practice advice for CEOs is to cut deep enough so that you can be sure there won’t be a second round in the next few months.
Earlier this summer, we began sharing a five-page document with some of our portfolio company CEOs outlining guidance based on our personal experiences and observations. This document was not intended to exist in isolation, but was the foundation upon which we worked with our investors, board members and senior management to build. We have had discussions with most companies about
We divided the process into three parts: planning, execution, and follow-up.
In some parts, the guidelines seem almost dry — references to lawyers, laws specific to local jurisdictions, blocking access to email and Slack channels. The inevitable reality is that he must conduct RIF in an organized manner with a strong business rationale, but an overarching need to convey his message with empathy and respect. increase.
Not all companies that ran RIF did so without error. Even if the actual cuts go as planned, avoidable mistakes can have lasting effects on the rest of the workforce.
RIF’s planning elements cannot be overstated.
It starts with assembling the team that drives RIF and extends to risk assessment, scope, budget, scheduling and communication.
In smaller companies, the team may consist solely of management. A large company may need representatives from different regions, departments, and levels. We work with our portfolio companies to answer a number of key questions to articulate purpose, purpose and narrative.
- What drives the need for RIF?
- Could it have been avoided? What other options are there or were available? What other actions are or could be complementary? Be responsible.