Episode 5
· 18:06
Welcome back to opening the c suite. I'm Mike. I'm Corey. And the purpose of opening the c suite is to look kind of behind the scenes at what's happening at the c suite and leadership teams across companies. So we wanna talk in part about the tough stuff.
Mike Shannon:There's probably nothing tougher than RIFs, layoffs, reduction in force is what RIF stands for. And so we're gonna talk about what happens in the process of a layoff or a riff or a furlough. And as a disclaimer this is not, hey, feel bad for the c suite when these things happen, but everybody on both sides of that table are humans. Yep. And and it's it's the toughest thing anybody in leadership goes through.
Mike Shannon:And so what we wanna do is just open up the hood a bit on what are the processes and the decisions that go into these things happening.
Corey Ferengul:Yep.
Mike Shannon:So I've had, unfortunately, like anybody, a little bit of experience here in start up land. Yep. Corey, you've been at a variety of larger companies, been on the boards of start ups. So I'm gonna ask you most of the questions here. Okay.
Mike Shannon:So if you can give us the primer. Yep. Right? Just lay the land of what's the difference between a layoff versus a rip versus a furlough. Just Yep.
Mike Shannon:Give us the one on one.
Corey Ferengul:So let's start with a reduction in force is typically I am letting these people go from the company and they're not going to come back. Yeah. Okay. Right? So they you know, if I'm doing a layoff, I am dismissing them for a period with an expectation of potential return.
Mike Shannon:Okay.
Corey Ferengul:And a furlough is sim is similar except furlough tends to be timed in may you'd be furloughed for 3 months. You're gonna be furloughed for 6 months. Okay. You tend to know the time frame already. Okay.
Corey Ferengul:So, you know, I've had really good heads of HR that I've worked with, and every time we're letting people go. And, unfortunately, like yourself, I've had experience with this. Somebody in a meeting somewhere will say, oh, we're doing a layoff. It's not a layoff. These people are not coming back.
Corey Ferengul:Okay. It is a rift. So most companies are doing a reduction in force.
Mike Shannon:Okay. And and that point by it sounds like your HR leader was specified because you don't wanna set a wrong expectation. Exactly. Okay.
Corey Ferengul:You don't wanna communicate to a person and say, this is a layoff and then they have the expectation that they could come back and they get their paperwork and it says they're completely gone. Yep. I don't understand. Right?
Mike Shannon:So we see this in the news. Right? Company has, some kinda hiring spree that Yep. The employee count is growing over a period of years or maybe even recently. And then in the news, at least, it kinda feels like all of a sudden Right.
Mike Shannon:There's a reduction in force. There's a layoff. What happens in that period of time between the hiring spree and all of a sudden there's a layoff? Like Yeah. Something didn't go according to plan or what?
Corey Ferengul:It's really that simple. I mean, something in your financial model doesn't hold up.
Mike Shannon:Okay.
Corey Ferengul:And and and I'm I'm boiling it down to the financial model because the activities of the company ultimately are represented through the financial model. New strategic
Mike Shannon:investment
Corey Ferengul:didn't pan out. Okay. A, we're gonna open a new office in a new territory. It didn't work out.
Mike Shannon:Okay.
Corey Ferengul:The market conditions have changed. And we saw this in the last couple of years where the market conditions changed and
Mike Shannon:it was
Corey Ferengul:growth at all costs, earn money to grow and the market condition changed. And all the investors said, there's no more investment unless you're gonna show profitability. Yeah. So something so there was a change. Yeah.
Corey Ferengul:There was a change from the plan you were executing on and that change could have happened swiftly. The the change of investors I have one CEO who I I love. She said, she was she runs a company that strongly profitable, weren't growing enough. And she'd been working on their board for years on getting a a growth plan in place. And she finally came in and said, we're gonna burn some more this year, but we're gonna grow.
Corey Ferengul:And they said, that's okay. We are in a profit these days.
Mike Shannon:Meaning the market condition from the investor side.
Corey Ferengul:From 2 board meeting from board meeting 1 to board meeting 2, the investors' perspective had changed because of the market. Interesting. So there was change. Right? And and so Which as
Mike Shannon:the CEO now changes everything you've been leading on Absolutely. Across the team.
Corey Ferengul:That's right. Right? That's right. And so something has changed. And if you're as a CEO, I always had in the back of my mind, if something changes, what am I gonna do?
Corey Ferengul:Yeah. Where would I go? What teams would I talk to? And I typically knew what investments we were making that were that's the speculative one. Can't ever touch that area.
Corey Ferengul:Right? You you you have some feel for that.
Mike Shannon:Yeah.
Corey Ferengul:The bigger the company, the less feel you have. Sure. And that's you're really looking at the company through the financial lens the larger you are. Right? But it feels overnight, but it isn't.
Corey Ferengul:Yeah. Right? You have that change. That was 2 board meetings that changed that I mentioned that the story about profit matters. But it's like, okay.
Corey Ferengul:That's still 3 months, and you probably had a little time to do a plan on the other side of that. Right?
Mike Shannon:So okay. Market environment changing is a little bit of, you know, kinda change of the weather thing that's more so out of your control. COVID. Yeah. Right.
Mike Shannon:Right. So what I'm saying is that's like I can't ask you, well, how do you know if the market's gonna change?
Corey Ferengul:I mean, I
Mike Shannon:can get your opinion.
Corey Ferengul:That's right.
Mike Shannon:The the stuff that, you know, maybe more in the lens of predictability or somewhat within, you know, executional control. Yep. What are some of those factors? And from the employee's standpoint or maybe across, you know, the wider levels of management, like, how do you, in some ways, keep an eye out for are we trending in the right direction or could this stuff happen? Yeah.
Mike Shannon:Like, how does the CEO communicate that?
Corey Ferengul:So I mean, how do we metrics, metrics, metrics. Right? I mean, how are you tracking the progress on these investments and initiatives? Yeah. What are your KPIs?
Corey Ferengul:How frequently are you getting that data? How much do you trust that data? How much do you trust the people are being honest with you? How many touch points do you have in that part of the business to understand what's going on? Because you're getting one person, and that one person is the good news network.
Mike Shannon:Yeah.
Corey Ferengul:And that person just wants to make you feel good all the time. You're gonna have the wrong
Mike Shannon:Meaning, if you're an employee and at the all hands, there's a good news network.
Corey Ferengul:Well, more specifically, I've got an investment in area. I've got a product manager there running that area, and that product manager wants to tell me great news all the time about the project. Maybe it's not going well.
Mike Shannon:Oh, so actually, as a CEO, you're saying sometimes you have a good news at work and
Corey Ferengul:To you. To dig in. Yeah. So as a CEO, you can't rely on a single touch point. Yeah.
Corey Ferengul:And if you do, you need to understand the context that person's gonna bring it to you through.
Mike Shannon:Yeah.
Corey Ferengul:Right? And so, it it was what we're we're we're dancing around a lot is that a a rift isn't a last minute thing. Yeah. Right? And and while it may look that way to the company Yeah.
Corey Ferengul:It is about information flow. It's about tracking. Yeah. It's about understanding and about taking decisive action when needed. I I hear constantly, and I think you've probably heard this as well.
Corey Ferengul:People like, well, management screwed up and they did this wrong, and that's why we have to do this now. Like, how do you react when you hear that?
Mike Shannon:Well, I reacted a lot of different ways. I mean, yeah, I I certainly always feel as, like, founder CEO, like, a huge sense of ownership. You bring somebody out to the team, and you're inviting them, oh, it's right. This this ride, and all of a sudden the ride's not there. So, you know, you feel this huge, like, empty and guilt, you know, around it happening.
Mike Shannon:Now in explaining, like, here's the sequence of events that maybe led to the environment changing or our outcomes not being what we thought, I mean, it's a tough one. We would do, very proactive financial town halls. Yep. That would be CFO, Nick, and I, and and you you can't do them all the time. We would try to do 2 or 3 a year.
Corey Ferengul:And then all everybody doesn't want them all the
Mike Shannon:time. Yeah. Right. Right. But it's what you're saying.
Mike Shannon:You try to you try to have folks understand, especially at the start up level. Yep. You know, there'd be, there'd be this line that we'd say a lot at Pacrick like, you know, we're we're not necessarily just like supposed to exist. Like as a start up, it's like the world was fine. Like before you were I mean it wasn't fine No.
Mike Shannon:Yeah. Yeah. Nobody was like asking you to come enter the Right. The economy. It's like we we we we had to like find a way to push our way.
Mike Shannon:So, I would try to have like, you know, a following along of the journey of like, hey, for us to continue to exist, let alone expand or keep head count, like, here's where we need to go, here's what the unit economics have to look like. And so I can kinda do the best possible there, but again, there's some uncertainty. Yeah. So when it doesn't happen then, what I now know from a startup standpoint, and I'm curious who you take at later stages, if all of a sudden you realize we're carrying more cost Yeah. Than we can because situation has changed.
Mike Shannon:Now all of a sudden if you wait, you know, a few weeks or a month, now maybe either the risk has to be larger Yep. Or you're just not even gonna have time to do it. So I think that explains some of why it happened so suddenly. That's a hard thing to to kind of understand.
Corey Ferengul:It's not, it's kind of sudden but it's not. Right? It's sudden because Well,
Mike Shannon:to the employee base. To the employee base, it's sudden. To the news or whatever. It's sudden.
Corey Ferengul:Right. It it, you know, if I'm looking at the metrics in my, you know, weekly staff meeting or I'm getting a dashboard or something, it's probably not that sudden. Right? It it it, you know, unless it was unless it was COVID or something like that. Right?
Corey Ferengul:It's probably like, uh-oh. Uh-oh. We're gonna have to make a call. Yeah. You know?
Mike Shannon:But when when that data point finally got you to to be convinced that, okay, we're we got too much cost. Help us understand what happens now, like, what stakeholders have to weigh in? Is it just the CEO says, hey, 20% are gone?
Corey Ferengul:No. No. I mean
Mike Shannon:to it. Right?
Corey Ferengul:Number 1 is what's your financial model.
Mike Shannon:Yeah.
Corey Ferengul:Right? And and your financial situation and the financial expectations for the company. This is public or private. Right? It is, when I was at a public company, we we did a layoff.
Corey Ferengul:We did a riff. See, I did it right there. We did a riff. When we did
Mike Shannon:that You did permanent.
Corey Ferengul:Permanent. We're we we knew we had to take a certain amount of cost out of the business to meet public expectations Yeah. For our cost structure. Right? And that drove it.
Corey Ferengul:Yeah. If you're a private company, you may have, you may have debt on the business that's got Yeah. Expectations. So how deep you cut, how much you cut out of the business is very much driven by your financial model.
Mike Shannon:If you
Corey Ferengul:don't have a good strong financial model
Mike Shannon:Yeah.
Corey Ferengul:You're going to be in a lot of trouble.
Mike Shannon:Yeah.
Corey Ferengul:To go with that, you also need to involve your individual managers. Yeah. Your individual teams. They need to understand, what the expectations are from their team. There might be a team that you're like, we can't touch you at all.
Corey Ferengul:You're strategic. You're a bit fine. But there are other teams. I am was not prescriptive, meaning I hated going around and saying, this person, that person, this person. I would prefer to go and say, here's what we need from this organization.
Mike Shannon:Yeah. Right.
Corey Ferengul:Right? And it would be the CFO and I sitting and thinking through it in the company and what could we where would we have to make the cuts?
Mike Shannon:Yeah.
Corey Ferengul:And then I'd work with the individual executives on what was the impact of the on their team if we took out X dollars. Alright. So let's let's talk about
Mike Shannon:the means of communication. Yeah. And one of the things that you see pretty frequently, you know, just on, like, social media, let's say, a rift or a layoff occurs, and I've I don't know how many times I've seen this, the communication happened through email. Yeah. Now however many employees are at the company, you see this talked about of I can't believe it occurred on email.
Mike Shannon:And I'm not saying that's the best way to have it happen, but just help us understand Sometimes the only way. Well, then that's what I'm getting at is was it that the leadership was cold hearted and we're doing a email because we don't wanna talk to folks? Or is there a reason why sometimes it's a mass email? Sometimes it's, you know, swift communication.
Corey Ferengul:Why does that occur? So, I mean, I've used email many times or Slack. Right? Which kinda became a replacement for email.
Mike Shannon:The point is it's not, like, not everybody had a Zoom call. Not everybody had a meaning And there's no resentment that
Corey Ferengul:comes in. Notifying an individual or notifying the company?
Mike Shannon:I think both. I mean, I'm just referring to
Corey Ferengul:Notifying an individual if you're notifying an individual they're being let go, I want them to have a call.
Mike Shannon:Oh, one to 1. Yes. Yes. I'm talking about if it's a 20%, you know, layout.
Corey Ferengul:If I'm telling the company, I am that that or I want I'm gonna go with the quickest means of getting the information out. Having a town hall not having a town hall, not having a company wide meeting to announce it isn't about avoiding the questions. Okay. It's about getting it out there quickly. You should follow-up later with meetings.
Corey Ferengul:Now if you're an international company, you can't say I'm gonna do a town hall this afternoon Right. Right. Because the time's up, like, really simple. Yeah. And most of companies have remote employees today.
Corey Ferengul:So you have someone on the West Coast Yep. And you're gonna, you know, 3 hour different time difference. How are you gonna do that? So the email, the Slack post gets the information out, but you should follow it up with a company meeting. You're not dodging the question.
Corey Ferengul:Yep. You're just try or the questions are gonna come. You're trying to get the information out there in a clear consistent way. What you don't want is team level communication, 1 to 1 communication, and then the rumor mill is beating you around
Mike Shannon:the organization. Through my mind is. Yeah. As less personal as, you know, an email to 20% of the company can feel if you go 1 by 1 and then the rumor mill is what circulates the information. And even if it's only a couple of hours that folks are waiting, it's those couple of hours can be, you know, I think pretty tantalizing.
Mike Shannon:Like, is it me too or not? So at least everybody knows. Yeah. And look, you've
Corey Ferengul:seen in the press lately that some very large companies, tech companies, you know, one announced that they were gonna be doing reductions as many as 7,000 people over the course of the year. Chris. Right. That's it it it goes counter to everything any executive has taught. Like Right.
Corey Ferengul:Do it do it decisively, do it quickly, let people move on. And and this is a a a harsh but very true thing. You have to think about the people that are still in the org. Treat the people that are leaving well. Yeah.
Corey Ferengul:Do as good as you can by them, as nice a package as you can, the outplacement help if you can. Yeah. What whatever the organization you can offer, the the people that are departing resources do it. Yeah. But you have to move on quickly to making sure the people that remain with the organization know why they're there, know why we don't want this to happen again, understand what we're doing, and and let them start to feel heal.
Corey Ferengul:Let them start to feel better about the organization.
Mike Shannon:On that. So, you know, I don't have as much experience in this. There's 2 main moments throughout my, you know, 10, 12 years that that we had a situation like this. And I remember the thought that, you know, we had as leadership team and I had personally was in deciding what the number was. Yeah.
Mike Shannon:We wanted to make sure it occurred once. Sure. And the biggest fear I had was we're going to actually come up with a smaller number Yep. And 6 weeks later we're gonna have to do it again. I made that mistake.
Mike Shannon:And now what's the culture like? So You make the mistake and now it happens again That's right. Or you have
Corey Ferengul:Yeah. So that that comes to the communication of the culture. Here's the only fortunate aspect to my mistake was I did a lot of communication of the company. And so when A lot
Mike Shannon:of confidence building communication. No.
Corey Ferengul:It it oh, status of the company communication.
Mike Shannon:Oh, okay.
Corey Ferengul:People understood our situation. Okay. And said, this is where we're at. Yeah. This is the action we're gonna take, but these are the metrics we're watching.
Mike Shannon:Yeah.
Corey Ferengul:And if these metrics aren't hit, we may have to do it again.
Mike Shannon:It's people wasn't a random surprise.
Corey Ferengul:That's right. So people always say, are you gonna do it again? Is this the only time? Right? You you can never say no.
Corey Ferengul:If mentor of mine always used to say, I reserve the right to change my mind. Yeah. Right. Right. And he's right.
Corey Ferengul:Because circumstances change. So in the situation where I screwed up, I we we did a reduction, but I had communicated up to the reduction what was going on with our numbers. Yeah. And we're having a problem. And people in the company said, I get it.
Corey Ferengul:I see why we had to do it. I don't like it. I get it. And but I then in that said, these are the new numbers. Yeah.
Corey Ferengul:And then every 2 weeks, I was reporting against those numbers. Yeah. And we weren't holding up. Mhmm. And somebody who was not on the management team came and said, we have to know the one, aren't we?
Mike Shannon:Yeah. And I think so. Well, what's I mean, none of this is cool. What's cool about that specific moment you just stated was it actually came to you Yeah. From a team member.
Corey Ferengul:And and I was doing step level 1 on 1 so yeah. Yeah.
Mike Shannon:But it it was like you had communicated what we're watching and stated the status of those metrics. That's right. Enough that everybody kinda saw, alright, here's who's coming. Because then in that regard it's like you want if if the team wants to be there and it's a good culture, it's like you want the riff number to be as small as possible because you wanna have at least the chance for the the team to stay as strong as possible. That's right.
Mike Shannon:Those are the 2 conflicting things. You don't wanna do it twice, but you wanna keep as much as the team intact.
Corey Ferengul:And it's the hardest. I mean, look, this is the in the CEO world thing that tore me apart the most. Right? You you you hated the personal impact. You hated the impact on the strategy and the things you were doing.
Corey Ferengul:You hated the changes that were gonna be have to be made to Yeah. What investments we're making and so on. So but that is the hard balance. How do you minimize the frequency of these changes? How do you maximize the remaining organization?
Corey Ferengul:Yeah. And how do you do as little damage as possible? Yeah. It's it's an art, not a science. Yep.
Corey Ferengul:But that's what you're there to do. It softens it if you're very open with the company as much as you can. In public companies, there are just things you can't say. Yeah. So you're just stuck.
Corey Ferengul:But in private companies, you can say a little bit more. Sure. And some investors don't like when you do, so I always negotiate to say more to company than they may have been comfortable with. But they would see the stage being set, and they would understand that it happened and why it was gonna happen. And while they didn't love it, didn't like to see their friends go away, people that they like, some of them realized they were taking on more responsibility.
Corey Ferengul:They understood it, and that made the healing a little easier. It made the situation easier. It made the healing a little easier. And don't forget, there is healing after this. This is a hard one of the most emotional things you'll do as an employee is see someone next to you being let go.
Mike Shannon:Yeah. Yeah. And there there is healing after it. I think it's it's that's like Yeah. The headline there.
Mike Shannon:Yes. I guess last question. What's one piece of advice to, you know, folks rising into the c suite out there that you can do to optimize the healing.
Corey Ferengul:To optimize the healing communication, be very clear to them why, what's gonna change. Okay. What the worst situations is when someone says, oh, just had to happen. Don't know why, but we're gonna have to do it. Or they blame it on the board.
Corey Ferengul:Oh, the board said we have to do it.
Mike Shannon:Yeah. Right. Have to own it.
Corey Ferengul:You have to own it and then you have to be clear to them how you're gonna proceed and not have to do it again. Yeah. Right? Just just have a strategy. Have a plan.
Corey Ferengul:Don't just be like, board told me to cut cost. We'll see what we can do. And I have seen that before.
Mike Shannon:Yeah. Rough. Alright. Well, I
Corey Ferengul:think we're open.
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