Category Archives: Management

There’s no good way to lay-off employees in a recession, but some ways are better than others.

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A recession forces almost every business to make difficult decisions. 

Whether it’s cutting back on discretionary expenses, finding a smaller office space to work out of, or (worse case) letting go of freelancers and employees, companies must do whatever they can to survive. 

SafeGraph is in a fortunate position entering this recession (we are still hiring and were profitable in 2019). So we will not have to go through the grueling pain of letting our colleagues go (but I have been there before in past companies). However, many of the 100+ of the companies I am an investor in had to do layoffs in the last month and I wrote this piece for them.  

There is no good way to lay-off employees during an economic downturn. But some ways are better than others. 

Here are some rules and tips for those companies falling on hard times during a recession…

Never, ever, lay off your A-Players.

This may seem obvious (why would any company ask its best people to leave?), but countless companies tell their highest performing people to go. This is really, really bad.  

If a company lays off just a few A-Players, first, it loses all of their contributions. Great employees are great because they bring a lot more value than average employees. 

But there are second-order consequences too. The remaining high performers will become fearful for their job when they see A-Players let go and will start looking for work. And once your high performers are looking for jobs, they are not going to be focused on helping the company. 

A company that is experiencing hard times and distress needs all its amazing people focused on making the company better. Never lay off your A-players.

And even if your A-Players are in an area of the company that you need to lay-off (like maybe you need to cut your restaurant marketing team), keep the A-Player and move them to another team to make a contribution. 

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Here’s How Your Start-Up Can Not Only Survive the Recession But Actually Come Out Stronger

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It is April of 2020 and we’re entering a significant recession.  As they say, winter is here. 🥶

While each downturn is different, there are common ideas and practices that have been proven to work from one recession to the next. 

Here are some of my thoughts from a geezer that has scars from the crashes of 2000 and 2008.  Some of these are obvious and some are non-obvious but hopefully, they will help you manage your business successfully and grow while others merely try to survive. 

Get the CFO on your side.

The CFO has much more power in downturns than you think — do everything you can to get her on your side.  If you are selling to a company, see if you can sell to the CFO. 💸

If your product can save the company money, they are going to be much more interested in using your services. In a recession, finding cost savings becomes very attractive. If the CFO is your advocate based on the numbers, you are going to have a much easier time selling.  🤑

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For example, open-source solutions (starting with LINUX) really took off following the dot-com crash. This is because companies realized that they could replace super-expensive SUN boxes with cheaper (yet still powerful) LINUX units. Many for-profit companies benefited from this trend.

If you are a SaaS company, prioritize customers that are doing what you are doing in-house.  Often you can find companies that are paying over $1 million dollars a year to do what your software does for $60k.  And yes, your software might only do 80% of what their in-house solution does… but is that extra 20% really worth $900k+/year? Probably not. 

This is also true in the B2C world — in downturns consumers look to save money. Groupon was the breakout company of 2009 because they rallied around saving groups of people money. Sometimes capital constraints can spur innovation. 

If you can find a way to save your clients’ money and get CFOs on your side, you can grow your business during a recession. 

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Why Specific Positive Feedback is So Important.

Not all feedback is created equally.

There are two kinds of good feedback: constructive feedback & specific positive feedback. 

“Constructive feedback” occurs when you give someone feedback on how to improve on the work they’ve done. 

For example, if you’re taking a golf lesson and your instructor suggests you shift your weight a little to the left to improve your form, this is constructive feedback. 

It’s specific, targeted, timely, and helps millions of people every day. It helps to get rid of non-productive habits in favor of productive ones.

Constructive feedback (for good reason) has been the practice of choice for many great managers, coaches, parents, friends, and leaders.

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“Specific positive feedback” occurs when you explain to someone what they did well. 

Most people think this type of feedback is a pat on the back and a “great job.” But it’s more than that. It’s dissecting the WHY and HOW behind someone’s good work. 

Giving specific positive feedback is hard because you generally have to spend a lot of time with them or see many variations of their work to catch what they did well. 

For example, you might have to watch someone take 100 golf swings before they shift their weight correctly and you can point out what a great swing they had and why (even if it was by accident). 

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The New Status Game for Companies: Fewer Employees

Bezos believes that you should be able to feed your team with just two pizzas

Crazy thought experiment: Imagine a new type of company that decided to only do what it was really good at and essentially outsourced everything else.

Because revenues of private companies tend to be secret, most venture-backed companies have historically bragged about how many employees they have.  A CEO will say: “we went from 100 to 200 employees last year” as if fast employee growth is always a good thing.

But this is changing: there is a new status game brewing between companies concerning who has the fewest number of employees, centered around who is engineering greater amounts output with less staff. Indeed, the freedom to iterate quickly is status. More resources along with lower headcount means that they can dominate new markets. This is because they are tripling down on their strengths.

In the future, those who achieve the greatest results with the least number of employees will be admired above all others; the key statistic to look at is the go-forward net revenues per employee because it best encompasses the company’s leverage. What matters is each employee’s productivity and how the business itself can scale?  

This statistic doesn’t just ring true for the technology space, rather any business should be aiming to maximize that metric. By doing so, every employee feels and acts like Warren Buffet; they’re investing their capital (time and skill) into the company. Every good CEO should be spending time trying to increase their employees’ productivity, which is the strongest form of leverage the company retains.

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Exit Transparency (on SafeGraph blog)

Over at SafeGraph, I write about why “Exit Transparency” is so important for companies and employees.

Since publishing yesterday, I got a ton of inbound from other CEOs and founders talking about what they do and also asking about how we do things at SafeGraph. We still have a ways to go at SafeGraph to be great at Exit Transparency (it is very aspirational) but we have made a lot of strides to be better at it.

Exit Transparency is about starting employment with the end in mind. When the employee eventually leaves the company (as all employees eventually do), what do they want to achieve and how to they want to grow.

More at: https://www.safegraph.com/blog/why-exit-transparency-can-make-companies-stronger

Why hard work is so important (and still under-rated)

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To be one of the best in the world at something, you have to work hard. 

While this seems obvious, there are many people who don’t believe it’s true. Many people believe you can become great just working 9 to 5.  It’s not clear where this controversy comes from.

It could be a result of the fact that we can’t all agree on how many hours of work really constitute “hard.” Malcolm Gladwell theorizes that it takes 10,000 hours of deliberate practice to become a master at something.  But it is not just the hours … it is the obsession that matters.  

You cannot be great at something unless you are obsessed with it.  You need to be thinking about it all the time.  That obsession may consume you and it might not be healthy for you … but that is the difference between the great and the merely good.

Hard work is a prerequisite to changing the world. 

People who changed the world were workaholics. Look at Martin Luther King Jr., or Mahatma Gandhi, or Alexander Hamilton. They all put in many hours more than a standard 40-hour week. 

The difference though is that their work is an extension of who and what they are. 

They worked hard because it did not feel like work.  At least not always.

Actually getting 40 hours of work done in a week is rare.

There are very few people who can do world-changing work in a 40-hour week. I’ve never seen one. 

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M&A is a Power Law

Warren Buffet once famously stated that compound interest is the eighth wonder of the world. Power laws rule much around us, but more so in the technology and business worlds. One fantastic deal, such as Facebook buying Instagram, can shift the bedrock of business everywhere. Despite the common belief that 80% of company acquisitions are failures, the remaining 20% can shape a new path for in that company – the expected value is still enormous and is definitely a worthwhile path if executed properly.

Many people mistake averages for value. Venture capital is exactly the opposite of this: missing the seed round of AirBNB if you had the chance to invest means you would be financially worse off than had you invested in 50 Theranoses. The difference is that in the first case you would make 1000x your investment or at worst 0, so the opportunity cost is immense. 

Power Laws also exist in company acquisitions.  

The Power Law of Company Acquisitions is why companies continue to make acquisitions. In the few cases it does work, like Google’s purchase of YouTube, the gains can continue to reap dividends decades later. Fundamentally, most of the best acquisitions are contrarian in nature; otherwise, they would have been bought by another company already. And sometimes, like the YouTube acquisition, there are only a few companies that could have acquired it successfully – the key is to stay within your circle of competence. 

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deeper article on why the famous Peter Thiel interview question is such a good one

Over at the SafeGraph blog, I write about why the Peter Thiel interview question (“what is a heretical view you have”) is so predictive. Take a look.

It reveals that most people hold conventional opinions and call them “heretical.” Almost everyone cannot come up with an answer that most people they know do not agree with.

What makes for a good answer?

One that sparks a unique view of the world and shows the candidate doesn’t think like their peers. This signals that the candidate:

1) thinks differently

2) is open-minded

3) is brave enough to discuss an unpopular opinion

Re-Tweetstorm on Thiel interview question

I plan on writing a lot more about why the Thiel interview question (what is an important truth that most people think is crazy) and why it is so brilliant. In the meantime, here is a tweetstorm with my quick thoughts:

Why written interviews lead to better candidate hires

Over on the SafeGraph blog, we published: Why SafeGraph Does Written Interviews ✍️ (and Why Your Company Should Do Them Too)

The article went viral this week and so did the following tweetstorm:

In marketing, social proof is king, queen, and emperor

Much of marketing is social proof. You use products because you see other people that you admire using products. This is especially true in B2B marketing.

Social proof, when it works well, is a feedback loop. Actions create evidence which create relevance and then create consequences.

This is true in products you buy personally and products you buy for your business. It is true for homes, schools, medical procedures, and even political candidates. Social proof is the number one thing that convinces you to choose any product that is out there.

If you are a marketer, you need to acknowledge the power of social proof and use it to your advantage.

Social proof is a very good short-cut for people who are doing due diligence of a product. They want to understand who else is using a product and what they think of it.

In marketing, social proof is king, queen, and emperor.

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The unintended consequences of rising stock prices – decreased risk taking among employees

Rapid raise in stock prices result in some people in the company being overpaid.  This can be very bad for the overpaid employee and also very bad for the company.

Many tech companies are going public right now and many tech companies have seen significant share price increases in recent years.  We can expect that most of these are facing real internal motivational challenges that could be extremely hard to overcome.  
The weirdness of RSUs in public companies

Let’s say that a company gives you an offer of $100k salary and $500k in RSUs vested over 5 years.  That essentially means that the company values you at $200k per year (as stock and salary are fairly fungible in public companies).  

Let’s say the stock goes up by 20% after six months.  The RSU grant (over 5 years) is $600k and your yearly comp goes from $200k to $220k (a 10% increase).  No big deal for the company as you are probably worth more than 10% more than what they originally offered you because you now have been at the company for 6 months, understand the processes there, have grown your skills, etc.

But now let’s look what happens when they stock goes up by 300% after 3 years (which happens in the tech world).  Now the original grant of $500k is now $2 million (over 5 years).  So the stock alone is $400k per year.  Add in the salary (with assuming some raises is now $150k/year) and you pulling in $550k per year.  

This is when things get a bit hairy.  Because likely the company only values you at $350k so you are making $200k more than you are worth. In fact, if you quit the company and went to work for its top competitor, you might have a hard time getting more $300k.

So now both you and the company are in a bind.

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