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Can't Change Fast Enough

Everyone talks about how start-ups have to move quickly.  And, if you have worked at a start-up company, you know that things move at a frenetic pace.  One of the strongest assets that a start-up has is a singularity of purpose.  Everyone knows (or should know) what the goal is.  There aren't competing objectives and hopefully no individual political agendas.  This helps the company operate at high speeds.

But, what happens when a more mature company has to make changes?  Both big and small companies can hit dead ends or come to the end of one growth path.  Changing direction, refocusing, or restarting can be difficult times at a company.  But this is the time when actions have to be the swiftest.

During the decision-making process when the Board and management are deciding what to do, it is natural for the rank-and-file employees to lose productivity as they engage in their own discussions and debates on direction.  Or, they wonder if the hard work they are putting in will see the light of day.  If the project looks doomed, why put in another long day of work on it?  This kind of attitude can quickly permeate an organization.  While I think it is best for management to be open with employees about the existence of a process to re-evaluate strategy, a message must also be delivered about the importance of carrying on with day-to-day work until a new decision is made.  Hiding the strategy evaluation from employees will lead to speculation that something far worse may be up.  The best way to keep productivity up is to squash rumors before they start.

But, there will inevitably be discomfort and uncertainty during this process.  So, make sure that it happens swiftly.  Set deadlines for gathering data and making decisions.  Then, stick to them.  The price of inaction is usually much higher than the price of a sub-optimal decision.

Once a new direction is set, take action switfly.  If the company is going to focus on a new direction, find a way to quickly get rid of products and projects that don't fit the direction.  Maybe they can be sold off or spun out.  Investigate this on a tight time frame.  If not, they have to be cut.  Make sure to deal with any people affected fairly.  No one likes participating in either side of a layoff.  But, if decisions are made in the context of the best long-term health of the company, resentment is usually kept to a minimum.  However, the way you treat employees on their way out will also set a tone for those who stay.  I've been involved with layoffs that, after a few days, reinvigorated a company with an exciting new focus.  And, I've been involved with layoffs that felt like one more step on a downward spiral to failure.  You need to reinvigorate a company if you want to retain the key talent.

Of course, slow decision-making is also a drain on the company's finances.  Projects that drag on for too long waste hard dollars.  But, they also waste the soft dollars of management attention.  Distractions probably exact a 25-50% penalty on the hard time they take up.  It takes mental and physical effort to shift gears, to stay abreast of unimportant projects, and to continue to evaluate options that should have been long since decided.

One trap is that entrepreneurial management and visionary board members may not be the best people to make decisions around a restart.  Entrepreneurs and early-stage VCs tend to be optimists.  But, cutting back on a company or making a radical direction shift requires some pessimism.  When faced with these situations, I have often felt that I should have cut a bit deeper and made decisions a bit faster.  Don't be afraid to bring in some outside help to objectively analyze the situation.

When making the hard decisions on a layoff, I would advocate cutting a bit deeper than you think you might have to.  Make sure you cut back on the workload to accomodate this, too.  But, it's good if the remaining people feel very busy.  And, if things start off OK, it's not a bad idea to hire a couple of new people a month or two after a layoff.  Chances are, when pursuing a new direction, you need some different talent than you had previously anyway.  Bringing in some new blood can reinforce the message that the company is reinvigorated and pursuing something exciting.

Overall, you have to measure twice before you make a cut or a change of direction.  Just make sure you measure quickly and move decisively.

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