Ah the Sequoia deck. If you work for a venture backed high tech startup, you’ve likely heard of this infamous PowerPoint, which Sequoia Capital originally drafted around the internet bubble of 2001, then distributed an updated version to its portfolio companies in Oct 2008. If you’re not familiar, the deck provides an overview of the financial crisis and outlines a plan of action.
This deck was taken as gospel and adopted as the modus operandi by VCs and CEOs throughout the land on how to react to the current economic turmoil. Not surprisingly, layoffs and salary cuts were an integral part of the 9-point plan.
I’m not naïve. I appreciate the severity of the financial crisis, and I believe VCs have every right to protect their investments by lengthening the runway of their unprofitable companies (especially considering the consensus that we are in the midst of what will be a prolonged recession). And in many cases, I’m convinced a reduction in headcount is warranted. But unfortunately, the cost of such action is not given due consideration.
I recently met with the President of a very promising startup, who told me if he were to cut salaries across the board by 10%, he would reduce burn enough to keep the lights on one more month. His reaction – “If that month is going to make or break this company, then so be it.”
At the very least, this “dare to be different” perspective is refreshing. In his opinion, the increased morale and productivity gained by bucking the trend will far more than offset the higher salary cost. The benefit is difficult to quantify, which is why this part of the equation is often overlooked. What is easy for most folks to identify with is that at the end of the day, it takes more than a paycheck to stay engaged and motivated.
And make no mistake, the true leaders who “have your back” when times are tough, will reap rewards in the form of increased loyalty when the situation improves. As for the CEOs who dispense of X% of their staff without a moment’s reflection (e.g. how might the team be restructured and/or retooled for efficiency?), they will learn a lesson when times improve. Staffers who made the cuts but were in constant fear of losing their jobs will jump ship to companies where they feel valued and respected.