by Carl Smith

29 Jun 2015


Eight of us were sitting there staring at each other. The projections were total shit. There was no way we would make payroll for the foreseeable future

As part of the “leadership team”, I was the oddball. I was in my late 20s while they were in their mid-40s. I was single while they were all married. Nobody was depending on me while they all had families.

“How many people do we need to let go?” seemed to be the popular question. Everyone was looking at the work we had and trying to decide if we could get it done with three or five or 10 fewer people. A few names started to circulate. We all started to protect certain people. These weren’t properties in Monopoly, they were friends. Choosing who had to go sucked.

Then I said it. I didn’t mean to be cold. It just felt like a logical question. But for those in the room something changed when those words came out of my mouth.

“Are we asking the right question? Shouldn’t we be asking who needs to stay?” Yes, you want to try and save people. But if the company is no longer able to sustain the employees, you have to make a difficult decision quickly. Figuring out how many people had to go felt like a naive question. If we don’t know how bad the situation is then we may have to do this again. Nobody wants that… so let’s figure out how many people we need to do the work we have.

The decision was made to let six people go. We thought that would be enough to steady the ship. Only it wasn’t so we let a few more go months later. And then again for a third time. The result of that decision was a company of people constantly waiting for the next layoff. Team morale and quality of work suffered tremendously.

I left that company a few years later to start nGen Works. I swore to myself if we ever faced a grim picture like I had experienced that we would handle it differently. It finally happened in 2008, a year that took a lot of web shops down a notch.

There were seven of us and we had been running a little low in the bank account. A big project we were counting on didn’t come in and the slow summer months were staring us in the face. I couldn't see how we would make it through. The day I realized we were screwed I took the afternoon off to figure out the best way to proceed. I was the single owner with no leadership team. This was on me, the big mouth who seemed to have all the answers when it was someone else’s company.

I decided the best thing to do was call the company together and talk about it openly. What I realized was this wasn’t anyone’s fault, it was a situation. Hell, if it was anyone’s fault it was mine. I was the one that was responsible for getting the work.

So we sat around our little conference table and I told everybody what they already knew. We didn’t have enough work coming in the keep the team intact. Then it happened. Someone said, “could we all take temporary pay cuts until the work comes back?” I was more than cool with that, but it was really up to everyone. Before I could ask for a vote everyone had agreed. We would all take pay cuts until the storm was over. It turned out the storm ended a few hours after the meeting. We landed a huge contract with a video game company, nobody had to take a pay cut.

I have never been so proud of a group of people. The idea of everyone sacrificing a little so no one sacrificed a lot was amazing.

We stayed on an upward trend until the bottom fell out in the summer of 2014. This time it wouldn’t be a false alarm. We were 14 people and it was doubtful we would all make it through the drought. Faced with a similar situation a second time, there was no doubt how we would handle it. It would be discussed openly.

After talking with the team, we made a decision to try and make it through with all of us intact. Letting half the team go to protect the other half felt cowardly and wrong. Again, nobody had done anything to bring this situation on. Also everyone was doing great work. To choose who would stay or go would be flipping a coin. So I asked everyone to take a temporary pay cut until we made it through. Only two people decided to leave, and it was for good reasons. They wanted to help the team and thought leaving was a better choice for them.

Things didn’t get better. We ended up setting a date that would determine who stayed and who left. If you didn’t have client facing work by September 5th, you were gone. We all worked harder than we ever had before, but we couldn’t land the work. As of September 6th, there were three of us left. While it was a painful experience, what happened next was remarkable. Almost everybody ended up with a good job in a few weeks.

No matter how they get resolved, layoffs suck. The very idea causes us to talk in hushed tones behind closed doors. Putting names on a board and weighing the value of friends and colleagues. But when you bring everyone into the process early on it keeps trust high. It allows everyone to make informed decisions. So if you find yourself staring at an unavoidable shortfall, believe in the people you’ve hired to be able to handle the truth of the situation. Showing honesty in a time of crisis not only empowers the people who may move on, it increases the confidence of those who stay.

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