This is the last episode of Year 15 – it’s wild how fast the last 12 months happened and the roller coaster ride we’ve been on as a business.
Looking back to last May, I was feeling pretty good about the record level of new business deals we were landing and also eager to roll out major org changes to set us up for scale.
A year later, we’ve struggled to keep apace last year’s revenue levels while weathering financial challenges for the past 6 months. This quarter, thankfully, is shaping up to be much better, but many challenges remain.
I’m ultimately grateful for the setbacks and disappointments because these have helped us to identify and address gaps, risks, and poor performance while compelling us to make tough decisions that will, in the long run, only make us stronger.
About Agency Journey: This is a monthly series detailing the happenings of my agency Barrel, founded in 2006. You can find previous episodes here.
Re-onboarding 1-on-1s with the Team
Last year, I began meeting 1-on-1 with new hires to introduce them to Barrel in a more structured way. My “CEO 1-on-1” onboarding covered the high-level business overview of Barrel, The Barrel Way–which touched upon our vision, mission, and core values, and a Five-Year Plan that detailed our approach to scaling the business.
As I ran through my onboarding with new hires over and over again, I took note of the engagement and solicited feedback. I made tweaks after every 1-on-1, from small language changes to more substantive content revisions. I also updated sections to reflect new ways we were talking about our culture with the team on a daily basis.
Over the course of several months, the onboarding presentation evolved enough that I felt the need to “re-onboard” our existing team. As a result, I’ve been meeting with new team members over the course of this quarter to walk them through the latest version of my onboarding presentation.
I made a couple of additions to the intro section where we talk about Barrel as a business. One slide breaks down the business model and why it’s important for us to keep clients happy, deliver great work with consistency, and be mindful of costs. Another slide shares three metrics that we keep tabs on tightly–gross margin, utilization, and NPS–along with explanations and examples of why they matter.
Other changes are around The Barrel Way, our model for how we think about our culture. It includes our vision, mission, purpose, and maxims. The purpose was a new addition and we also decided to sunset our core values in favor of our maxims, which had, on a daily basis, become the way we talked about our most important behaviors.
I also dropped talk of a Five-Year Plan and instead rolled in a section called “What’s Expected of Us” to help new (and existing) team members get a clear sense of the behaviors necessary to succeed at Barrel. These include great communication habits, personal accountability, and full participation in meetings.
The Five-Year Plan proved to be forgettable for new hires, and many of the goals and challenges we set to address over the next five years were on the extreme spectrum of being quickly checked off or feeling too far in the future to matter. As a result, I felt myself just reading off the slides in these sections rather than engaging with the other person about more tangible expectations and work situations.
I’m certain there will be more tweaks to come that will necessitate another re-onboarding in the future. We’re of a small enough size that it’s manageable for me to meet individually with every employee. In fact, this has been a great opportunity to catch up and chat with people I haven’t spoken 1-on-1 with in a while.
Town Hall and a Tough Question
Our Quarterly Town Hall took place earlier in the month. We always ask people to submit questions through our anonymous feedback form. One of the questions that came up was around layoffs and whether or not we anticipated doing them again in the future. This was especially in response to the layoffs we did in February as well as discussions in late April around our company’s finances and why we made the decision.
My answer to the question, after much discussion with the partners and team leads, was this: If we didn’t hit certain levels of business performance, especially when it came to landing new business, it was possible that layoffs could happen. We didn’t sugarcoat the situation and also did not offer any empty assurances.
We knew the answer would introduce uncertainty and anxiety, so we acted quickly over the next few days with follow-up communications that clarified what we meant and where we stood as a business. Many of our team leads had 1-on-1 discussions with team members about the topic and came back with feedback. Yes, many on the team were nervous, but many were also committed to their work and asking how they could help.
After working quickly to crunch more numbers, stabilize cash flow short term, and cut back on additional non-personnel expenses, we shared with the team that we could guarantee no layoffs would be made through the end of June and that if we could hit a certain amount in new business wins, we could very well be in a position to not have layoffs at all. We also shared that, contrary to the gloom cast by potential layoffs, the org is making great progress on improved processes, financial oversight, and deepening client relationships. In other words, the worst case scenario is that we may have to right-size the team to match the amount of paid work available, but on the whole, we’ve been trending in the right direction.
It’s hard to tell whether or not this level of transparency and forewarning was ultimately the right move, but one thing I appreciate is that it’s given us a sense of urgency in making decisions and communicating with each other.
Top of Mind
Patience and Enabling Execution
I mentioned above that part of our decision to do further layoffs would be contingent on how much new business we are able to land in the coming weeks and months. This is the most straightforward to simple explanation, but I think the reality has more factors we need to navigate carefully.
The challenge with laying off people is that we may have unintended consequences. One ripple effect is that other people, people that we really need to keep, may leave because their peers are gone. Another one is that a project or client relationship becomes seriously impaired because a key person is no longer there. Handled poorly, a layoff can also lead to direct client churn, which can negate the cost savings with a revenue reduction.
Winning a bunch of new work doesn’t necessarily solve all the problems right away either although it is a step in the right direction. In my experience, a sudden spike in new work is a stressor on the team, even one that’s relatively free. Handled poorly, people can quickly become overwhelmed and the initial experience for the client can be subpar if we don’t have things buttoned up. There’s also a bit of whiplash if we go from being on the verge of layoffs to now scrambling to find new talent. The risk with having to hire quickly is that we may commit to folks who’re less than ideal fits for our culture, something that can erode productivity and morale in the long run.
All this is to say, nothing is easy, and there is no simple solve. Everything has be considered carefully, and we have to be prepared to deal with the 2nd and 3rd order effects of our decisions. And most important of all, we need to keep executing well as a team. We need to deliver on our promises to our clients and we need to keep them happy with exceptional service. By expanding on this base, we’ll have more work from existing clients as well as more referral business, deals that have a much higher winning percentage.
I’ve been reminding myself that while it’s important to be decisive and to act with a sense of urgency, it’s also incredibly important to be patient in giving our team leaders the space to follow through on their plans and the team at large the space to execute and learn from their experience. In other words, I need to resist the urge to meddle and micromanage, and instead, continue to reiterate our goals and remove blockers for others.
For me, this is especially relevant when it comes to business development and our services offering. My initial instinct is to get more hands-on and involved at the first sign of a slowdown or struggle in these areas. However, I’ve come to see that behaving this way only undermines the confidence of the team. I need to strike the balance of having oversight and verifying that people are doing a good job while keeping enough distance to let them do their thing. The best way for me to have impact is to be clear and find alignment in articulating our desired outcomes and to have periodic check-ins to verify progress while offering ad hoc support or just being a sounding board for new ideas. It’s a balancing act.
Fifteen years in, I’ve found myself at extreme sides of the spectrum over the years, from being way too much of a micromanager to being not engaged enough to know what’s been going on. As I enter my 16th year, I’m hoping to steer myself to a place that feels just right.
Shared with Partners
“For example, try asking someone why he has been behaving defensively. Universally, the first response is a protest: “Me? I’m not behaving defensively!” By focusing attention on the other person, the “confronter” has taken no responsibility for the situation. It always takes two (or more) to dance. If we perceive a defensive routine operating, it is a good bet that we are part of it. Skillful managers learn to confront defensiveness without producing more defensiveness.” (Peter M. Senge, The Fifth Discipline)
I’ve seen this play out with team members at work and also with myself as an active participant. The blunt way is to call someone out and brace for conflict or hope the other person acknowledges their defensiveness right away. This works rather well in a high-trust environment (the Barrel Partners enjoy this among ourselves for the most part), but will not work well for most people. I still struggle to find the right “skillful” way to navigate this without watering down the intent to the point where the other person is just confused and wondering what’s wanted from their end.
“Customer satisfaction always affected our notion of “a win.” A sales contract is not yet a complete win: the end zone is when we have implemented successfully and created a delighted customer. Not just some revenue, but another brick in the wall of building a company one thrilled customer at a time. Selling a deal was great, but we immediately felt the pressure of making sure that customer was successful. Being blue-collar meant pride in workmanship and full accountability—if we ever fell short, it was a major event to be scrutinized and learned from by all of us. We took everything personally.” (Frank Slootman, Tape Sucks)
This is an added dimension to the many factors I presented in the previous section: even if we won a bunch of new work and logged future revenue, we still have to execute and deliver for our clients. We’ve been seeing success with our more extensive internal debrief meetings. I plan to distill some recurring lessons into a shareable format with the entire team in the coming months.
“A typical first call with a business owner starts with them telling us how they have a $100 million business, but when they send the financials, the current run rate on revenues is about $70 million. “Well, it was $100 million a few years ago and that’s where we need to be” is the explanation we usually hear. The entrepreneur is slowing tapping his feet waiting for the business to recover to $100 million. In those situations, I usually see a $50 million business that makes a lot more sense; it is protected with high margins, real expertise and loyal customers. Although I want to quickly shrink to sustainable profits and a business with great core strength, the owner struggles to give up the big number that sounded so great but never really worked for them. “You went from $100 million to $70 million. What about $100 million (other than your dreams) sounds sustainable to you?”” (Jeff Sands, Corporate Turnaround Artistry)
The conversations around layoffs and stabilizing our financial situation made me think of this book by Jeff Sands on restructuring failing businesses (see my highlights of this book). It’s a good reminder that ego can get in the way of getting to profitability. I’m perfectly okay if we have a down revenue year as long as we can get to a consistent level of profitability.