FounderFuel: How to survive team downsizing as a founder

With the Risk Readiness Report, from government think-tank The Entrepreneur’s Network, identifying that 49% of founders believe the current economic climate is negatively affecting their business, it is likely that most founders have had to think about the possibility of team downsizing at some point. Maybe not at the planning stage, but the possibility looms large in the back of most founder minds.  

The mere mention of team downsizing understandably shakes even the most resilient of founders – it is loaded with feelings of guilt, failures and deep-seated frustrations. Yet there isn’t a founder in our founder-family that hasn’t had to do it (often multiple times) or got very close to it. Given this level of frequency, let’s instead rewrite it as a part of being a responsible founder, and focus on sharing the wealth of unspoken knowledge out there between founders – which is exactly what we set out to do with our recent Scaleup Session. Here’s a few key insights from the founder panel in this session.

Indecision is cruel to your brain so give yourself decision milestones

Contrary to popular belief, our brains aren’t well designed for holding multiple thoughts at once. When we consider that founderhood is filled with holding a multitude of scenarios (plan A, B… F… G!) in tandem as a way to navigate the constant unknown, it’s easy to see how this starts to take its toll. Overlay the emotional baggage that comes with BIG decisions like downsizing, and we have a hurricane of thoughts and feelings whirring around the mind, without much ability to process it effectively.

In practise, the decision to downsize or not to downsize is usually based on an external trigger (or several)… if a big client signs the contract, if the investment/grant comes in, if a customer cancels… and the lack of control feeds the turmoil in the mind. You can’t change the lack of control over these external factors – but you can still change the sense of control. The mind is calmed by knowing when something will be decided or reviewed, so rather than let the mind whirr away worrying over all the uncontrollables – anchor it to a date when a decision will be made or circumstances reviewed, and line up your financial forecasting so that you have what you need to make your decisions. That way, whenever those negative thoughts start plaguing you, you can firmly put them back in their place with a reminder that you will be addressing it on X date, and right now you’re focusing on Y.

Create agency for better outcomes with your team

When it comes to redundancies, there are different legal requirements depending on your location and team size. Everyone on the panel took professional advice on what the best course of action was for them and would recommend the same of others. In the UK, there is a legal requirement for ‘collective consultation’ if you’re making 20 or more employees redundant, if it’s less the process can be speedier and more top-down.

However, our panel – which included founder talent that had used both the consultative and top-down approaches – all agreed that the consultative route leads to better outcomes. It may take a little longer, but this route gives agency back to the people in the process, and we know that agency and autonomy feeds motivation. All founders felt that involving team members in the restructuring discussions resulted in them being left with people who really wanted to stay. Not only that, but everyone – even those that were let go – felt heard and understood and our founder-panel believe that those they had to lose would return in the future as a result – which is high praise indeed.

Be ok with whatever the outcome

Candidly our founder panel spoke about going into the consultative process with an idea of who they really wanted to stay – either because individuals were star team players or business critical in some way.  It’s not surprising – we’re only human after all – but now, with the benefit of hindsight, they all recognise that trusting the process is the optimum approach.

Out the other side of a downsize you need a team who are ready to get stuck in and adapt to make things happen with fewer resources. We very rarely know everything that is going on for those in our teams. Faced with the opportunity to take redundancy, those that are feeling burned out, or not motivated by the mission any more, can proactively decide to step out – giving you the optimum team fit for the fight ahead.

At the same time, from the consultative discussions several of our founders discovered alternative solutions to letting people go, that were win-win too: For example, reducing to part-time so a team member could also do a qualification, or moving to a contract so that they could start a portfolio career. The one-to-one discussions that happen as part of restructuring can surface new opportunities, as well as leaving people feeling listened to.

Give yourself time

In talking about how they coped with the downsizing themselves, our founders talked about the understandable feelings of anger, frustration, and sadness – as well as guilt for the impact on others. It is a lot to shoulder and it is very easy for these feelings to descend into catastrophising with worries spiralling over what other people will think of you, and beating yourself up for the impact on others.

With the luxury of being out the other side, all our founders look back at these times with self-compassion:

“At the end of the day, your aim is to make the best decision you can for the company, with the information that you have at the time”

In the moment, this is a helpful thought to come back to. When negative thoughts were really spiralling, one founder said what worked for her was to play out the worst-case scenario in her mind – because ultimately she could survive that worst case and still have positives in her life. Similarly, others on the panel focused on family – particularly playing with their kids – after a tough day in the restructuring melee, as a way of remembering that there is more to life that just the business, even though it doesn’t always feel like that.

Restructuring usually means change and losses – it is, in essence, a form of bereavement – for the team you’ve lost, for the company, for your efforts! By thinking of it as a grieving process, it is easier to connect with these feelings of frustration and anger and ultimately process these emotions effectively so that they do not negatively affect you longer term.

Rebuilding takes time, don’t expect it the next day

When it comes to change, different people accept and adapt to it at very different speeds and in different ways. As founders we have a tendency to move on very quickly – it’s part of being highly resilient. Not only that, but you and your leadership team have also had more time to come to terms with the changes than the rest of your team, so be conscious of their grieving process too.  Our founders felt this happened much more slowly than they anticipated (or wanted!) and team culture was affected significantly.

What helped them was to really focus on culture and the team dynamic coming out of the restructure, and support the remaining team to gel as a new team around a common sense of purpose again. One founder did employee engagement polls at stages after the restructure – it didn’t make for pleasant reading at times – but it gave them clear feedback to act on, and demonstrate that they were taking action, which the team respected and this made for a positive (and probably speedier) recovery.

Overall, what came across from these experienced founders was an acceptance that downsizing is just part of the founder job (be it a hard part) and interestingly now they’re out the other side they look at their teams as even better, having been through it. Faster, leaner and making better decisions together effectively.

FounderFamily members can access the recording of this Scaleup Session here.


This is all part of a series of articles on keeping it together during tough times:

Keeping it together when you’re feeling the pinch – a founders’ guide to emotion-regulation

How to drive a sense of URGENCY in your team

Keeping your motivation topped up as a founder

Written by Christina Richardson, founder at weare3Sixty
Founder coach & trainer | Startup exec-team coach | FounderCircle® creator & head-coach. Passionate about sustainable founder performance, wellbeing and the leadership transition from founder to C-suite.

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