Introduction
Ceci [00:06]
Welcome to Top of the Ops, the podcast where we have real conversations about what actually happens behind the scenes I'm Cecilia, I'm an ex VC at Talis Capital and now FD of PortalOne.
Bea [00:18]
And I'm Bea, ex VC at Lakestar now chief of staff at Praktika
Ceci [00:21]
Today is a very important episode for us. We're talking about things that no one talks about.
Bea [00:26]
'Cause what gets talked about in ops is all the shiny stuff, the systems you've built, the processes you fixed, the tools you rolled out, the stuff that makes a good LinkedIn post.
Ceci [00:37]
Then there's the other half of the job: firing people, restructuring, layoffs, the board call that goes badly, the strategy everyone's committed to that quietly isn't working. Founders who aren't speaking together, two people on the leadership team that cannot be in the same room, fundraising that's not going well.
Bea [00:55]
All the possible disasters that nobody posts about.
Ceci [00:58]
Okay, let's start with the one everyone dreads. Firing people.
Firing Someone for the First Time
Bea [01:05]
Ceci have you ever fired anybody?
Ceci [01:09]
I have, I have.
Bea [01:11]
What did you do? How did you approach that? How did you feel?
Ceci [01:16]
I think you will never forget the first one. I felt really, really nervous and I felt like I owed a person a lot. But ultimately it's easier than people say. We'd already made a decision about a specific person. I was a manager and I had a one-on-one with her And the moment in which you start that call, the other person already knows what's happening. And so I said, look, this isn't working out. And we have decided to let you go. Gave them a bit of time to ask some questions. And then sometimes would involve HR just to talk people through the notice periods and documents they may have to sign. You always have to approach it with kindness and respect. And ultimately separate the person from the problem. How about you?
Bea [02:02]
For me, it definitely took too long to make the decision. Some people were poking me. They were saying, hey, this team performance is not doing well. And sometimes I see the potential in people and I kinda have expectations on them. About what I would do in their place and I don't understand why they don't do it. But I know they have the potential and I'm like waiting for that to happen. But deep down I knew that probably for six months I should have made the decision, and I came to that decision way too late. The other bit that I did wrong with that particular person is that I don't think I was necessarily upfront with continuous feedback. So the person somewhat expected it, but I think I would have probably been better at giving continuous feedback. Feedback to that person so that it doesn't come as a social surprise. But yeah I was dreading that moment, like nothing I've ever dreaded.
Continuous Feedback vs Performance Reviews
Ceci [03:03]
What do you think is more helpful, continuous feedback or when you have performance reviews every free, six months?
Bea [03:09]
At Praktika for example, we have systematized it with quarterly performance reviews. They're very quick. It's like values deliverables, hard skills, and communication. And then you get a score, and you know at all times where you stand. Some people didn't quite know where they stand because they didn't quite know what the expectations were. And that's quite Classic, in the in the early stages of expansion of a company, you have a s a small team, everybody knows what's happening, and then suddenly you have 40 people and not everybody is aligned with the same expectations. So definitely systematized with performance reviews, but I do as much as possible continuous feedback. How about you?
Ceci [03:47]
I completely agree with that also because a quarter is three months and three months is quite a long time in a startup. And if you need to wait three months and then start acting about perhaps letting someone go, that's a really long time. I believe very much in continuous feedback so the person also has the opportunity to start working on improving themselves straight away. And they might receive like one or two or three pieces of continuous feedback and then Have conversation, be like, okay, is something that I'm doing not up to standards or expectations, and then you can have that conversation with them, so I'm a big fan of it. The more structured performance review, I think, are super helpful because they actually help you as a manager think more thoroughly about a person rather okay, this piece of work wasn't up to scratch, and also come up with like some broader idea of how that person can, keep on growing. So I'm kind of like with you, both of them, but continuous feedback is super, super important because you don't want to lose time and you don't want to get to, the point that is a complete surprise
Bea [04:46]
What actually improved a lot the performance review process at Praktika specifically was thanks to our head of talent, shout out Ashley. She defined from one to ten, like what does ten mean? What does seven mean? And she's great at that because she's working in tech before. And especially engineers, they need exactly what that is. Like you can't go off the vibes, you have to define it. For example, I once got a seven in a score and I went to the CEO, I was like, why am I a seven? And he explained what a ten is, but I didn't know what that ten was. And so now we have that defined.
Ceci [05:19]
It's so important, to speak the same language as a company. Everyone in the company should know what great means for the company. And it's important from the moment in which you're interviewing somebody to when you're giving performance review. I love that you guys are doing that.
How Long Do You Give an Underperformer?
Bea [05:33]
Yeah, and I initially thought it was a little bit fluffy, why would I have to define what bad and good is? I know what bad and good is, but actually it turns out that the definition was different for different people. I want to ask you a question, going back to the letting go of a person, what do you think is the timing? If somebody's not performing, what is the timing that you give them? As soon as like you gave them some feedback, they don't improve, you gave them some other piece of feedback. Is it like a month, a quarter, six months? What's in your mind?
Ceci [06:02]
I wouldn't do more than a quarter. If the decision is already made in your mind, you then have some clear standards of what would change your decision. But there's already been an erosion of trust of some layers. That takes quite a lot to repair. And so I don't think more than three months. The only reason about why there is that gap and why I'm not saying one month is to first, sometimes you are unsure about your gut and you want to have confirmation. Once you start having doubts about someone, then you need to have a clear rubric, as you mentioned earlier, for yourself about this is where I draw the line and I think we need to start working on Letting this person go, or this is what I need to see so that I can change my opinion. The second, depends on the role, but you may need some time to prepare on how to absorb the workload that this person is currently doing. Or if they're finishing some really critical processes that will take you more time to redistribute across the company than just letting this person finish, then you may do four. Or five months for that.
Bea [07:06]
If the person comes to me saying, Hey, I've got like a personal situation going on, like I've just really quite haven't been myself, that warrants like a little bit more time. Both informally and then also formally if you have to involve HR if somebody's has health problems or they need a little bit of time, you just have to be more understanding.
Ceci [07:27]
Question for you. What happens if the team is performing very well and then there's somebody who's now a non-performer and you're delaying the decision for one or two quarters? How do you deal with that from a team perspective? You're realizing this person is an unperformer. If you're realizing it, the rest of the team probably is. How do you manage that?
Bea [07:50]
It's a tough one. Letting go of people has been my Achilles heel over the past year, probably since I went to operations. I tend to do it late and I now understand that by doing it late it ruins the Teams dynamic. So unfortunately, the team follows the lowest common denominator. If there's somebody in the team that is slacking off and the team is quite overly an overperformer, inevitably the average will go down because they understand that that's still an acceptable level. So they're saying, why am I doing more? That person is doing less. Why wouldn't I do that as well? And so in the long run, I would say past the quarter, that actually ruins the performance of the whole team. I actually did let go of somebody at some point and I just spoke with somebody in the same team and they were like, Yeah, like it was coming, like bitch, couldn't you do it before? And I was like, Wait, no, I thought they would be destroyed. People know. And also, has your gut ever been wrong?
Ceci [08:53]
No.
Bea [08:53]
There you go.
Ceci [08:53]
No. And that's the thing. Managers or leaders would come to me I would always be like, go and do it sooner rather than later. And ultimately it has never, come to a surprise to the rest of the team. The only time that it's come to a surprise is when the team wasn't entirely clear on expectations and what great looked like.
The Exit Checklist: Script, Notice, Equity, Laptop
Bea [09:13]
Going to the practical tips for operators out there that haven't gone through it yet, something that you have to remember like last day, pay notice, equity, laptop, etc.
Ceci [09:26]
Yes, so first and foremost look at the legislation of the country the person is hired in and what you can legally say or not. And I typically work off a script that's either been, you know, prepared by a head of legal or by a external consultant. The second is even before you're getting to the conversation, have a process about how teams Are normally informed within your company. Like I work for companies where managers and leadership team will know before and then it will be up to them to then communicate to their to their own teams, or been in other companies where we just like post something in general and everyone knows. So be clear about that. Then I would have my script last day, whether there's an expectation on handover and when the handover is to be completed by. Whether a person is to be terminated immediate or going to garden leave or has some time to say goodbye to the teams, if not, then I would always offer to get a message on their behalf and their phone number, and share it with the team. Then What's the notice like? What happens to the equity and how much equity they've actually vested until the date? If they want to buy any hardware, how much it would cost? Any impact to visa or personal specific. Have I forgotten anything?
Bea [10:46]
Remember to collect the laptop timely. Sometimes there's people with laptops and people without laptops that they have their own. And it has happened to the best of us that the laptop was lost in the ether for three months and eventually you got it, but you had to pay the lease for another three months. So that's a bit annoying, like just make sure you nail that before.
Telling the Team, Severance and Probation
Ceci [11:08]
Yeah, one for you, do you have a process on how to tell the broader team and when?
Bea [11:13]
Yes, tell immediately. People talk. Sometimes we had conversations like maybe we should wait for the town hall to announce. No, send a Slack message, send immediately because people know and people will lose trust in the company if you're not transparent and communicative. Communication is the single most important trust building activity that you can do and even if it's hard decisions just communicate them immediately with dignity of course and just be very vague. People will know but like you don't have to say like this person had a terrible performance.
Ceci [11:48]
Treat people with respect and treat your colleagues like adults, you know. You don't have to
Bea [11:52]
Yeah.
Ceci [11:53]
Coddle them because if you keep on coddling people then they stop acting like adults.
Bea [11:58]
They will try and slack this person and suddenly they don't find him on Slack and like that's just disappointing.
Ceci [12:04]
Well, there is a way. There's a fantastic way when you have to terminate somebody immediately but you don't want the team to know because you need an hour or two to send a message, You deactivate their Slack account. You deactivate their email and then you reactivate their Slack account, but they can't log in because their email is deactivated. So they still look alive, and they that buys you time. And this is a great segue on something that you may need to do when you're doing multiple firing on the same day.
Bea [12:35]
Interesting. I hope I will never have to use it, but thanks for the tip. Firing and letting go of people is the thing that I just dread the most, but the flip is Somebody that is not aligned with the values of the company, they're probably gonna be happier and better off elsewhere. And sometimes you make the decision before them. That's how I justify that in my head to probably feel better about myself.
Ceci [13:00]
It's similar to a relationship. Sometimes you're in a relationship and it's not right for you and you're stealing someone else's time by keeping them in it. You're stealing the opportunity to go and find something else that would be more meaningful. On the other side, some people are, fathers and mothers and breadwinners and it's not always a easy environment to go and find jobs. So I always try and look as if this it's not just a job, but it's something that changes completely their livelihoods and you do feel sorry because Not a lot of people are used to not having a lot of stability and a job is a very important thing for stability and to make different life choices. Somebody might be getting married or buying a house because of the job.
Bea [13:45]
For sure I would probably differentiate between two things. There's your probation period, which is the time to really decide if somebody like has the values for the company. And then if something happens later on for example two years down the line, in that case, we would pay a severance. We would be quite generous depending on legislations, but also depending on the tenure of the company. And then with that you will buy some chunky amount of time to then rebuild
Ceci [14:11]
Yes, in the US sometimes you have a couple of weeks, but it's always nice when a company gives you a bit more than that.
Layoffs Start Before Anyone Hears About Them
Bea [14:19]
So then different animal, you just have to restructure or do some layoffs. Layoffs start way before anybody hears about them. So and it could be in your operating career or in your venture capital career, what was the trigger the first time you were involved? Was it a board conversation, a performance-related runway before Somebody actually said it out loud. Can you talk me through the process?
Ceci [14:43]
It was always a moment of actually a reckoning. I don't know how to say in English, but like in nodi che vengono al pettine.
Bea [14:49]
So in Italian we have this amazing way of saying things like the knots that come to the brush, like at you're gonna run through and at some point you're just gonna get stuck. That's beautiful.
Ceci [14:59]
It's basically everything has been running as it has and you have this like aha moment, but like a oh-oh moment where you know that you can't keep on going in that way. It may be because you're burning too much and the sales aren't going as strong, the team is dysfunctional, the board is pushing you quite hard. You look at the runway for the first time with fresh eyes and you know it's not enough to get where you want to be. It's always a reckoning. Through my career been involved in some that came from. The board, others that have came from the founders, others have came from the financial director of the company. People have been looking at the same things but they just look at it with different eyes and are like we have to do something about it. And that something isn't pretty but it's necessary.
Bea [15:44]
There's also, a reckoning when it comes to the underlying technology has changed. A new technology comes out, things get automated with AI, and suddenly a certain task force just doesn't have a reason to be with the company. And that's maybe even sadder because the company is doing very well, but there's suddenly a team that just has been replaced by something else.
The One File and the Bare-Minimum Company
Ceci [16:07]
It does happen and it's a reckoning moment. There's always the one file during a restructuring and it's a big Excel and there's all of the cost of the company and then names become raw and they either get a termination date or not.
Bea [16:22]
I have seen the file from like a board perspective, it is hard and you have to trim down the names to the bare minimums and minimum viable product after which the company just wouldn't exist. And what has been helpful in my VC career was to actually take that file and send it to your board. So for any operator, founder out there, send them back to your investors with like amazing references and contact details, role and what they have achieved. That's probably the least you can. That you can do for your people and then ask them to reassign them to maybe other portfolio companies. That is the biggest leverage that you have and you should take advantage of it.
Ceci [17:07]
Absolutely, the advice I would give is first veer on cutting more than less. You build, as you said, the bare minimum that we need to keep this company or this product alive, as in lights on only. And then
Bea [17:22]
Yes.
Ceci [17:23]
From it you build more and trying to understand what you actually need to function and get where. I've never been the person choosing person A stays or person B stays. But I always try and come up with a proposal of this is the cost base if we were X people or this is the cost base if we did X, Y, and Z. And that gives sometimes founders a bigger ability to think and try and see differently because it's harder to go for a list and be like I need this or I don't need that. Okay this is the constraint. Let's call it like 20 to 25 people. Who are those 20 to 25 roles that we're keeping? And the other thing I would always push founders on, whether as a VC or as an operator, is to look for highly flexible and highly adaptable people as opposed to extreme specialists, unless that specialist role is something that you need to keep the lights on.
Bea [18:19]
I have a third situation, and this is something that I've seen in my VC career. That was actually something that my Boss at the time. He was an operator, and at some point they had to completely pivot the company in Silicon Valley back in the day. And what he said is that he fired everybody, including himself, They were like 300. And they were supposed to be 30 left. So he put up 30 job specs, and everybody reapplied. To those job specs and They went through the applications and they found new people, including the new CEO, and he kind of fired himself as well. So that's a good way to be like, hey guys, we're in deep shit, Everybody's fired. These are the roles. If you take the role, great. If you don't take the role, here's your severance package. And I think that's very original and like really cool.
Ceci [19:12]
It's very interesting and it's quite a Scandinavian way of doing it where you're thinking about roles first as opposed to people and there's something to be learned from that, I believe.
Bea [19:26]
Yeah,
Ceci [19:26]
There's something else to go with the restructuring, where I think if you're just reducing the scale of the company that's fine, but that also needs to go with a change in the operating cadence, the way people work. And sometimes you keep having the baggage of a much bigger company in terms of like types of meetings or the way company operates. And that stops that restructuring to work as well as it could have.
Salary Cuts, Founder Pay and the Poker Face
Bea [19:55]
So if you're the person in charge of the budget and the numbers, was there anything that the numbers made you do that you actually disagreed with?
Ceci [20:04]
I think you have to take the emotional side out of it because taking people out of a job, especially knowing their circumstances, like from an ethical point of view, I struggle with. I've been in a few companies where there were some decisions on the who stays and who goes and the types of service packages that are given that I maybe disagreed with, but I perhaps didn't have the enough context. But I do care a bit less about reducing the ACV of SaaS companies out there when it's about cutting software. So that's fine, but it's the emotional side on people. How about you? Have you ever seen something that you were like is completely wrong?
Bea [20:40]
So the first people to go usually are the overpaid executives. The overpaid middle management, especially in bigger companies, that's something that is like you're very at risk. And I would see it even in banking, the VP is the highest risk. Role in a bank in startups, sometimes VPs or head-offs are paid really well. And sometimes you're saying, maybe we should cut that person. I'm not saying not but if the question is runway, perhaps that person would be open to a salary cut. During COVID there was a lot of founding teams that just took salary cuts and they said, okay, for however this period lasts, we'll be at 60% of our original salary and we'll keep our equity and we'll keep the company growing because that's where the majority of our upside is gonna come from. So if you've got an overpriced VP that also has a lot of equity, you could go and say, well, actually take a salary cut and the respective amount we'll give it to you in equity maybe at 2X rate. And it's more productive than actually getting rid of that person
Ceci [21:48]
Quick question for you. Do you think when there is a restructuring round founders should take a salary cut?
Bea [21:55]
Yes, unless their salary is already really, really low, which I've seen quite a lot. And that's like in that case, no, you should be able to survive. But if you're on like a two hundred and fifty grand salary and your company's going to shit, I'm sorry, but you have to at least half in your salary.
Ceci [22:12]
In VC, that was one of the first things that we would always ask, I always first try and understand what are the founders making because you don't want them to be stressing about paying rent or mortgage. But at the same time, if you're cutting people and that's because the company is not doing well I think you need to look at what you can do as well internally.
Bea [22:31]
Also, if you have a startup and you have fifty percent ownership and if you're in this huge salary probably you're not as motivated as to make it on the equity side. So that's that's just a little bit sketchy to me.
Ceci [22:45]
Unfortunately you're not on the same boat. You and I may have equity in the startup, but it's nowhere near the upside that a founder will get. So yes, you could take a bit more risk
Bea [22:54]
So from the emotional perspective, you've known for weeks you're in one-on-ones with people who are on the list before they know the decision. And someone asks you directly, hey, is my job safe? I know something's happening, what do you say?
Ceci [23:13]
Pokerface, I mean, it's really hard because I don't want anyone that is on that list to be reached out by a recruiter the same day and not pick up the call. Right. I would feel really, really bad because I really don't want people to be out of jobs. So I would try and not say anything direct, dissolve the conversation, but I always believe in giving people just enough information that if they're smart and then putting two and two together and figure out maybe I should start looking elsewhere, but without saying it directly. You can give things away gently and subtly to the right people because the other part is if someone is resigning from a company it's always better to the company than if you're firing somebody
Bea [24:01]
Yeah.
Ceci [24:02]
So the best case scenario is If they actually find a new job before and they resign, it's a win-win situation.
Bea [24:10]
We've said it. Nobody wants to say it, but we do. There is also the point of We are professionals and we have a duty to the company, to the board, And we're not a big happy family, sometimes you just have to recognize that you might be friends with certain colleagues, but at the end of the day you're there to do your role and to be a
Ceci [24:34]
Sometimes you have to lie and like that sucks because there's people that you're friends with and you know they would be impacted. But if by the few breadcrumbs of information you've given they haven't gotten it and they're asking to you directly, I'm sorry. Life is tough
Bea [24:49]
Because you carry some weight and we're all humans and we have emotions, did you see any impact on your mood, your sleep,
Ceci [24:55]
I am really good at compartmentalising for me personally it fills you up with a bit of anger because you have to execute on a on a strategy and it impacts a lot of people and there's nothing you can do really for those people. It was mostly that, like I would just be more tense, more angry, more edgy. How about you?
Bea [25:19]
I really don't do well with these things. I'm a sensitive cancer baby at the end of the day. But I try to be logic about it I've done everything I can to give this person a second chance, send the contact to VCs and other portfolio companies, be respectful with their time but yeah, it's really hard. Is there anything that broke on the day How do you make sure that people don't talk to each other before you get to them? It's like remote in person. It's quite complex, yeah, actually.
Layoff Day and the Survivors
Ceci [25:45]
You have to run it as the most tight regime. So you have all of the communications and the script ready. You have a timeline on which you're executing on that is extremely fast. Sometimes you may have an IT person that it's on the side as soon as the conversation has been had, the HR person jumps on that conversation. Straight away the IT person blocks the account and then you go through throughout the day and making sure that everyone is on a tight timeline. It really depends on who's doing the conversation. Sometimes it's the manager, so you can have like multiples at the same time. Sometimes it's the CEO and the founder, so it needs to be like one after the other. In some cases, you have to announce it before because of the legislation, and then you need to have calls after. In other cases, you just go throughout a day, 15 minutes one after the other, and then you have a big all hands with who's left. A big CEO, ask anything where you are quite honest and open, but you have to run it like a tight, tight ship. That's why the ops person they just need to make sure that everyone is jumping on slack on the calls, whether they're remote or in person at the right time, HR is jumping in.
Bea [26:53]
I didn't know that it's some legislation you first have to announce and then do the call.
Ceci [26:59]
You have to announce that you are considering a reduction in force of X roles but you never know exactly who the people affected are, but you have to do it.
Bea [27:09]
So I guess I'm quite curious what happens to the survivors just sometimes the team that is left is left with like a very low morale. So like what do you do to like boost their morale a little bit and also avoid that they also don't just go and look around for something else?
Ceci [27:26]
It's one of the toughest things and one of the things that it's like less thought of. My advice would be first treat them like adults, as in have an all hands or an AMA where you answer the right questions and you explain and whilst you're doing that you try and get people amped up for the next thing. You're like, okay, the team is smaller, but you know, we pick the team of fighters, we pick people that really want to go and work hard and work fast. Sell them on there's going to less overheads. It's going to be less like big meetings or whatever. Then the third thing, if you can get people together. Get people together, get get them all amped on the new strategy, get them to have a feel of who everyone is and like why do we like each other, why do we all choose to join this company, and why do we actually believe in the strategy? You have to re-sell them again.
Bea [28:22]
I don't know if you know percentage of restructurings that has worked I always say that the pivots and the restructurings technically are quite hard and they don't work overall. But then, you know Slack has pivoted, So it is possible to really like build something with a new
Ceci [28:43]
I have a founder saying that's the best thing they've ever done for the company. It's the thing that enabled them to strip down to the basis, figure out exactly what they were doing and then rescale up. So they do work. When you're looking at the survivors, always have a list of people that are, so committed, they're low risk and like high flight risk, and you gotta be focused on the high flight risk. These are the people that you gotta be selling hard and reconvincing and be like, Yeah, pick you because A D and C and I want you in you gotta be selling hard to them because sometimes those you can't afford to lose.
When the Board Goes Wrong
Bea [29:14]
Alright, so then part three. Which is what happens when a board goes wrong? And this is collecting our operating and VC experience. So, was there ever a board that went completely wrong and these are like war stories. And then what happened?
Ceci [29:33]
I've seen some boards go really badly in a couple of different ways.
Bea [29:38]
You talk like a veteran.
Ceci [29:40]
Maybe it's me I'm the problem. The two occasions that for me were hard to see was when you're on a board call and you can tell that the board has completely lost trust in the CEO and the founders. And that is
Bea [29:55]
Two.
Ceci [29:55]
A really really tough spot to be because you as an investor want to back the founder, but then yeah, it's a really weird dynamic another one is when you see Board members being able to influence the future of the company with really bad advice. And you see that that advice is being taken into account and shapes the future of the company. And you're there sitting and be Is that the right thing? But you know, imposter syndrome, so you don't know. And you're like, Okay, maybe they know better than me. And then like two years later you're like, Well, that was not right.
Bea [30:40]
I would say one of my first boards in my life, just the whole experience of that specific board was the nightmare. I set the standard of what the worst board can be, and then promised to myself that I would never be involved in a board like that ever again. It was very dysfunctional where you had co-founders not communicating well to each other. Probably I could have picked up in the diligence process, there were some signs, I should have thrust my gut feeling a little bit more. So they had different ideas of strategy and they couldn't quite communicate with themselves and have an aligned version for the board. And the board was completely dysfunctional because it amassed three types of completely different investors. So you had the very aggressive, you have to spend all the money on burning unit economics marketing. You had the more mild approach of where I was where it's like spend money on things that work from the unit economics perspective and don't just like burn money For the sake of. And then you had a very private equity focused investor that was like, you have to be EBITDA profitable. And so there was already difficulty in communication and alignment between the founders. Plus, the three investors couldn't quite give an advice that made any sense. It happened that one of the investors wanted to remove the CEO, and the CEO was not speaking. With some of the board and I had to play telephone in between people and bear in mind I was very young and an observer as well. I did not have any slither of experience to deal with that. So it was quite traumatic.
Ceci [32:23]
It sounds like everything that you don't want in one board. I mean
Bea [32:27]
Sure, and for founders, I mean, obviously make sure you agree with your co-founder and you're aligned and you form a united front in the board, but also choose investors that have, maybe similar principles.
Communicating Bad News to Investors
Ceci [32:39]
I have a quick question for you on how do you communicate with the board as an operator or a founder. In both of our careers we've seen founders being extremely open and transparent. And then we've seen like makeup numbers, Or bad news soften quite a bit. Not to always talk badly about who softens bad news. Sometimes you're in a board and some Series A fund invested in the seed just to keep an eye on it and you do want them to reinvest so the board actually evolves from being the place where you talk about the truth to the place where you're trying to sell
Bea [33:15]
Mm-hmm.
Ceci [33:16]
On potential new investors. So that said how what's your philosophy on it?
Bea [33:22]
This is like in the best case scenario. You want a very good investor on board. A good investor will do their own due diligence and they will know, they will get to the conclusions. They will get to the truth. A good investor should seek the truth So it's probably best to be upfront about it and We always say the bad news with the justification. Be very, very upfront. Hey, maybe this metric hasn't gone great this month, but this is why, and this is where we decided to prioritize, and here's the result of it. And I find that This transparency, people really appreciate it, and we steer a little bit more towards the over-communication. Our investor updates have started to be really long because there's more to talk, and it's down to the investor to read them. Please read them all of it.
Ceci [34:10]
I very much agree with that. And something that I really admired of for example, Evan at Seqera the CEO was that every piece of bad news it would be very quickly communicated in a way of like you get a bad news, a type A bad news, then you take, a couple of days to yourself to deal with the bad news. And I don't think the moment in which I don't know your biggest customer churns you gotta send a within five minutes a message to your lead investors. No, take a couple of days. Like
Bea [34:38]
Exactly.
Ceci [34:39]
Breathe in. It's something that really impacted the future of your company. So take a day. And then we would either, send a message to the main investors and being very open. This has happened, this is why. This is how we're like thinking about dealing with it. But you know this has happened two days ago. So let's brainstorm. Bring them in, let them help you, they're on your board. And then I would always put it in the monthly updates. And generally, by the time you get to the board meeting, it's old news. Like everybody's
Bea [35:08]
Exactly.
Ceci [35:09]
Already knows and you're just actually being really productive and talking about the strategy, what you're going to do about it, how they can help you, or what you've already done, what's already working. So it's so much better and refreshing. It is very important for a board to be helpful. For board to be working on the same truth. So if there are two truths, then they can't be helpful. Then you're not speaking the same language.
Bea [35:35]
100% the investors that don't do their due diligence you don't want them on the board because they're the people that are not gonna be helpful on boards, they're not gonna get to the truth, they're probably not gonna read your investor updates,
Ceci [35:46]
One more thing, you gotta remember that VC investors, especially early stage investors, they have a ten years or so window. The fact that you have a blip on year two or three, it's irrelevant in the long scheme of things. And you want to be picking people that go for that. They know, it's not a linear progress, and they need to be able to be patient and long-term thinking.
Bea [36:08]
It's unreasonable for an investor to expect that everything goes well all the time. It's more about the expectations of it. And this is not to say that there is not a difference between how you communicate internally and how you communicate, to the board. The board is definitely more polite, more hand-picked language, while being transparent, and internally there might be a couple of F bombs thrown around and what the hell are we doing? So and just like moment of recollection, alignment and then we communicate. That's fine.
Ceci [36:38]
Quick question on board materials or investor updates, has the board ever told you, can you insert this analysis, can you put this number, can you put this? What's the good balance?
Bea [36:49]
It's very much a collaboration exercise. We don't have a board deck. We have a common document agenda, where we just dump a lot of things and then we discuss strategically. We always prepare A draft of it, but then the investor might be asking for certain references off the back of certain metrics that they've seen, and then we add to those. It's very, very collaborative and I quite like it. We tend to repeat the same thing over and over again, which is good because everybody's aligned and we do that a lot more than what we did before so internally we have the same topics that we discussed over and over again with the town hall we have the same topics that we discussed over and over again we have like five objectives and the board is also on those five objectives so everybody is aligned.
Ceci [37:34]
As they say in Latin, repetita juvant
Bea [37:37]
Repetita Juvant, of course, from two people that studied Latin.
The Ex-VC Chief of Staff Advantage
Ceci [37:42]
As a chief of staff, how can you be most helpful to the founders dealing with like board pressure or bad board members or anything with the boards? What's your take?
Bea [37:53]
Find a chief of staff that has been in VC before. The market is full of us. We all want to go to ops. I think it's super, super important to have a Chief of Staff that has been in that seat before because it demysticizes it for you. And you understand that it's actually not. That important and your investors are important but sometimes founders, assign to the board member this like a halo and a crown. And they are just people, they are just managers of capital. And you have to understand how they think. You could have an important ally next to you if the chief of staff has been in VC before and knows what are the dynamics there.
Ceci [38:36]
You understand their incentives and you speak their language. So you can take all of that burden off. Maybe there were some really, really annoying board members. I was just like, well, you know what? I'm just gonna have a call with them because I understand where they're coming from.
Bea [38:49]
Mm.
Ceci [38:50]
That conversation moves from a conflict to like I actually understand why you're asking those questions. And you can speak their language in a very like easy way and they just calm down. But I'm with you, like VCs will would see will understand why they're asking something and then it would be much easier to actually give them what they want.
Pivots, Decision Gates and Feeling the Pull
Bea [39:08]
We go to the fourth sticky thing. Instead of sticky we could have said shitty thing. But I should be polite.
Ceci [39:13]
Shitty thing. Well maybe we'll say shitty things.
Bea [39:17]
Changing the strategy and pivoting. How do you tell the difference between a strategy that isn't working and one that hasn't had enough time?
Ceci [39:27]
That's one of the most big difficult things, as difficult as execution in the strategy I think. But this is when being an early stage VC really comes in handy because you're really, really good at understanding signals from noise and making decision based on imperfect information. That's literally what a pivot is, is like you have an inkling of something that you should be changing, but you have very, very little information. And so how do you determine what signals to use to then like go and prepare the strategy? But as important as that, the other important thing is to create decision gates to understand whether the strategy is going well or not. Thinking of this decision gate, These are not OKRs, these are not goals. These are just simply like quantifying or codifying signals so that you're able to double down or something or put the pedal off the gas. By Q1, if you're trying to launch a new vertical, have we seen an uptick in the Number of meetings that were booked, or is our messaging resonating well? That can be as simple as that, you know? Something that's saying, okay, we're saying something that it's correct. Maybe let's go forward and maybe let's start creating like packaging and pricing for this new product. And the second thing could be: has one person signed up? Simple as that, but as you're thinking about the strategy, you've got to be thinking about what within the next quarter or months will tell you that this is going as you expected.
Bea [40:56]
Hundred percent if something has product market fit, you will feel some sort of pull. You'll feel it. We started selling Praktika B2B. And that was purely out of inbound. And the pull was continuous, initially we were not ready to sell B2B. It's just a completely different motion. I saw people asking for it in support tickets. Please can you give this to me for my company? And do you have a monitoring dashboard? And then we kept ignoring that. And then after a while I like okay let me just do like an MVP. And the MVP of the monitoring dashboard, let me tell you it was disgusting. Insanely ugly. It was pre-Claude by the way. Now I vibe coded a dashboard with Claude It was just the ugliest dashboard ever. And just people didn't care and people did not churn. I don't understand how people do not churn with this disgustingly ugly dashboard. And so that's the proof that you need. Like you have to go through that. And now obviously we haven't pivoted, we're still a consumer company, we have just a new go-to-market strategy, but you can feel it when it's there.
Ceci [41:58]
I say this to founders, there was a day a while ago where you had an inkling about something and you wanted to create a company and then you had to decide whether that was a good idea or not. And getting to two million dollars of ARR, that was not that was not it, right? It was like, people are signing up to this website that has the most weird copy we put some something on Twitter and a lot of people want to know more, those are signals. You have to go back into like that era at the beginning and trying to look as those are signals.
Bea [42:31]
Praktika went to 20 million ARR with an ugly app. That's also why when people tell me, you know, you have to have like an amazing brand and like work on things. That doesn't actually matter until probably a few million in.
Ceci [42:44]
That is something that's going to amplify, but it's not something that's going to create demand when there isn't.
Bea [42:49]
So how many times can a company change its mind before people stop believing anything leadership says? Let's assume you pivot once and then you pivot twice and then you pivot the third time, does that create a loss of trust? How many times can you actually pivot so that your employees will actually believe you?
Ceci [43:08]
If the pivots haven't gone well? I think you get maximum two. And the second one you really, really, really need to prove it and explain yourself. So the first one, it's fine. And you can actually get people going just on vibes. You know, we're doing this, this is why Yeah, you can, you can. You can get people hyped. The second one, if you get to do it, You really, really have to explain and have more signals than just an inkling. I would put as much effort in communicating the strategy as to figure out how you're proving the strategy. Imagine that you're going to an investment committee, and the people in the company are the people on the committee. This is how I would treat it. But how do you treat whoever come out with the first strategy or the first product?
Bea [43:57]
This is partially what you just said. At the moment you communicate the pivot, you have to do another investment committee with all your employees and everybody involved in the company. And you have to sell them on the new strategy, almost like you were pitching the business, from scratch. But eventually you have to make sure that everybody commits to the new plan. This goes for pivots, but it also goes for any decision that you make within the company in a team and Actually, at Praktika, we do sign up to this disagree and commit framework as well. We will talk things through, crush against each other get into heated discussion, but you have to get out of the meeting aligned, and even if you disagree, you align and commit. And if we don't get the time to it we would follow up a little bit later, but in the same day. It has to be in the same day. We continue chatting about it. Maybe we sleep on it, but then we disagree and commit. And then you know, you have to separate things for like the actual person. It just has to be the plan and it doesn't have to be your own ego. And you have to really, really separate the two and don't get too emotionally attached to the first version of the company.
Ceci [45:09]
What's the role of an operator or a Chief of Staff in all of this?
Bea [45:13]
Concierge the process. Making sure that the execution of it goes well, making sure that the people understand and repeating the strategy and it gets done.
Ceci [45:24]
I have one more that is Be the person questioning even before the strategy gets told. Like it's really easy to get hyped about something new that sounds good, but it needs to be a bitch in the room. Hello, which is it's going to be like the annoying partner of an investment committee, and it will be like questioning, questioning, questioning, and probing. And that's not to be annoying or be a non-believer, but it's just to make sure that the founders have really thought everything through or if they haven't and that's okay there can be holes that we are all clear about where the holes are what do we still need to be proving you will be involved in those conversations and it's your role and you owe it to yourself and the entire company to be the person that's probing.
Conflict at the Top
Bea [46:10]
Hundred percent. Last but not the least, we will have the conflict at the top Terrible. It's my least favorite. What are the early signs before anybody's shouting at themselves? Like, have you seen anything happening?
Ceci [46:27]
I've been quite lucky that I've only seen maybe like a few and they've weren't so bad. You see it when the founders stop being a united front. That's one. Or when you see more disengagement from one of the founders. There's something there. Have they stopped caring about the company? Have they stopped caring about the other founder? Is the conflict a lot for them emotionally that they just take a step back. I think always question the disengage
Bea [46:57]
The board that I mentioned before, the two founders would disagree with each other openly on the board and I assume that if they disagreed with each other on the board, they would disagree with each other also in team meetings. And in team meetings, that's like the major mindfuck for the team is to have one executive that says something and the other executive that says something else. They're like which one do we do? That's like a recipe of a company is going to shit.
Ceci [47:25]
But then as a chief of staff or as an operator, when do you get involved? Do you get involved? What's your boundary and when it's your job to fix it?
Bea [47:35]
I just leave not my circus not my if the two founders cannot agree on a strategy and they cannot disagree and commit like maybe I would do an attempt at reconciling them But if not, like it's just a recipe for a disaster. The company's not gonna know what to do. It's never gonna be a winning company unless, they actually have a heart to heart conversation and one of them decides to like do something else.
Ceci [48:00]
I think there's something that can be said in how you can help manage that, which is you need to understand where the conflict is coming from. And sometimes the conflict is coming from like miscommunication, lack of clarity. You brought more people in. One of the founders feels their role is threatened. And sometimes it's just about restructuring, changing titles, and making sure that what one needs to do is clear It may also be that the founder disagrees in the strategy because they're like at the top and they feel like they need to have an opinion. And then you can restructure not in cutting people as in change org chart in a way that One of the founder just has a say on a specific strategy that they're really, really good on You take it that into account I trust you on that, on anything else? That's me. And maybe that's all it takes because the founder has felt like their voice wasn't heard, and then I started to disagree on everything else just because. And so this can actually work quite well. There's also an evolution, right? Sometimes founders are three people out of uni have barely worked, and one of them is growing faster and it's becoming more of like a CEO or like an executive and the other isn't. But maybe the other person doesn't want to. So like stop treating them as one. Have them a role as maybe like a super-powered IC, you can sometimes. Broker data and be very creative So that's what I would do.
Bea [49:25]
Do you have any boundaries? Where would you like not go?
Ceci [49:30]
Anything personal really I don't have a lot of boundaries and I hate conflicts I'm a Libra, come on, I'm a diplomat,
Bea [49:36]
Ha ha ha.
Ceci [49:36]
I must solve them. So anything personal that has happened between them and I can fix I would always try it. And then if it's not if they don't want to talk to me about it
Bea [49:46]
People should just grow up sometimes. The best quality for founders is to just to be loyal to each other. And if they're not, I just I don't think I'm gonna work with those people. I'm just saying. I'm just gonna say.
Ceci [49:57]
Yeah, yeah. Of course. No, no, of course. If things have happened that I just ethically, morally I disagree with, then my role would be to try everything I know to remove the person that's done something unethical.
Team Conflict and High-Performing Assholes
Bea [50:10]
So what happens if the conflict is not at the top necessarily, but it's between team members, when do you get involved and what happens there?
Ceci [50:18]
Can I give you the best advice that a board member has given me and the founder about a team conflict. It was like, take person X, take person Y, close them in a room together, give them booze, give them drugs, whatever, don't let them out until they hashed out all of their conflicts. And I was like, Yes, Sometimes what you gotta do is that. Force people to hash everything out. Sometimes the role of a Chief of Staff is to be the therapist so that you diffuse Somebody might come to you and be like, that person's done this So first you listen and get all of the anger out. Then you try and explain why they're doing something You try and help them to like, okay, this is why maybe you should go about it. And then you only surface the things that actually matter when people can't work together.
Bea [51:03]
So let's say there's a very, very high performer who's doing amazing, but he or she is a problem for everybody around them. Like what do you do then?
Ceci [51:14]
Do you remember what one of our previous bosses used to say? Why do you wanna work with assholes?
Bea [51:19]
Yeah, we don't want to work with assholes There's no space for assholes in our life.
Ceci [51:23]
No, it will always be a problem. No matter if that person is like your best salesperson If the performance is actually taking a toll on everyone else's performance, then you look at it balanced, and that's a problem. Like everything that they're doing well, they're taking away from other people. People will leave for assholes
Bea [51:44]
I agree. There has been only one time that I have allowed one type of person to infiltrate in a business and it was a time bomb. You have to learn on your skin sometimes, It's the lowest common denominator also when it comes to values.
Ceci [52:07]
How do you deal with them? Because you know, you've hired them and then by month three they're kind of assholes but you don't wanna fire them straight away because they're doing really well. How do you give feedback on the fact that they're hassles?
Bea [52:18]
It might be a little bit non super-kosher from an HR perspective, but if everybody has a problem with you and everybody complains about you, maybe the problem is you sometimes there could be a communication issue, maybe it's a written communication issue. We live in an AI world where You could pass it on to AI just to make sure that it's more polite than how it would sound, just like just on Slack as you type it. But yeah, it's just it's just basic things. If you're that smart to be an A performer in a startup in AI I'm sure you're smart enough to learn language.
Ceci [52:57]
If not, use Praktika.
Bea [53:00]
Use Praktika, exactly. Use custom lesson how not to be an asshole.
Closing
Ceci [53:04]
We covered a lot.
Bea [53:05]
I've never been this honest and transparent in any conversation.
Ceci [53:09]
And obviously all references to people, companies and funds are all
Bea [53:16]
These have been like either examples from our past VC life, things that we have heard not necessarily a reflection of our current experience.
Ceci [53:25]
This has been like the really honest version. I think if you're sitting on one of those processes right now, if you're thinking whether you should fire somebody, if you're in starting a restructuring round, if there's problems at the board or between founders and conflicts, like this is the episode for you. And there's a lot of meat.
Bea [53:45]
A lot of meat, we talked about also something that neither of us as an investor knew, which is like how much weight that can cause on like one person or like a short like a small set of person and you're not alone. It's something that a lot of operators go through.
Ceci [54:01]
If you need advice, you can come to us, you can come to your Chief of Staff friends, It's a community.
Bea [54:08]
This was the first episode of season two of Top of the Ops. We are in a brand new season, and very happy that you guys are still with us. So, you know, subscribe, leave a review, send this to an operator who's in need, see you next time.
Ceci [54:24]
See you next time.
Bea [54:26]
This was Top of the Ops.