What to do when we've shrunk?
It's a challenging economic time and some businesses have contracted in size to ensure they can continue to trade. What should leaders of product development teams do?
I have been through my share of ups and downs over my career. I’ve been retrenched various times.
I’ve been on the other side of the equation too; involved in the decision of where to reduce and being the bearer of bad news.
That is to say, I’ve earned my share of grey hair over the years as I navigated these challenges.
An uncertain global economic environment
Uncertainty globally and high interest rates have led to a trend of reduction in technology companies. Companies are downsizing and being more cautious with investments.
I recently responded to a product leader on a forum who was sharing their own situation of their company reducing its workforce. I thought there was some value in sharing some of what I’d learned being in these situations before.
Sharing what I have learned at least brings some value to someone from what were painful experiences for me at the time.
A typical situation in today's climate
The original poster I was responding to is working for a reasonably well-established startup business with offices here and also the US.
They had recently reduced the size of their technical team and were facing questions of what to do differently given they still managed the same portfolio and still had a need to evolve their product and grow their business.
They mentioned embarking on some ruthless prioritization and were also considering whether they should look at working differently with the smaller team (maybe more scrappy, they pondered?).
These are of course two important areas to investigate. Many others generously also provided their suggestions with specifics on how they had approached this challenge.
Consistent with the thesis of this publication, my own career experience has taught me to check we know the direction we need to head towards.
There are many posts out there which touch on this subject. In particular how to manage the immediate morale and emotional effects of such a change. I may write about these aspects in the future but today, so as not to repeat what others had covered well I have decided to focus on what we might need to know first.
Check alignment with organisation's purpose
And to do this I first recommend starting by checking that the purpose of the organisation is still what we think it is.
In this case, a startup that needs to reduce its workforce may be a signal that something we’ve assumed about our organisation has changed.
For instance, if we are reducing due to economic challenges, funding challenges or profitability challenges it might be because we've learnt some things weren't working and there was a need to pivot.
There may now be different imperatives. Knowing these can inform how we prioritise and how we organise ourselves around the work.
Are the organisation now looking to validate a different market fit? Are we needing to find cost efficiencies to find a sustainable margin? Is it needing to increase its supply of leads?
Engage the company leadership
Engage with the founders and leaders of the organisation, the customers, the financiers, the sales and customer service teams. Anyone who might hold a piece of the puzzle. The answer to these questions may change what the most important contributions your team can make.
For instance, if the answer is we need more leads, maybe it’s the reliability of the website and its performance that's most important to support this endeavour.
If it’s the product market fit validation then maybe it’s finding cheaper ways to test and validate product ideas - are we over-investing in implementation which could be validated more simply through false door tests or by other similar means.
This begs the question: Is our organisation maintaining software to a high degree of quality which may not be an important part of the organisation’s future? Maybe we are maintaining features for market segments we've now invalidated.
Such an insight and context could help the product development team further focus by stopping or reducing other activities and organising themselves around what is important (maybe in the more scrappy, focused way they mentioned).
For example, if the organisation needs to pivot to validate market fit, business model or any other start-up issues it’s possible they should reevaluate practices that may have made sense when you thought the business was considered more sustainable.
Adjust to the new investment environment
The recent significant shift in funding availability and cost of capital increases means businesses are being asked to show profitability sooner to secure more funding.
This has affected many startups that were benefitting from cheaper more available sources of funding with lower thresholds to be eligible. The runway to prove their viability was longer and as interest rates increased, increasing the returns required to make the investment worthwhile.
The result has been companies becoming leaner, to buy more time or to show more clearly the profitable potential of their business model.
I know this is a common scenario for many right now and this is also probably the first time for many experiencing the emotionally challenging roller coaster of losing colleagues, feeling some survivor guilt and then needing to quickly adjust to do what we can to make the business work.
Hope that's helpful for someone out there. Good luck. Comments and DMs are open if you'd like to ask any clarifying questions or discuss further.