Small businesses are – by nature – optimistic. They tackle big problems with limited resources. But every business goes through tough periods, and when you're in one, optimism alone won't get you far. Here, Tom Mundy, COO and Co-founder of Goodlord, talks us through one of the most difficult things that can ever happen to a business.
Towards the end of 2017, Goodlord – the business that I co-founded – made just under 40% of our employees redundant. It was one of the hardest moments of my life, and it was extremely difficult for the team – both those who left and those who stayed. Here’s how we got there… and how we came out the other side with a Series B and a truly inspirational team.
The early days
We were a lucky startup. With £6,000 and an external contractor, we built a product which achieved near-instant product-market fit. We started to get customers – a lot of customers – and soon afterwards, we attracted investment. We got more customers, more investment, and everything looked like we’d absolutely nailed the startup dream.
Two years down the line, we found ourselves with just months of funding remaining, and facing the choice between laying off almost 40% of our employees, or explaining to everyone that Christmas would be our last payday.
What went wrong?
Whenever I talk about Goodlord’s problems, with people both inside and outside the business, I’m immediately tempted to blame “fun”. There’s some truth to this – we drank too much, and stayed out too late – and the office could have a bit of a Wolf of Wall Street vibe from time to time.
That probably didn’t help anything, but I think that’s an easy answer. It’s easy to blame the surface-level, obvious issues like that. The reality, however, is that plenty of companies (especially startups) have a culture like this – and do just fine. There were deeper problems in the business.
Ironically, I can trace almost all of our problems back to our early success.
We didn’t hit the roadblocks or struggles that many other startups talk about. We were sitting on a large pile of money, and everyone was telling us that we were “successful”. Because of this, we never really developed something I’d call an “objective-based culture”.
Early failures teach small businesses a valuable lesson. They show you what happens when you don’t hit objectives. They give you an idea of what’s at stake, and help you build a culture of responsibility and accountability. They teach you what "delivery" looks like.
Early on, we decided to rebuild the entire Goodlord platform. We were complacently growing, and – according to everyone – “successful”, so we were confident that we knew what we were doing. When we started the rebuild, we didn’t have a CTO, we didn’t listen to customer feedback and we never really decided what the “point” of the rebuild was. Of course, we thought we had objectives, goals and a “vision” – but crucially, we lacked any clear, widely-understood criteria for what success or failure looked like.
“We need to hold people accountable”
We didn’t have explicit standards to meet. Hold-ups and problems didn’t lead to a re-evaluation of our project – they simply led to deadlines being extended, and more money being spent. For two and a half years, our team of world-class engineers beavered away on this rebuild, and, one morning, we realised that they’d built a product which the customers didn’t actually want.
We were building the snazziest, most technically impressive back-end system possible. It was, undeniably, an awesome thing to work on. But for one of our customers to use, day-to-day? It didn’t do anything remarkable Tom Goodman – Head of Success, Goodlord
A particular conversation with our newly appointed CTO stands out to me. He told me “we need to hold people accountable.” At the time, I thought that sounded extremely dodgy – as if we needed to implement a culture of punishment, naming-and-shaming – the opposite of the type of business I wanted to build. Maybe he phrased it badly – but he was right. As a business, we needed to approach objectives in a smart way, and, when we failed to hit objectives, people needed to be ready to own that failure, learn from it, and act on it.
There is – strangely – not much to be said about one of the hardest things I’ve ever had to do in my professional life: deciding to make almost 40 people redundant. I’ll settle for giving some advice to anyone who finds themselves in a similar situation to me.
First and foremost, when you’re making this decision, leave your ego at the door. I had to choose between a large portion of our team losing their jobs – or ploughing on, and everyone losing their jobs. To take the first option would mean admitting failure, and recognising that I hadn't lived up to my personal image of a "good leader". But my own personal disappointment wasn't worth jeopardising the jobs of everyone in the business.
During this whole process, surround yourself with your best people. You cannot do this alone. You need advice and support – both professionally, and emotionally. This is going to be tough on everyone.
I don’t want to dress this up so I’ll be honest. It was really sh**. We were a friendly, ambitious and forward-thinking team. A family culture. That made everything ten times worse. People felt betrayed. Best friendships and relationships were broken up. It was hellishly awkward. Tom Goodman – Head of Success, Goodlord
Your team will judge you on how you treat their departing colleagues. We were lucky enough to have an incredible People team making sure we were not just acting legally, but fairly. The departing members of the team always had someone to talk to and were offered as much hands-on support as they wanted to find their next challenge.
As soon as you actually start telling people, the most important thing to remember is to have a clear and transparent plan about how the business will be going forward – and how you are going to make the business a success. As soon as you say the phrase “there will be redundancies”, everyone in your business will assume they are going to be made redundant. They will start planning. They will look for other jobs. So if they’re not one of the ones made redundant, there’s still a strong risk they’ll find another option – and if you don’t have a compelling vision for the future, they’ll take it.
Afterwards, for those who were still here, knowing that we had a chance to rebuild and we were going to band together to get it done – that was legitimately inspirational. Tom Goodman – Head of Success, Goodlord
Tell the team as soon as possible. If you delay, people will find out – especially in small businesses. They’ll notice that you’re stressed, they’ll overhear something, they’ll look through the glass walls of the meeting room and see the expression on the faces of your investors. They’ll worry, they’ll discuss theories, and generate a massive amount of uncertainty. Certainty is always better – even if it’s certainty of something bad.
When you tell the team – tell them it’s not their fault. Blame floats upwards in situations like this. Point the finger at metrics and numbers, and at management – never at the team. Businesses don’t end up in situations like this because someone or some team isn’t “pulling their weight”. They end up here because of a core, structural problem.
You must be incredible at communication. Explain things clearly, quickly, and consistently. You are going to be explaining complex stuff which severely affects peoples’ livelihoods. Do not dress things up in euphemisms or jargon, and make sure you are highly accessible for people who want to ask questions.
I’d been on holiday. The day I got back – first thing, Monday morning – I was called into a full company meeting. Tom walked in and explained that there were going to be a lot of redundancies. The main thing I remember is that he didn’t just say this and leave – he stayed for questions. I won’t pretend it was pleasant – but the fact that it was done openly improved it a lot. Kat Wynne-Ellis – Head of Referencing, Goodlord
How we rebuilt
I’m unbelievably proud of how the Goodlord team have worked together to tackle our problems and rebuild. We made it through a crisis that would have ended the business if we didn’t have such a fantastic team – and we’ve come out stronger than we ever could have imagined.
Immediately after the redundancies, we knew that we needed to radically re-shape some aspects of our culture if we wanted to survive. At the core of this was tackling the way we treated objectives and tackled failure, whilst ensuring we protected the most important things that attracted great people to Goodlord in the first place, such as our progressive stance on mental health in the workplace. At the very centre of our cultural reboot was a renewed focus on our values, and a complete 180 on how we treated objectives and tackled failure.
Build a culture of honesty
We needed to build a culture which talked about problems and confronted failure head-on. Previously, we’d thought we were an honest, transparent business. The reality was that we were only ever honest about the good numbers. We’d tell everyone about the stats which made us look like we were thriving. We’d discuss them constantly, maintaining the illusion that nothing was going wrong.
We needed true transparency, and to get there, we had to learn to be brutally honest. Now, if our sales aren’t hitting targets, or our customers aren’t bringing in enough revenue, we talk about it. We tell people what numbers we need to hit, which ones need to improve, and what problems we’ll face if we don’t hit them.
Each week, we pull up graphs, look at our runway, dissect each department and analyse how things are going. We’ve encouraged people to openly ask about runway, and we’ve also introduced anonymous questions into full company meetings – for people who might feel intimidated by publicly asking tough questions.
Never be complacent about objectives
We’ve completely revamped the way we think about and review objectives. To put it simply, we don’t ever want to have another situation like the 2+ year platform rebuild. If there hasn’t been significant progress on a project for three months, then we assume something has gone fatally wrong – and the project needs to undergo a brutal reevaluation, or be shelved altogether.
Startups love to ignore the traditional rules and structures of businesses – but let’s face it: there’s a reason companies work in quarters. As a rule of thumb, I assume that if a project hits problems, you have to double every time scale – and if your time scales are as long as six months (as ours were) – you’re going to end up with year-long waits. For a small business, that is almost always an unacceptable amount of time.
Recognise what a “great culture” actually means
Back before the crisis, I thought Goodlord had a great culture. Looking back, I realise that I’d assumed “culture” meant beer pong, office dogs and going out with everyone on a Thursday night.
I was completely wrong. Sure, those things are nice, but they alone don’t make a great culture. A great culture comes from great people – people who are excited to work on tough challenges and push for success together. It’s a culture that values challenge and learning in a mature way.
A lot of that comes from the experiences we’ve been through. We don’t hide from our past: we talk about it openly. We’ve become very, very good at having tough conversations, and as a result, there’s a sense that everyone is fighting for the same thing – an infectious atmosphere of teamwork that has allowed us to build the foundations of a truly great business.
One of our most-used graphs charts the company's burn rate, and it reaches back to just before the redundancies. You can see that burn rate peaking at around a million pounds a month – but you can also see all the great work we’ve done since. We now have 70 employees, and 19 new people in 2019 alone. Our revenues are more than twice that of 2017 with less than half the number of total employees, we have increased our number of customers, and we have a productive and motivated team. When you’re in a crisis like we were, every day feels like the end of the world… but it’s not. Recovering, rebuilding and thriving as a business is possible.