370: Changing a Startup Team’s Culture vs Hiring a New Team?

[0:00:00]

Steli Efti: Hey, everybody. This is Steli Efti.

 

[0:00:03]

Hiten Shah: And this is Hiten Shah.

 

[0:00:04]

Steli Efti: Today on The Startup Chat, I want to talk, Hiten, about changing a team’s culture versus firing and hiring a new team. Here’s the deal, I just got off the phone with a founder and CEO of a company that has raised a shit-ton of money. That has accomplished a good amount of scale and success. That is now going through a rough patch and the founder wanted to reach out to talk to me, specifically, about the sales team, but I’ll give you the greater context. I’ll tell you about his challenge. Then I thought it would be fun for us, for the audience, and everybody listening, to go back and forth on what somebody should do in this situation, because I think it will apply in many different scenarios. Basically, they had a good amount of success up until this point, and now a lot of things are starting to not work anymore. They used to have a lot of success with inbound leads. They’ve become market leader in their markets and all of that good stuff. They accomplished a certain amount of scale, but now the market is changing. Number one, they’re getting a lot more competition. Number two, the product they’re offering is not as unique, or compelling, anymore. There’s so much competition. There’s also new technologies, so it’s not the newest, coolest thing anymore that all customers want. The paid advertising channels that it used to use, the prices have gone up, so they’re not working as well anymore. For a variety of reasons, they’re not able to grow as well as they used to. Which means, specifically, for the sales team that they have developed, established, that the sales team is now getting less leads. These leads are less qualified. This means the sales team has to work a lot harder and is making a lot less money than they used to. All of a sudden, there’s all this tension, these issues, sales team is really unhappy, people are cranky. There’s all these problems and the founder reached out to me, specifically, with their sales team saying, “Steli, what do I do now? Do I try to pay the sales team more money? That’s going to ruin … I have slim margins, it’s going to ruin my margins and it’s going to be a problem. Do I try to just hire a lot more new people in the sales team? But what do I do with the old sales people? Do I just coach them through this and try to … Do I, maybe, just take out the commission and pay them a fixed income and tell them, ‘Don’t worry about how many or how little deals you close. You’re going to make a little less money, but it’s more stable. What do I do in this situation?’” I’ll jump in and share with you what I shared with him, but before I do that, I’m dying to hear … If somebody came to you with this limited amount of context, and if we zero in, not on the overall business, because there’s a lot to dissect there, but on the specific challenge of having a team that is not happy anymore, and is not happy about the change in the market, and the change in the work they need to do, and the circumstances of their work. Typically, what is your approach? Do you coach that team through the change? Do you just let go of that team, hire a new team? Do you do something in the middle? What’s your initial, immediate, thoughts on this?

 

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Hiten Shah: Yeah. At that scale, I start with the leadership. What I mean by that is I go to the person who heads up sales, hopefully, it’s not me.

 

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Steli Efti: Hopefully, it’s not me. I just want to double-click on that.

 

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Hiten Shah: Hopefully, it’s not me, otherwise I’ve got to go to myself and do this. And say, “Hey, are you able to do what’s required of you, considering the changes in the market and changes in the business? What’s going to be required of you is, basically, starting from scratch in a lot of ways. Also, being able to lead your team through this change.” My evaluation is, first, at the leadership.

 

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Steli Efti: Right.

 

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Hiten Shah: Because, if the leader cannot manage the change, is not in on it, then it will never happen. So, I start with the leader. Then I go, “Hey, what’s up? Are you in or are you out?” I’m very deliberate about it, like that. Usually, though, here’s the thing, you wouldn’t find yourself in this mess, if that leader was conscious enough of the situation to be able to already do something about it. Already this hints at there’s a leadership problem over there. The question is, does that leader stay or leave? Because you might not be ready to let that leader leave, because then there’s all this people mess on your hands. But if that person is the one that’s going to have to manage the change. You have to really determine whether that person can manage the change or not, and that’s it. It’s, honestly, that extremely simple. Everyone else makes it complicated, from what I’ve heard, when people evaluate the situation. But, at the end of the day, that leader needs to lead. If that leader cannot lead the company, or sorry, their team through this change, that’s a big problem. That’s where I’ll start, because I’m dying to hear what you said. There’s a lot more to it, but that’s like … For me, if I were dealing with this, that’s exactly what I would do first.

 

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Steli Efti: I love it, because I do think that those things, if not all things, are leadership issues. Right?

 

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Hiten Shah: Yeah.

 

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Steli Efti: And then, again, that’s an inconvenient truth, because if you think that someone whose responsible for running that team is not doing a good job, then you have to ask yourself, again, “Are you doing a good job leading that person?” Right?

 

[0:05:34]

Hiten Shah: Absolutely.

 

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Steli Efti: “Are you doing a good job having hired that person?” But, in this specific case, unfortunately, he’s the responsible person for the revenue team. I didn’t get a chance to get into too much detail on why that is, but even, let’s say, you talk to the leader and that leader says, “I’m all in. I’m happy to manage the change.”

 

[0:05:57]

Hiten Shah: Yeah. If it’s you, you have to say that to yourself. I guess, it hit on the big point that was … You know what? This is probably the biggest problem. There is no leadership there. It’s the, I guess, founder, CEO, I’m assuming?

 

[0:06:11]

Steli Efti: Yeah.

 

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Hiten Shah: That’s actually leading revenue himself. That’s probably, honestly, I bet this is indicative of a number of other problems, especially, when it has to do with sales, because this person hasn’t let go of that role yet.

 

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Steli Efti: The other thing that he had brought up, specifically, is that this company has gone through a first phase of great success, and then they’ve been in this second phase of struggle for a minute now. They’ve gone down different paths of saying, “This is going to be the solution. We’re going to expand into new markets to find growth,” and everybody was excited. New markets, that’s going to be the solution. They invested a ton of money, and effort, and time into new markets. It didn’t work out. They went back to the drawing board and said, “Fuck, new markets, there’s another competitor. They’re much smaller than us, but their technology is much better. Let’s try to acquire them.” Cool, everybody is like, “That’s what we’re going to do. We’ll merge. We’ll acquire.” Worked on that deal for a real long time, eleventh hour, deal didn’t work out. The acquisition didn’t go through. Okay, back on the drawing board, and he said they went through this three times and now you have the overall team morale thing of, “You guys don’t know what you’re doing. We keep changing the strategy.” People are just burnt out on this back and forth. And on top, just like with all of these problems, when I offered some more radical solutions to the problem, he was like, “Yeah, I’d love to do that, but we’re also in the middle of closing our next round. I don’t want to rock the boat too much, right now.”

 

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Hiten Shah: Wow.

 

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Steli Efti: Yes, exactly. I mean, is it ever any different, Hiten, when somebody comes to you with these kinds of problems?

 

[0:07:46]

Hiten Shah: No.

 

[0:07:46]

Steli Efti: No. It’s always like stacking, stacking, stacking, stacking, stacking. It’s like, “Yeah, you came to me with the peak of the iceberg of the problem, but when we try to analyze it, obviously, there’s a lot more problems underneath the surface of the water.” This is a much bigger challenge, but, again, you have to be like, “All right. We got 10 minutes, I want to be as useful, as possible.” It’s not the first, or the last, founder that’s going to find themselves in this situation. What do we do? In terms of the … I’ll just seemed a little bit on the basic changing a specific team and its culture versus hiring a new team. I mean, there’s no answer, just like with everything else we ever give, in terms of advice. We always go, “It depends.” Lots and lots of factors, but I do think when you … Let’s say you were leading a team and there must be a radical change in how that team operates, or the reality has changed. It was a cushy, easy job to make a ton of money. Now it requires you to work much harder to make the same amount of money, or to survive. It’s a much more competitive landscape, all of a sudden. The team has to shift from a causal, this is an awesome gig and everything just works out, to a, we’re back in a war phase, where we have to fight for survival, and we have to figure out a new model that will work again. When you have to make that shift, as you said, first of all, you have to ask yourself and look in the mirror and say, “Am I sold on this change? Am I all in on this?” Because you can’t be a little in on this, you have to be all in. If you are, you need to sit down with the team and explain to them, “This is a new reality. These are the new expectations. If this is something that’s … Since things have changed, this might not be the right job for you anymore. You might not want it or you might not be able to do it. We want you. Here’s what we’re going to offer you to make it happen, but this is what the expectation is.” The expectation in attitude, the expectation in work, the expectation in results, and the expectation on our end, our best guesstimate, on how much time we’re going to be in this phase. Then you have to be radical in living that change, and, not just telling the team, “Well, you’re going to have to go through harder times,” then you fuck off back into your office, doing the same job that you were doing. You have to be in the mitts and the trenches, eating the same amount of shit that they eat. Doing the same calls, demonstrating to them what you want them to live. Demonstrating to them the energy, the intensity, the great attitude. Showing them what you want them to do versus telling them what to do, in this crisis phase. Then the people that are joining you, awesome. The people that are not joining you, you have to part ways with very, very quickly, because they are creating … They’re poisoning the well. They are creating a terrible culture, because they’re going to be walking around trying to sell everybody else on having a bad attitude, and this sucks, and this will never work, so you have to counteract that. But that, in a nutshell, is my advice in these situations. It’s hard to change the culture of a team, but it’s not impossible. You’ll have to make very quick decisions and execute on it with clarity. But you also have to demonstrate the change. You can’t, as management, come in and be like, “Well, the market is changed, so this team’s work is now much harder for much less pay. But you know what? Just suck it up and do it.” Then you go back and you do the same shit you were doing when things were good. You’re back in at your desk looking at charts, and slides, and checking your emails. You’re not demonstrating what you want them to be. That will never work. You’ll have to be the crisis faces in the middle of the team, demonstrating, showing them what you want them to do. Showing them that it’s possible. Showing them that you are all in. That you believe it and that you are willing to do whatever you tell them to do. You don’t expect of anybody to do something you’re not willing to do yourself. Then, for the ones that can’t get onboard, they have to get off, off the boat, because they are dragging you down. They have to go, as quickly, as humanly possible.

 

[0:11:47]

Hiten Shah: I’m going to add one thing.

 

[0:11:49]

Steli Efti: Beautiful.

 

[0:11:51]

Hiten Shah: Just for context. Obviously, everything you said sounds perfect. That’s a pretty pragmatic way to approach it, which I think is what you need in this situation. The thing I’m going to add is that he gave you context around something that I see a lot of entrepreneurs get into and founders, basically, especially, CEOs is they burn their team. Not they burnt out their team, they’ve burnt their team.

 

[0:12:21]

Steli Efti: Burned their team.

 

[0:12:21]

Hiten Shah: Because they’ve said, “This is going to happen.” Then they go after this. It doesn’t happen. One time, team, it’s like, “All right, team. We failed, fine.” Second time, “We’re going to do this.” Okay, go after it. Doesn’t happen with lots of effort. The team is like, “Okay. Can I trust this person in what they say?” All it takes is that second time of it failing, and that’s not … Again, this is … I know why this is happening, I’ll explain. Then the third time, you do it again, and by then, you’ve essentially lost trust. I bet people have already started leaving. Here’s the thing, as a founder, you can get super excited about the idea you came up with as solving all your problems, period. What you can’t do is convince your team that it is the solution, and it is the only solution. You are inadvertently do that when you get that excited about finding the solution and rallying your team around it. You need a really specific balance of, “Hey, this is what we’re going to try. If this doesn’t work, we will try something else.” If you don’t do that, then you end up burning the team. Because the team stops trusting you, because you got so excited about it. And they look at you to have the answer. But when you’re in this uncertain time, and you’re, literally, just essentially doing the equivalent of experiments, or attempts, then you make sure the team is ready to do their best to go after the attempt. Then, right away, when it fails, you go to the back of the team and you’re honest about it. It’s like you bookend it. In the beginning, in the first chapter, you’re just saying, “Hey, this is the best idea we have, right now, and this is why we’re going to go after this. This is how long it’s going to take or this is all the next steps. Let’s go.” Then, at the end of it, you say whether it worked or not. If it worked, great, everyone’s cheery and you’re a hero. If it didn’t work, you sit there and say, “Look, this was part of the journey. That didn’t work. We’re going to all regroup and figure out the next thing.” Then, over time, you have to get them more involved in figuring out the next thing, in whatever way you can do. Whether it’s more visibility into the decision making, or just their help, but it’s super critical to keep their trust along the way, and not promise things that might not happen, when there’s that much risk at play. That’s the way I look at it, because you have to … There’s a level of honesty that you need to get to, and it’s honesty that starts with yourself first, of knowing that you’re being overly optimistic, or you’re looking for a silver bullet, as well, and that there might not be any. And it’s going to take a bunch of attempts to get to whatever end goal you’re looking for.

 

[0:15:07]

Steli Efti: Beautiful. I love it. All right. Let’s wrap this episode up with … If anybody’s in this type of situation, if you are listening to this and you’re like, “Shit. Yeah, I might have burned my team,” or, “Shit I have a certain team that’s not doing that well and I don’t know what to do about it.” You can always reach out to us and see if we can give you contextual advice; steli@closeio, hnshah@gmail.com. As always, if you liked the episode, if you enjoy the podcast, give us a five-star review and rating on iTunes. It’s highly appreciated. This is it for us for this episode. We’ll hear you very soon.

 

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Hiten Shah: Later.

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