Come and join our open discussion with James Mackey, the host, and Tom Gerrity, the VP of People at RECUR. Learn how to effectively handle market downturns, cash burn challenges, and difficult decisions such as layoffs and shutdowns. They will also provide valuable insights on optimizing operations and leading teams through downturns, offering inspiration to executives, employees, and companies alike.
0:42 Tom Gerrity's background
1:21 Navigating tech market downturns
14:20 Process documentation during a market downturn
23:10 Leadership, growth, and resilience in a down market
Thank you to our sponsor, SecureVision, for making this show possible!
Our host James Mackey
Follow us:
https://www.linkedin.com/company/82436841/
#1 Rated Embedded Recruitment Firm on G2!
https://www.g2.com/products/securevision/reviews
Thanks for listening!
Come and join our open discussion with James Mackey, the host, and Tom Gerrity, the VP of People at RECUR. Learn how to effectively handle market downturns, cash burn challenges, and difficult decisions such as layoffs and shutdowns. They will also provide valuable insights on optimizing operations and leading teams through downturns, offering inspiration to executives, employees, and companies alike.
0:42 Tom Gerrity's background
1:21 Navigating tech market downturns
14:20 Process documentation during a market downturn
23:10 Leadership, growth, and resilience in a down market
Thank you to our sponsor, SecureVision, for making this show possible!
Our host James Mackey
Follow us:
https://www.linkedin.com/company/82436841/
#1 Rated Embedded Recruitment Firm on G2!
https://www.g2.com/products/securevision/reviews
Thanks for listening!
Hello, welcome to the Breakthrough Hiring Show. I am your host, James Mackie. Thank you for joining us Today. We are joined by Tom Gerrity Tom. Thank you for joining me. I appreciate it, hey, James, thank you so much for having me. Yes, and before we jump into the topics we have outlined for this episode, could you please provide a background for everybody?
Speaker 2:Yeah, hi everyone, my name is Tom Gerrity. I live in New York City and my career has been mostly working for venture capital backed startups in the tech industry from crypto to fintech to software as a service, and I come in and help these organizations grow, usually typically around the series A stage anywhere from 25 to 50 employees and watch them go through the series of growth to scale to hundreds of employees around the globe. So that's been my career and background and currently, right now advising a company called Recur, helping them actually wind down operations while I'm on the market, looking for my next full-time opportunity.
Speaker 1:I love it. Thank you so much for sharing a little bit about yourself, and I think we're going to talk about a topic today that we have not talked about before. On the show We've done over a hundred episodes covered a lot of great material, but I think one thing that we haven't gotten enough depth with was going into really how painful going through a market downturn can be, as we're seeing in the tech industry, and not just commiserating on the pain, but some of the actual process and how executives are navigating this time, and everything from logistically to looking at how to run organizations, to also looking at career planning, thinking about OK, what do we do next, particularly if we're working at organizations that are struggling or whatever it might be, changing strategic directions of the company. There's a lot to think through. I would just like to hear from you, based on what you're seeing on the market.
Speaker 1:We're starting to see SaaS companies that maybe had a year in cash or runway available to them and per VC advice that honestly did a pretty good job for an unprofitable organization to preserve cash to get enough runway to operate. And even those companies that got a lot of funding and spent appropriately or responsibly, I should say, are in positions now where they're struggling because this has been going on a lot longer, and I think we almost as bad as COVID was. We bounce back pretty fast because of how much the market was flooded with capital and, in hindsight, maybe flooded a little bit too much, and so I'm just curious to get your thoughts on what you're seeing out there and what do companies do when they reach this point where they're out of cash and maybe they're thinking about closing down shop. I'm curious if you have any insights on how they go about making that decision and what next steps occur, particularly from a people and talent perspective.
Speaker 2:Yeah, absolutely, it's a good question. So it is wild times right now. So, if you think back before COVID, venture capital funding was pretty easy. Right, these venture firms. They were raising billions of dollars and pumping them into these companies unprofitable businesses. It was all growth, grow. We don't care how many employees you have, just the numbers, just need to grow Right Across the board. Then COVID hit. Everyone had a quick little panic there where there was a little bit market layoffs and so on and so forth, but then that quickly turned around and companies went right back into quick hiring mode.
Speaker 2:Right Now what I'm seeing is that, like you mentioned before, growth is not the answer anymore. All these venture capital firms are looking for companies that are on the road to profitability. Right, that they need to cut their expenses and increase their revenue, so at some point they don't need to rely on venture capital funds to keep the business growing. And it's challenging right now across the board, especially in tech, and I'm specifically. My background has been in tech and software companies. So there are under other industries in America and around the world that are are doing very well, but in the tech software world right now, companies overhired and expanded really quickly added a ton of additional cost to their business, and now they don't. They can't support it. So what do they do? They have a few options. They need to go out and either raise more capital or make drastic cuts. And so what you're seeing is a lot of companies are have had multiple rounds of layoffs right Because they identified that they have an issue with cash burn and they may not want to lay off every employee, or 50 percent of the company, or 20 percent. So they've been doing it in stages right In 2022, it started for us.
Speaker 2:I worked at a company that we started in June.
Speaker 2:We had a June layoff, then we had a September layoff, then we had a December layoff, right, and it was.
Speaker 2:We were just building them in stages, and that's what all these companies are facing right now. And then the other option, if you can't raise capital, is what I think we're going to see over the next probably six to 12 months is companies that can't raise capital are going to try to get acquired by a bigger or larger tech company or more successful company. And then the third option is if that, if you can't raise capital and you can't get acquired and obviously cash burn is a problem, you're going to most likely have to shut down the business, which is just really sad that you see all the time and effort and energy that the company and the employees put into these organizations and the founding team, so on and so forth, and to see that all just go away, whether it's a year, two years, five years, 10 years down the line, it's just very sad to say, it is really sad to see and I'm going to share some experiences for everybody tuning in.
Speaker 1:I own and operate a company called Secure Vision and we do contract recruiting and better recruiting an RPO solutions for the tech industry. An easy way of saying all that is companies borrow recruiters from us to hire engineers, salespeople, these types of things, and so we have seen a significant downturn and demand, just given the fact that the hiring demand has gone down significantly and the RPO space and better recruiting space has been really going through it. So we've had several competitors In fact, I think it's accurate to say most competitors actually go out of business in the past 12 to 15 months, a lot of which have gone out of business in the last six to three months. It's gone through significant layoffs and most of them weren't profitable and it was like a fire sell in a sense, but basically where they had to sell due to the financial situation, not being able to operate the company moving forward, we've been going through this too and it is a tough time. It's hard and there's a lot of really hard things about it. One is managing the financials. You want to focus on growth. You want to focus on the fun stuff.
Speaker 1:I missed focusing, for instance, on really dialing in on employee experience, and there's some things that I can still do to help employee experience. When it comes down to communication, you try to do that. I received some feedback from my team. I could actually be a little bit better there, so I'm implementing some of that feedback, because the amount of feedback that people want in the downturn is it's even more so. I was just basically at this point. Whenever I have any update, like I'm posting it on Slack general, we're doing the all hands meetings and really trying to dive into even more details. I used to give high level information on revenue strategy and now I'm like okay, here are the details of the strategy, this is exactly what we're doing, here's exactly the tactics, and that's literally the level of detail that my team feels like they need from me to feel confident that we're moving forward in a way that we're going to be able to make it. So I'd say.
Speaker 1:Employee engagement has been really tough. Morale has been really tough. Of course, the reality is of like a P and L, and figuring out how we're going to get through it financially can be really tough. It's also it's incredibly hard on the employees and the individual contributors we do. However, we have a lot of executives tuning into the show, and so I also want to speak to that. For executives, it's also incredibly hard A lot of the times. As overhead positions executives can be the first to go, and it's also the whiplash and perception of your leadership.
Speaker 1:I would say in 2021, probably I got a little bit too much credit for the growth of the business and people look at you like you're this genius.
Speaker 1:And then it's like when the market shifts and things are really hard, they look at you like you're an effing idiot and you have done the strategy in the world and if you had done stuff differently that they wouldn't be, then we wouldn't be in the position we're in. And I think part of it as a leader is really keeping a level head and realizing that it's possible that neither of those things were true in an upmarket or a downmarket. That reality is you're trying to take incremental steps towards growth, but we have to live in the reality of a P and L and market conditions and reality is not everybody's going to understand that. So there's managing your own stress levels. Your mental state is managing the stress levels and mental states of your employees, and there's also managing, I feel like your confidence, all while also trying to put together a strategy to get through this. It's just, it's a lot to focus on right, yeah, yeah, no, there's absolutely right.
Speaker 2:There's so many different headwinds and you take it all and you try to not, you just try to move forward, right, the best that you can. Listen, I've hired people into these companies and different startups and they have their own lives going on and families and everything. And you feel bad, right, when these companies and you're like, is it my fault? It's not necessarily your fault, right? These companies go through many different market conditions and you try to react to the market and you try to grow the business and there's just things that are out of your control. And so my advice for executives right now is even just be open, transparent and communicate as much as possible.
Speaker 2:The worst case scenario is all like raw, we're all doing well every week or every month on all hands, and then all of a sudden, you lay off a third of the company. Well, you're not really doing that. So, if you can over communicate and just say you know what things are tight right now, things are tough, the market is challenging and we are all stewards of the business. We are all stewards of the capital coming in. Even though you may not be an owner of the company, you have to take that responsibility on and try to be really strategic with the capital that's coming in, the capital that's in the bank, and how you can extend that for as far as you can go.
Speaker 2:So it's challenging. There's a lot of pressure on teams and you do feel bad when you have to lay off in place, but it's just the nature of these companies and the market does change. And, like you said before too, with culture and all the different tools, when things are going well and you're in growth mode specifically HR teams you're buying all these different software and tools and engagement and performance management. When things are going bad, all those things get cut. So you've got to go back to the basics of just face to face or video communication or Slack or email. Those things are free Just over. Communicate with your teams on how things are going and what we can do to work together and improve.
Speaker 1:I remember we had a guest on the show and I blankied on what episode or guest this was, but I heard from I think it was from the show. Somebody say that a lot of the SaaS companies that like they series B, they basically have one SaaS product per employee, like the ratio of one to one.
Speaker 2:I mean you might be right. There's so many different tools and softwares, especially in growth mode when times are going really well, that you want to build for employee engagement, employee experience and events and groups and get everyone together Right. I've onboarded so many different tools and they're great, they work right. But then when times are tough, those are the first things that are getting cut immediately. All the software as a service tools, and it's not just for HR and culture and employee experience, it's across the business, right, they have to cut the finance tools, the engineering team has to cut the engineering tools and reduce cost on Amazon, web services, et cetera, et cetera. So it's across the board. So B, when these companies are growing, you got to be really thoughtful and strategic about all the different tools.
Speaker 1:Yeah, I think too. It's just like moving forward. I think a lot of executives that are going through this are going to be even more frugal when it comes to finances, and I think sometimes, when we're in a growth market, it's things that we think we need to grow, so we got to get to this next level. In order to get to this next level, we need this technology, and I think, of course, technology is really important. It's like flying an airplane, right, the more passengers you have, the more sophisticated, the bigger the aircraft, the more dials you need and the more visibility you need. Right, if you go into a cockpit of one of these passenger planes, you see the whole thing the ceiling, the floor covered with a lot of different tools, and I think that the same can apply to companies. But the reality is we have to have a very clear pulse on what's driving results for organization, like for the department, and I think it's like healthy to look at these things that maybe at a quarterly or every other quarter and say, okay, I'm going to cut 15% of our tech budget or of the budget, let me, I need to find 10% right, and you just go through that motion consistently of I'm going to cut something, I'm going to cut some type of technology cost, or we have this trial we rolled out with this new tool. Can we actually show a clear relationship to the tool, to the value it's supposed to be creating and the value it's creating? Is that actually helping us achieve North Star Metrics?
Speaker 1:And I think we need to be probably even more critical. It's because it's times like this where I'm looking back on budget decisions we made a year ago and we've been pretty damn tight. To be honest, we haven't made any huge mistakes. But I'm still thinking, man, if you had just cut that tool a little bit, done this, done that we would have had, even if it's like another, I don't know, it's like a small percentage of revenue or profitability or something. It all matters. When you get down to the point where you've been in a market correction for over 12 months, it's the difference of keeping a key person on payroll. No, absolutely.
Speaker 1:It's the difference of like delivering a great experience to a customer. It can be when things get really tight, a little bit of money can be the difference maker that's going to help you retain that customer, or keep that technology tool that is going to allow you, or that person that's going to allow you, to take advantage of a market rebound.
Speaker 2:Right, yeah, no, absolutely. I've been doing this for a long time. There's not a lot of companies don't audit all their tools and systems and software. You don't know how many times I joined an organization. You come in and they still have users that are in the systems that are not even employees of the company. That never. You're paying subscription fees and then I've onboarded tools in the past that the team begged for. They needed it scheduling software for recruiting teams, this and that and some of these tools are amazing. I love them. I have great relationships with these companies. However, sometimes they ask for these tools. You onboard them, you pay for the subscription and then they don't use them. Teams and managers and executives need to audit are these companies, are these teams using the software and these tools? So, yeah, it's critical. Cash right now is huge and if you can extend companies runway, keep things going. That's really the focus on these software companies and businesses in general.
Speaker 1:I want to get a little bit more into talent acquisition here. Here's my primary philosophy when it comes to how to run talent acquisition in a market downturn, and I'm not going to talk about it from my perspective as a business owner and the embedded recruiting RPO space, but I'm going to leverage my experience building in-house teams here and talk about your growing product company how to think about preparing for a market rebound. Process documentation is often underestimated as an incredible asset for organizations. For executive tuning in. You should have all this stuff on your personal Google Drive as well, because you can bring that with you when you're interviewing for your next role. You have a stack of 30 to 100 pages of process documentations that you can put. Create a simple one pager and present that to the potential founder CEO that you're going to work for. Here's all the things that I'm going to do for you. Here's links to process documentations. We don't need to go through the details, but on a one pager. Here are the outcomes I'm going to deliver. That's incredibly powerful, by the way, for executives tuning in that might need to look for their next position. However, one of the most impactful things actually, I feel like more people should do that when they're interviewing for executive positions. Anyways, I think process documentation is incredibly important because you want to prevent knowledge gaps. When people leave the organization a lot of the times they're taking all the process best practices, the strategies that work for the environment with them. There has to be somebody in the department or on an ops team or administrative team that is constantly doing process documentation for every single part of the town acquisition, people, functions. They need to be updated on a monthly, quarterly basis. It has to be a constant. I think leaders within the organization maybe it's not the VP, but maybe it's director-manager, or maybe it's an individual contributor that wants to take on more of a team lead has to position or what not has to be on process documentation.
Speaker 1:The second thing I would say is keeping the core tech stack in place. Maybe there are some fabulous SaaS products that people aren't actually using. I think sometimes with scheduling tools or these other tools, I don't even know if they necessarily save time. I just feel like the time goes from doing it manually to just doing it in the system. I think sometimes it takes the same amount of time. It's not actually an efficiency gain, but the gain might be additional ability to track data and measure performance in remote environments. We have to look at it from that perspective too. Long story short, there's stuff that we can probably cut. But when it comes to core tech, your applicant tracking system building process out in that maybe you can get a tool like gem building process out with that.
Speaker 1:Even if you get it down to just one license, you can keep all of the data and workflow and structure in place. You have process documentation. You have tech and process in place. Even if it's in a very unfortunate situation, you need to let go of your recruiting staff. You at least have the skeleton structure in place. You have your strategy and tactics in place. You have your process documentation.
Speaker 1:Your business has to be built in such a way that it is bigger than any one person. You cannot be in a position where the company is so heavily leveraged on one person that if that person leaves, the company is unable to achieve their goals. Preventing knowledge gaps, process technology is how you go about doing that. Again, you can have a small tech stack. Just figure out those one or two technologies you got to keep.
Speaker 1:That way, when a market rebound happens, you can quickly hire into that role and they already have an active engine. It's like making sure the car is ready so you can put a driver in when you have the right process and technology. What's cool about it is that you always want the best person in the role. But let's say you get a recruiter and they're not a 10 out of 10 in performance, they're like an 8 out of 10. If you have the right tech and process, you can bring that eight up to nine Right Like you can shorten the gap between an A and a B player by having great process. So that's like my philosophy on how to navigate this and prepare for a growth market.
Speaker 2:Yeah, no, I agree. I think it goes both ways. It goes for growth stage companies as well as companies that are slowing down. Right, you build that scalable hiring strategy. You're optimizing for different things at different times Right. In high growth it might be speed. When times are tough and you're not hiring as much. It might be quality Right. And then you're leveraging different technologies in from the recruiting process into the onboarding process.
Speaker 2:And right now, companies that are not hiring and that are planning for the future, into Q4, into 2024, should be prioritizing the key roles. Okay, so if things turn around, this is what we're going to need for future growth, and it might have been 15 roles in the future, but now it might be three, because companies are going to be gun shy on just hiring, going on a hiring spree, anymore. They need to really prioritize. And then things that you can still be optimizing right now are your onboarding process. What does that look like? How can you get employees into the systems and communicate with them and build out a 30, 60, 90, and so they can come in and hit the ground running really quickly, right.
Speaker 2:And then the last thing is you should be revisiting compensation, right, the compensation bands and markets and different roles has gone up and down over time, but you need to revisit that, making sure that you are being really competitive with your compensation philosophy Right. Every company has a different philosophy. Some companies are not going to pay over the market, some companies are going to pay in the 75% tile, et cetera, et cetera. You as a company need to revisit that. And then the last thing I think that companies should be looking at too in down markets and in high growth markets, is just the legal and compliance aspect of hiring right. Whether you're building your company and hiring in the United States, in all 50 states, or building international teams, how are you hiring them? How are you being compliant in different countries and different states and different regions? Making sure that you are being legally compliant for your company as you grow?
Speaker 1:Yeah, I think so, and there's several reasons to consider. I would say the primary thing with being compliant, too, is also from a. I think that's important. I also think we have to think about it from a tax perspective, and that's why an employer of record might and I don't know the official rules, actually, but because we have a finance team that does this but I would also think that working with an employer of record, like a TryNet or Just Works we actually work with Just Works as our PEO and I think that protects us from some of the tax liability of having employees in all these different states, so I'd have to double check on that I'm not a finance guy, or not.
Speaker 2:What the PEO does is help you get set up in all these different states so you can legally hire in different states. But then if you start hiring internationally, there's different laws whether you're hiring in the Philippines or you're hiring in Europe or Africa or wherever, and so making sure that you're hiring them compliantly there, and then even within the states like California you're hiring exempt and non-exempt there's different rules for these employees that you're hiring. So it's just something that your teams HR or finance should always be looking at. And in down times, I know you're really focusing on the bigger strategy of the business and get back to growth et cetera, but these are things that need to be looked at and should be audited all the time.
Speaker 1:Yeah for sure.
Speaker 1:One thing just to say for leaders tooting into when it comes to thinking about doing a lot of these motions, planning for the future, constantly aligning with the founder, CEO or other executives on companies' North Star metrics, and maybe the wins you're getting are not short-term, Like a lot of the wins that I'm getting at Secure Vision are strategic partnerships, revenue strategy, establishing a board of advisors, doing all of these things that are going to have a huge positive impact on the business during a market rebound.
Speaker 1:And I think this is where we can work on very high-leveraged projects maybe that aren't paying off immediately but on the other end of this market are going to pay off immensely and hopefully, if done properly, we're bringing some value to the table that competitors are not. And I also would just say, as executives, I would look at down markets as what we get paid for. We get paid for growth and achieving growth metrics in an upmarket, but to me it's until you've led teams through a downmarket, you're a rookie as an executive and those are the really fun and challenging times in a downmarket Right.
Speaker 1:Yeah, this is what you get paid for. Handle it, and it's hard. I'm not trying to lack empathy because again, I'm in the seat. It's right, right now, and I'm like I've taken a lot of hits financially to keep the business and as good of a position as I can, and it's still. Of course things aren't easy right now, but we're pulling through. You got to be willing to take the hits. I remember back before COVID, there was all of these executives out there that had only known a bull market.
Speaker 2:Right, I was going to say that happened, it's just the market. But people would join a Series A company. Right, they just raised capital, maybe they're valued at $100 million, and then, all of a sudden, the market was going crazy. They get their next Series B and it's their worth of billion dollars. Now, did that executive or did that executive team get the company that? Yes, technically they did. However, it's just the market conditions. Right, they might have not done that much incremental growth or moved the lever that much, but they were definitely part of the story to see that grow. So I think those times are probably, right now, not going to be happening like that again into 2024, maybe 2025 and beyond, but right now those stories are over.
Speaker 1:Yeah, and I think, too, it's just starting to see. I've also seen like some folks that were promoted really fast let's talk about 2019. It's they might be taking a rollback. Maybe they were VP and now they're back in like a manager or director level role, more reflective of their skillset. I would just say the silver lining to what the economic condition that we saw a few years ago and the volatility is. I think it was a little bit humbling for a lot of executives and I think people started to think more critically about the advice they were showing out and I think it was overall.
Speaker 1:I think the leaders that are coming up right now and over the environment of the past few years, I actually think are incredibly well positioned and I would just and this is just more my life philosophy too it's like we actually we need suffering, we need market downturns, because this is when we grow and get better.
Speaker 1:It's if the analogy would be going to the gym and lifting heavy weight you push, you resist and you build muscle, and right now we have to see this as companies were building muscles or getting lean or pushing hard, and you need this. You need it to understand what the actual drivers of success are for your business, and then also from a personal perspective, quite honestly, going through these times really makes you think about your values and what matters to you. And so I think, from a business perspective, we understand, we get to figure out what really matters and drives the business forward. Personally, we get to understand what do we actually find fulfilling and what matters to us, and is that going to change based on the experiences we're having in this type of market. So we have to search for silver linings and we have to understand that hard times are not something to shy away from or to hate. They're actually required in order to build companies. They're required for us to grow as executives. You have to have them to grow.
Speaker 2:I think you're right, it's like the great reset. Executives are resetting, companies are resetting, employees at all different levels are resetting and thinking about what's next for them if they are looking for a new job or, in the future, a company that they may want to join. So, yeah, it's not fun, right? However, we're all going through it, we all have to go through it and we all will get through this.
Speaker 1:Yeah for sure, and again I think we're approaching the tail end. We were actually talking about this before we hit record. A lot of people have been saying that Q4 is going to get a little bit better and then by end of year, hopefully 2024, is going to be a better year, and I think that timeline is shaping up to be somewhat accurate. I am seeing the market starting to turn. More companies are starting to hire again. It's not like I have a great sales pipeline of companies that are hiring right now, but it's sure as hell a lot better than what we've seen over the past few months, and not only from my experience, but what I'm hearing from other business owners successful business owners that have built and sold companies from what they're hearing from their network is things are turning a corner, which is really great to hear.
Speaker 2:Yeah, no, that's what I'm very hopeful. That is happening as well. That's what I'm seeing. I had to actually let go of two amazing recruiters previously and they just recently got jobs. So things are turning around. Recruiting obviously is in these companies are is the first department typically to go when you're in a downturn right, but to see that they're back in and starting to get offers and jobs again is a good sign. So, yeah, I'm very hopeful that the next few months closing out this year things will stabilize and then really turn around in 2024.
Speaker 2:These venture capital firms, and specifically in my world, have hundreds of millions, of billions of dollars in these funds. Their job is to put that money to work. So now, yes, over the last six months to nine months, they've been a little bit more slow and a little bit more tight and holding their money fair. That's going to happen, but they have two options deploy the capital or give it back, and they don't want to give it back. So I'm hopeful that things will turn around and the market will pick up and companies will start hiring. They're maybe not hiring at the same clip they were in the last two years, but hiring again and growing and stabilizing these companies.
Speaker 1:I love it. I love it. I think that is what we're going to see, tom. So, tom, we're coming up on time here. I wanted to say thank you so much for joining me today. This has been a great episode and I know folks tuning in are getting a lot of value from what you're sharing.
Speaker 2:So thank you, James. Thank you so much and, to the audience out there, please connect with me on LinkedIn. Happy to connect on anything people, operations, town acquisition, anything you want to talk about. I am an open book. Please reach out.
Speaker 1:Yeah, thank you for that and for everybody tuning in, we're going to have Tom's LinkedIn profile dropped into the description of the episode, so it's going to be easy to connect with Tom. So thank you for joining us everyone, and we'll see you next time, take care, thank you.