My company was in a tough position. We were raising money, and that’s never an easy proposition, but it’s really difficult for a semiconductor company. We had a term sheet, but one of our existing investors wanted an additional new investor to join the syndicate.
We had four new potential investors that were closing in. I was confident, and our existing investors were confident, that one or more of the new potential investors would join our syndicate shortly.
We were almost out of money, so the investors had to decide whether to continue funding the company until we found a second investor. We discussed our options in a closed session of a board meeting.
One of the things you learn is there is a difference between confidence and writing a check: one investor was willing to write a check, and the other wasn’t. Most investors are unwilling to go it alone. The verdict was in:
Furlough the employees and sell the company.
That was the last thing I wanted to do, and frankly, it would have been the worst thing for the investors at that time. Fortunately, I was prepared for this contingency, and I gave the board and the investors an alternative:
“What if we went on minimum wage for the next six weeks? We could play out our hand with the four investors? We will almost certainly have answers from them by then.”
Shock! The investors agreed.
Just one thing: that was the easy part.
The hard part? Telling the employees they were going to be on minimum wage.
You don’t want to win the battle with the investors only to have all the employees walk out. The real work was about to begin. This was going to be a strong test of my leadership skills.
We always had a company meeting the day after our board meetings, so I had 24 hours to prepare.
First, I confirmed with our co-employer, TriNet, that we could indeed change employee salaries to minimum wage ($10/Hour).
One hurdle down.
Second, I gathered the executive staff, and let them know what we were going to do. We then spent the rest of the afternoon preparing for the next day’s employee meeting. I reviewed my comments with the staff, and we made sure all the pertinent areas were covered. Next, the staff posed likely questions the employees would have, and we reviewed my answers. We worked on the language of the answers, so there would be no mistakes.
The theme of my speech was simple: We, the employees, will need to sacrifice to keep the company alive. I asked the employees a straightforward question: “Are you in?”
The answer was yes. It was a unanimous yes.
I’ve never been prouder…and more relieved. The employees asked the questions you would want them to ask, such as, “How are we going to get the company operational when this is over?”
It couldn’t have gone any better, yet I still delivered a somber message. I expected everyone to quietly file out to their desks. They didn’t.
It was the last thing I expected, and I had to hold back tears. Clearly, we had done something right.
Why did this critical moment, this leadership test go so well? I believe there are three reasons:
- We prepared well. Public speaking and being quick on your feet are about preparation. The better prepared you are, the quicker on your feet you can be.
- We had the right team. See last week’s post on hiring exceptional employees. We had hired an exceptional team, and it paid off.
- We had the right culture. See my post on the importance of culture. Our culture was positive and open. We trusted the employees, and they, in turn, trusted us.
It’s easy for everyone to be on board, even the worst employee in a bad culture, when things are going well. The true test of your team and culture is when times are tough. Interestingly enough, we didn’t lose a single engineer when we went to minimum wage.
Within a month of the meeting we had a term sheet from one of the potential investors (two of the four would eventually give us term sheets). Our bet had paid off.
That’s all for now,