It was March of 2001, and after the internet bubble burst, Communispace had very little working capital left. “Communities” were an alien term to most companies, our prospects were delaying, and we needed to cut costs.
The decision we made next changed everything. We called all 38 employees into a conference room and sat for 2 hours going through all of our numbers: our cash flow, the P&L projections, our burn rate, our venture capital commitments, and our balance sheet. It was clear we needed to lay people off and cut costs significantly. The task for employees was to understand the number and to come back with their ideas. We gave everyone 36 hours.
The result was incredible. Employees came back with 52 ideas: renegotiate our lease, get individuals from other companies to “rent out” extra desks, ask clients for prepayments in return for discounts, and more. The biggest idea saved us: all employees volunteered to take 25% pay cuts in return for stock options. Our management team was floored. We hadn’t even asked for that.
Obviously, we made it through 2001, thanks to our investors and to a group of committed employees who believed in the future. It was a huge lesson for me, and it changed our culture forever.
Quarterly Numbers Meeting
I thought about this last week during our quarterly Numbers Meeting, where we continue to lay out our performance and share the details of how we are doing.
As a CEO, I wondered how we ever would do it differently than this. The process of sharing confidential financial information with employees affirms their importance to our future — and makes managing our performance a truly collective task where the ROO – Return on Ownership – is immeasurable.
Diane -
This is an awesome example to set – with immeasurable rewards. Reminds me of reading something about the profitability boost of having more women in senior management and board positions.
Thank you for sharing -
Rachel
I completely agree. My firm has had our share of tough times; getting the whole team together to discuss numbers, stats, and forecasts has given most people a sense of ownership and belonging. This has directly and positively affected company morale and our ability to retain employees.
Great job! For another example, see Paul Levy, CEO of Boston’s Beth Israel Medical Center. He’s written extensively about how transparency and employee engagement dramatically improved BIDMC’s ability to respond to economic challenges without resorting to layoffs. (http://runningahospital.blogspot.com/)
[...] reflecting on Paul Levy at Beth Israel Hospital, Diane Hessen’s post about "Return on Openness" and my own experience in the Ivorydale Soap Plant with high-commitment/high-involvement work [...]
[...] Women know relationships and know that the more open and transparent we are, the closer the relationships are that we can foster. This allows us to form really persistent relationships with employees, partners, and customers – and not through the use of money and rewards – which is more profitable and less vulnerable. See Diane Hessan’s excellent example of Return on Openness. [...]