Connie Loizos of peHUB interviews Marty Pichinson of Palo Alto’s Sherwood Partners. Sherwood is known around the Valley as “the undertaker,” for advising companies on how to cut costs and/or shut down.
Marty explains how to get companies ready to fight through the recession. The bottom line: Make the cuts all at once.
I take it business is booming right now?
I’ve been coming in at 6 a.m. and going home at 8 o’clock. “Booming” is being polite. It’s a tsunami — a word I used before Alan Greenspan did. It’s just a total, unexpected paradigm shift for the world.
It’s really is shocking, isn’t it.
“Shocking” is being polite. It’s earth-shattering. We’re back to one or two calls a day, which is translating into three of four new engagements a week…
So you’re busy unwinding companies. Would you walk me through who typically gets fired first and why?
You can’t determine who to lay off until you understand what your needs are. When you analyse who to cut, you have to say, “Do I need four people in sales or is the one consultant who has better connections better for me?” And do you need full-time salespeople? Some startups try to have too many full-time employees when they don’t have a full-time business…
Once you know who is getting axed, what’s the best way to do it?
If you do cut, you only try to cut one time. [Hear that, Yahoo?] You cut deep and sharp because you have to build morale up and everyone left has to be comfortable that they have a job…
You’ve got to take your P&L line item by line item by line item. And after you finish, put your work in a folder, look at it tomorrow, and then again the day after that, just to confirm that you’re doing the right thing and that you can’t do anything more.
Meaning you have to make all of your cuts at once? Can’t it be an iterative process?
I’ve been doing this for 30 years and if you do it strong and deep one time, everyone complains for a period of time, then gets over it. Also, I’ll be honest with you, I’ve terminated people and two weeks later, I’ve brought them back and apologized for cutting too deep. Usually, they come back. It’s acceptable to be human as long as you’re not a jerk.
Read the full interview here. Good tips on how to save money on food, electricity, rent, PR, and everything else you didn’t know you were blowing your precious cash on.
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