Dear Founder,
I can only imagine how you’re feeling. I have a lot of sympathy. As a perfectionist myself, it kills me when I don’t deliver on what I committed to do.
Let’s stop for a moment here and appreciate the discomfort you’re feeling right now. It’s painful. Let’s use this knowledge to harden your resolve so you’ll prevent this unpleasant situation from reoccurring.
Now, we have to think about why this has happened. To determine that, I have some questions for you:
- When did you start to think you might miss the quarter? When were you certain?
- Did you communicate this concern? Did you message anything in advance, or did you wait, hoping for a miracle?
- Boards don’t do well with surprises. As I always say, bad news doesn’t get better with age.
- If this comes as a surprise to the board, how big of a surprise is it? Where would it fall on the Richter Scale?
- Remember, when things don’t go well, people are looking for you to step up and lead in a bigger way.
- How you handle sharing bad news is a great way to instill more confidence in your leadership.
- What was the business issue that caused the problem? (Answer these questions clearly and definitely to understand why. Own it. Don’t be defensive.)
- Was your planning flawed? Was your planning unrealistic?
- Was your execution flawed? If you under-executed, at what phase did this happen? (e.g. sales, technology development, marketing, etc.)
- Was the product flawed?
- Did the market for the product or service tank?
- How bad is the situation? Is it the cold, is it the flu, or is it something more serious that could be terminal?
- If it’s a cold: find a way to recover quickly and still make the year. The quarter is gone, but don’t give it up yet. Work harder to get back on track. Over-deliver for the next quarter and try to make up for the miss.
- If it’s the flu: you probably won’t make the year and your next round may be at a lower valuation than hoped, but you may still be on a good long-term trajectory if you put the right recovery plans in place and execute on them.
- If it’s a serious illness: there will be lots of angst and discord in the boardroom. If you don’t have a lot of cash in the bank and you need to raise money, it will likely result in a down round with onerous terms. It’s not pleasant. This often leads to leadership changes. You can escape from near-death experiences though. I joined eBay under such circumstances, when the company had just missed its quarter after losing significant revenue during an outage. It was 1999 and the company had just lost $10 billion in market cap. It was bad, but it wasn’t terminal (mostly because there was no alternative to eBay at that time). Customers needed us to list their items and we had to figure out how to keep up with the demand in order to survive. I know first-hand that you can have a miss and still pull through, but you need to turn things around quickly or you won’t be around much longer.
- If it’s terminal: work on minimizing your cash burn, get acquired or acquihired if you can, and return cash to investors.
- How can you get better? The board and the people at the company want to know how this affected you.
- Did this defeat you? Or, did it harden your resolve?
- Do you know what to do next?
- Are you doing this with urgency—better, faster, and stronger than ever?
- If the miss doesn’t have dire near-term implications for your company, then it’s important not to let this change your belief in your company. Don’t let this change the trajectory of hope for the company.
- Set aggressive goals. It’s important.
- Be transparent about where you fell short and be positive about the momentum that you do have.
- Don’t become so conservative that you miss the opportunity you’re striving for. Mediocrity is the worst place you can be.
At eBay, we used to say, “it doesn’t matter what happened last quarter. The most important thing is to get back on track.” You have to understand what went wrong, learn from it, do something differently, communicate more, and not give up. Lead through this. Leadership is about giving hope—and then delivering on it.
All the best,
Maynard