Culture Summit 2015: How to make firing employees into an unscalable growth hack
How do you build a great startup culture? While everyone likes to talk about all of their great hiring and recruiting hacks, no one likes talking about having to fire employees—until now.
Watch Steli discuss how he turned firing half of his team at a previous startup from one of the worst things he had to do as an entrepreneur to a fun experience involving N 'Sync and cake. Firing people doesn't have to be horrific if you're transparent and invested in helping your former employees succeed.
Somewhat related: we're hiring in all departments! Engineering, sales, support & marketing. If you want to be part of a small team with big ambitions, have a proven track-record and are a nice person, please apply!
Steli: Thank you so much. Alright. So who was here for Hiten’s talk? Most people right. So Hiten is awesome and after him I thought it would have been cool if I knew his talk this slide would like say, how to successfully shit people out or something like that. You know what’s weird about that when he said that, everyone was laughing but it’s like this interesting uncomfortable laugh where we all slightly guilty for finding it funny. You know there’s something, there was something that we actually recorded a podcast right after this where we’re just talking about that one sentence and how to fire people in a cultural way.
Any ways so I’m gonna talk a little bit about you know how you define culture and how you treat people when things go really bad and when things are very tough. Because buying ping pong tables and having a great time and giving everybody free pizza and whatever massages and whatever. That’s all cool. I love that. But how the true measurement and test for culture and what kind of culture you created is when things go really, really bad. So that’s what I’m gonna talk about.
Before I do that I truly believe that appreciation is the currency you pay the universe and with so that being said, thank you for being here. Thank you for listening and thanks for all the guys that are putting together the event. Awesome job, guys. Thank you so much.
From Germany to Silicon Valley
Steli: Alright I’ll tell you a little bit about—so who knows nothing about me? Probably most of you, just raise your hand. It’s the shot of motivation I need that wakes me up, keeps me motivated. Nobody fucking knows who I am. Alright that’s cool. So I’m gonna tell you a little bit about myself so you have some context to what I’m gonna share with you as a story later on. So I’m not gonna do the whole thing because it would take us hours.
But I’m Greek originally; grew up in Germany; dropped—oh wow somebody, yes, one person you’re right. I have a culturally I offer the best that Europe has to offer, the two opposite extremes. I dropped outta high school. I start, I’ve been an entrepreneur my entire life. None of you would ever me for very good reasons. So eight years ago, I decided to build a tech company so I sold everything I had. I bought a one way ticket and I arrived at SFO asking someone how to get to Silicon Valley.
Steli: That’s how you win. The guy was like, Palo Alto, Stanford—Stanford I’ve heard of that!Yeah okay, I’ll spare you the rest of my life's story, you can find it on multiple places online. But the thing that’s relevant here that I’m gonna share a story. I wanna give you guys a little bit of context on that.
Why we started Close
So about 3, 3 ½ years ago I started a company called ElasticSales. And what we did with Elastic is we helped B2B startups in Silicon Valley scale their sales and discover their sales processes. So we had all these sales people. We were doing sales for over 200 venture-backed startups. Nobody knew we existed other than CEOs and VCs. So we were kind of one of the best kept secrets in the Valley. But in the process, we learned a shit ton about sales and about culture.
And from day one, we developed this little application, little piece of software that allowed us to do sales more successfully than others and eventually that product got so good that we decided to launch that product. And today that’s all we do. It’s a software that’s called Close. It's for inside sales team and really helps them crush it. And we are insanely profitable, we’re growing really fast, we’re having an amazing time. But the transition from a services business to a software business and from having a shit ton of sales people that we couldn’t use or utilize anymore once we shifted to the software business. That is the story that I’ll share with you.
Before I do that, I don’t just launch companies, I also launch babies. So this is my oldest one, Georgios and this is my youngest edition. I always say, you know, my wife and I were were co-founders although I’m more—she’s really the technical co-founder and I’m more of a business and support role type of person in this relationship. These are also the guys why I’m not gonna be at the happy hour. Everybody knows Greek people love happy and hours but I need to go back and put them to bed because that’s what I like to do.
One of the worst things I had to do
Steli: So let me share this story. That’s the main reason why they invited me to this place. Nobody fucking cares about my life story. But I’ll share this story and I could stretch this story out to like eight hours or to 5 to 10 minutes. I’ll try to do the latter so we can have more of a conversation. It’s gonna be more fun for you guys, more fun for me. So here’s the setup. So I’ll spare you all the details but for a lot of reasons, at some point, we had to let go a lot of people.
It was just the most kind of logical thing to do. And I’ve been an entrepreneur my whole life. I had to let go of people before. It sucks. It’s the worst thing about entrepreneurship. But I never had to let go of a lot of people all at once.
So this was around the time when I got my first baby boy and was not sleeping any nights. So I was like really stressed out of my mind and then weeks and weeks of built up to that event, I was like trying to figure out how could I do this in a humane way, how could can I let these people go because for one, I didn't want to let them go. They were amazing people. Just had no use for them in this new business. And then I didn’t know how do you do that in a day.
Like what do you do? Do you bring everybody in one room and go y’all fired? Or do you have one after the other come in and go you’re fired. Don’t cry when you go out so because I wanna keep this a surprise for the next person. Like how the fuck do you do this and I was like how the hell do I do this to the people that I want to stay at the company and I was like super conflicted about how to make this happen. And there was no real good—and like I didn’t feel like I’d figured it out before the day. But I’ll tell you what I did that day. So in the morning, so I didn’t sleep the entire fucking night, baby was crying, was like I’m not gonna make this easier for you. I don’t care if you have to fire people or not.
'N Sync and cake
Steli: So I drive to work and I feel, I’ve never felt more horrible. I was just like ready to just puke in the car while driving. I just felt really sick. And then I remembered that one of my employees a year earlier when I hired her she said, “Steli, I don’t give a shit about anything but you have to promise me one thing before I say yes to the offer. If you ever let me go, you have to buy me a cake and you have to play Bye Bye Bye from ‘N Sync”. I was like sure no problem. I don’t care. So I’m in the car and I'm remembering this and I’m like holy shit! I made a promise and I don’t have a fucking cake or 'N Sync. So I drive by, arrived at the parking lot at the office and I turned around and I’m like fucking is like I’m an idiot. I’m gonna go and buy some cake now.
Steli: So I go to Safeway, I buy some stupid cake. I’m downloading Bye Bye Bye ‘N Sync on my iPhone. I’m like just in case she really wants this, I wanna be able to keep my word, right? So I show up at work and we had scheduled—so what I decided to do was I decided to have a word one-on-one with everyone in the company. Doesn’t matter if they stayed or not; just everyone. And I decided not to, I don’t even remember exactly how I did the sequence but it was not like all the people that I had to let go first or last, it was a mix. And I was like it’s gonna be fine. I can’t if people go out and start talking this weirdness that’s what it’s gonna be. I can’t make this unweird, I can’t make this great. It’s gonna be a shitty day so we’re just like let’s not try to reign in the negative energy. Let’s just be honest and transparent about it.
So anyways I was having this one-on-one meeting. So here's the format of these meetings. People would come in, I would tell them the first thing I would tell them is that they’re not gonna be a part of the company moving forward. So I wanted to get that out of the way and not be too nicey, nicey about it. Then I told them why and then we hugged. Usually sometimes people cried with like a little bit of time to kind of decompress emotionally. And just to say as an easily way, people were not insanely surprised because we were super transparent from day one.
Every week we would have a meeting with our financials, with what was going well, what was not going well. So it was not like people like, “We’re, we will never pivot and our job’s perfect and the next, oh they’re now doing software, this is a surprise.” That didn’t happen right. So people kinda prepared and when they saw there’s a day where everyone has a meeting with me they’re like, “Oh, shit that’s gonna be judgment day, right. There’s something bad is gonna happen that day.” So people were not that surprised but it still sucked.
So we talked about it and then at the end, because I’ve some experience of letting people go, I told them listen, I want to make it my mission for the next few weeks to help you succeed in life. I wanna stay in a close relationship, I wanna be a friend, I wanna be a resource. But I know the moment you walk out of this door, you don’t wanna talk to me anymore; you won’t return my calls; you won’t reply to my emails. You’ll just be like I don’t wanna see this dude.
Steli: So here’s what we’re doing right now. We’re gonna put a 2 hour time slot in the calendar next week for you and I. I want you to go home, I want you to think about what do you want to do next, whatever it is, start your own business, get another job, go back to school, whatever the fuck it is, figure it out and next week we’ll sit down and for 2 hours, I’m your resource. I’ll do anything and everything you want to be helpful. Whatever it is that you want to do right. So we did this, we put these calendar dates in.
And then the next thing we did is we put the calendar date in, three months from that day for all of us, people who stayed on the company, people that we had to let go, to go for dinner. We're like in three months let’s see what the fuck happened with all of us right. Let’s make sure that we’re not just like breaking apart and nobody knows. Let’s make sure that we come back and we’ll check in on each other. So we did that.
So I’m going through all these one-on-one meetings and the last one was with the girl that said I had to buy the cake and the 'N Sync thing. So I do the talk with her. We talked, we laughed, we cried, we do all that and then at the end I’m like, “Listen I promised you a cake and a song if you don’t feel like it, that’s totally cool let’s not do it”.
But she’s like, “Wait, do you have cake?” And I’m like, “Um, yeah”. She says like, “That’s awesome”! She says like, “What about ‘N Sync”? And I'm like, “Gosh if you want me to play that stupid song, I’ll play that song. Whatever makes you ….” She’s like, “No, no, no, no, no, no. I didn’t say you're gonna play 'N Sync. I said you’re gonna dance to 'N Sync for me”. And I’m like, “No fucking way. There’s no way I’m going to dance to, no there’s, no there’s boundaries. This is one of them. Cake, cool. But I’m not dancing”. She's like “No, no, you’re dancing, you’re dancing”.
Steli: Two minutes later, there’s a bunch of people, everybody that was let go or not with fucking cake in their hands eating, while I’m dancing Bye Bye Bye to 'N Sync. There’s actually a video of this. The funny thing is I told everybody there’s no fucking video of this. There’s like seven videos of this. And you’ll see and you’ll see it it’s super shaky. I’m just showing it to you. There’s not much to see.
I’m just showing it to you for two reasons. One, it’s proof that this really happened and then secondly, it’s funny because somebody, some friend of mine who saw this video was like, “Steli, I remember you being a much better dancer”. I’m like motherfucker it was not about me dancing well. The whole point was for me to be an ass and be an idiot and make other people look good. No, I didn’t try to do like some awesome dancing to 'N Sync. I tried to be as stupid looking as possible. That was the purpose. He’s like, “Oh oh alright that makes sense. I was wondering what happened with your dancing skills.” Nothing.
Steli: Alright. So we'll see if this video thing works. So this is somebody secretly doing recording this and everybody’s like shaking because they don’t want me to see that they’re recording.
Male Audience: I just saw you looking as stupid as possible.
Ready to join a cool, profitable startup?
Steli: I don't know what the fuck to do. Hey what the fuck. I discovered one. Obviously, it was not the one that we are watching there's like multiple people are like I need to capture this. Alright so that’s my story. We are hiring now, by the way. And before we hire anyone, we always tell people how we’re firing people. Just in case you’re wondering, this is the worst that can happen to you: some cake and Steli dancing right. No, honestly if somebody knows awesome people that would be excited to join a company that gives out cakes and dances then let us know. We’re super small team, we’re travelling every three months around the world together we’re so, that was our last retreat in Berlin. We’re just 8 people crushing, we’re profitable, we’re growing, we’re cool, we’re happy, we’re amazing, we’re everything. Alright. So enough of that.
Hiten + Steli = The Startup Chat
Oh, here’s another thing, so if you really loved Hiten you’ll like this. If you go to thestartupchat.com, you’re gonna see two beautiful faces. We just launched, a few weeks ago, a podcast. Hiten and I—and this happened after we got invited to this. So we’re independently invited to this event and we loved each other so much that we thought we need a reason to meet once a week and we launched a podcast. Funny thing is today, though we launch two episodes a week.
Today the episode that launched was “Hard Times”. And it’s actually him and I speaking about the worst moments that we ever had as entrepreneurs, one of which was me firing all these people. But he had some really amazing stories so check it out if you liked his talk and mine and give us a 5 stars, give us a review and we’ll send you chocolate. I’m serious about that.
Steli: Alright so now let's do the Q&A as I said I could stretch this on like all the lessons I’ve learned from how to fire people and culture and this and that but I’d rather have answering the specific questions you guys have. So who’s gonna be the first person to ask a question? Not all at once. All right we’ll have her. She’s gonna say something that I won’t like but we’ll go with it. Alright.
Female Audience: Dude nobody else raised their hands. I’m helping you out.
Seli: Yeah, you’re helping me out I appreciate it.
Female Audience: Yeah, yeah. No heckling this time.
Steli: Alright cool.
Female Audience: Okay. So like that super awesome great dancing, so what would you do if you’re getting rid of someone not because like oh crap we’re just going in a different direction, more so like that person’s not working out. How would you handle that?
Steli: Yes. So that’s a great question. So less cake and less insane typically. So here’s the thing that I’m trying to do and this is really, really hard and we were talking about this with Hiten today on the podcast. I’m pitching this podcast really hard. So a lot of people ask me how do you know when you should let somebody go and I say the moment you start thinking about it. That’s the moment. Oh I guess a bunch of people are like oh yeah.
It’s true. The moment you start wondering how will this person work out, it’s usually the beginning of the end. The question now is how long are we stretching this out. And the longer, we do, the worst for them, not for you, not for your business. For them. You’re just wasting their time you're making them fail bigger and bigger and bigger until you have so much social proof that you feel comfortable to go and let them go. But you're making, giving them a huge disservice. This is so funny. Both of you like 10 minutes alright okay 10 minutes people. So so and I’m coming back to your question.
I think that when somebody’s not working out, the best thing that the best thing that can happen is that you figure it out quickly. If it takes you three years, it was probably didn’t take you three years, you’re doing your job really wrong. So what I’m trying to do is figure out really fast because if it’s really fast, they’re not as bought into the the company, the team, the career, the job, the rest of the company’s not as committed to it.
Steli: So that’s the one thing and then the second thing is don’t make it about them. Like it’s not about like, you suck, you’re not good enough for us, blah blah blah. Obviously nobody fucking wants to hear this. And also it’s not really true. No matter how much you think that this person is not good. I would ask myself oh my God we’re so horrible at hiring. Like if somebody turns out to be like horrible then I’m like holy shit like, who’s responsible for hiring this person. Let’s fire that person first, right. And that would be me.
So I think like taking some responsibility for that and when you talk to these people just don’t sugar it up, don’t make it, don’t tell, don't do story telling time, treat people like adults; be fast in making that decision. Sit down, say “Listen, we both obviously wanted to make this work. I don’t think it’s a good fit and I don't think—it’s setting you up for failure if you keep, if I keep letting you on the team while you’re not succeeding here. So here’s what I wanted to do, then I would keep the same structures before. Here’s what I wanna do, let me help you succeed. Now that I know you a little bit better, let me help you find a place where you can crush it and be a rock star. Let’s work together to make that happen. I’d rather have you somewhere else where you’re crushing it than here constantly fighting for your position, constantly wondering what other people think of you. Like that’s stress you don’t have to have and I don’t have to have.”
So that’s it. So make the decision fast, be straight with them and then help them, like truly help them. Anyone and everyone that was part of my company, doesn’t matter if you’re an intern, doesn’t matter what the role is or for how long you or if it wasn’t just one hour you’re part of the family. So I need to figure out a way to make you successful right. Next question. Yes.
Female Audience: So what if someone is an early employee and a very important cultural ultimate touchstone of the organization and that person operationally isn’t working out but culturally, they are important?
Steli: It sucks. That’s all the wisdom I have for you. Just fucking sucks. Like I so that’s so true. It happens all the time. Somebody in the beginning is amazing for that part of the life cycle of your business or the company and they were maybe a generalist, maybe whatever whatever made them really effective in the early days. As the company is, you know, moving on in the journey that person might less and less effective right. So what do you do then? You’ve somebody that’s super important because they were at the beginning there, there’s a culturally really important there, a lot of people have deep relationships with that person but what do you do when their operation are not doing their job well?
You need to let them go. Again not selfishly you might wanna and I’m like selfishly, I will try to sell myself on keeping them on because I’m like I can’t let this person go it’s gonna affect everybody else and they’re such a great cultural saleswoman or salesman or like such an important person to like just spread the story and the word. They’re the beginning this is still an important part of fabric of the company. But that’s also see how all these are very selfish reasons. Oh, are they crushing it? Are they learning, are they growing? Do they bathe in like admiration and positive feedback? Does everybody thinks that they are a rock star? No, right. No. So then they need to go somewhere where they can. And a lot of times it’s so crazy.
Here’s one thing that I definitely have realized doing this a few times in my life is that no matter where that person is, if you put them in a better situation like there's so many times where somebody that was like, “You’re not a rock star in my company”. And then we found them another business and they were crushing it over there and I was like did I miss out on something? Like I started having second thoughts, maybe I should have just kept that person you know.
But no, if I step back it’s like, over there with this team, this culture this kind of part where their business where, they were able to come in and crush it and to grow and in my company at this time they weren’t. So you have to let them go because it’s the right thing to do but it’s very hard. It’s easier said than done. It’s really really hard. Alright, next question. Well, so there you go, I have to point to people? Just tell me I have that power. I think you whoever has the mike so I’m looking for who is that person with a question and a mike so it you.
Male Audience: Steli, you’re fantastic story teller. This has been awesome.
Steli: Thank you.
Male Audience: I’m curious if you have any thoughts as a founder in ways that you’ve intentionally and unintentionally shape the culture of your company like what happened?
Steli: Wait, wait wait keep the mike with him. Can you elaborate on the question?
Male Audience: Sure. So I guess I guess I’ve seen my experience founders will have a deep influence on their culture almost like, who they are somehow permeates the company.
Male Audience: Have you seen that with Close and how’s that changed you?
Steli: Yeah! It’s like saying how has you and your wife being the parents of your child impacted the DNA of the child. Pretty dramatically, I mean yes I think that and I don’t wanna make fun of it. It’s just that that it’s hard for me to take it as a question because it’s just a true statement.
Male Audience: Has there been anything you found that like having the company that rose was because of you and then you changed or wanted to change?
Steli: So how me changing, changes the culture [yeah] or how I see something that culture of the company that I’m like I don’t like so maybe I have to change?
Male Audience:Yes, yes.
Steli: Yes. It’s constantly like I think so, I think that the company’s work is that the core DNA starts with the founders, right. They are, they setting the core DNA of the business and that has a pretty high potency. But obviously as more and more people join, it’s kind of like yes these are my children, they have my DNA but now there’s like 10 people that are raising these children. Everybody is influenced, we’re now making up an environment that’s gonna shape them in a pretty impactful way.
But you’re not gonna shape their eye color to be different or something but you’re gonna have an impact on their, you know, their understanding of the world, their character, their many many things, right. So as more and more people join the company and we’re building a village around these children, we all have kind of more of an influence and we’re all impacted. But it all starts with the founders and the founders typically will pick people that somehow they find attractive based on who they are. So it starts with that.
Now, I think that in general in life just anything and everything that happens that happens in my life, I ask myself how am I responsible for this somehow, right. So honestly anytime I’m frustrated with something in the company, I ask myself how is that reflective of myself. I heard once somebody say, “You can’t criticize someone else and be at perfect acceptance and harmony and happiness with yourself at the same time”. And that’s a pretty scary statement because it’s so true.
So every time I’ve learned to whenever, I’m critical with others to ask myself, am I happy with myself right now? Just not a single time can I answer that question with a yes. It’s always like, “No”. Alright I think that they’re really doing blah blah blah wrong. Do I think that I’m doing a great job in this area? No, all right mother fucker then just get your shit together. Aww! But that’s so much work right. This is by the way, this is my whole—I was told this before having children, I still stand by the whole point of like how to be a good parent, live a fucking good life. End of the story.
Like work on your problems, your fears, your issues, live a good life, get your shit together and your children will get their shit together. There’s nothing you can say to them, you know, “Oh you have to you know attack this fear and grow” but I won't do that with my fucking life right. That’s not gonna work. So, so I think that constantly everything is a reflection of who you are and you can make a difference and as the team grows, that goes down, is watered down a little bit but it’s still really, really strong I think. Yeah.
Steli: Let’s try to get another one or two questions. I’ll be briefer with my answers. Yes.
Female Audience: So I wanted to ask you about firing in a slightly different context, in the context of a non-profit where the employees are volunteers and have wavering bandwidth and at times they will really come through and they will perform and then at times, they're gonna vanish and you can’t rely on them and they’ll come back. How do you, what do you do there?
Steli: Will you, do wanna let them go?
Female Audience: Well how do you, yes. So one how because they have an inconsistent bandwidth and their volunteers, they're are unpaid, there will be times when they are a lot more engaged and performing and other times when they’re not and it’s really hard to to get through to them at those times. So do you just decide then that when they’re not performing then that’s the right time to let them go and then also how do you do that?
Steli: Do you wait for a down cycle? No. I mean here’s my advice to this, first of all I would have to decide what do I expect of my volunteers, like what’s the true expectation and then I would communicate that with them and if my expectations and if i don’t care what your life is like, anybody who volunteers does this then that’s the standard. It doesn’t matter if they are volunteer or not because that’s what you pitch them on and that’s what they subscribed to when they joined your team.
Now if you think well I have to let people have ups and downs because they’re volunteering and that’s the way that I’m gonna build this organization, then I think I again whenever you feel like this person is not working out, it’s a little harder it might feel a little harder because you’re like they’re volunteering and I’m letting them go. They’re here for free like kinda right that sucks. Like how do I do this in a humane way that’s not like you’re worth less than free to me. Yeah. Less than that. I mean it’s hard right. But again you have to go back to like are they succeeding?
Now they’re coming here and they’re not with their families doing something else. And they’re failing and you’re allowing them to hang around, failing longer and longer. So it’s your responsibility to help them go volunteer somewhere else where people think they’re rock star, where they’re appreciated and where they’re really truly make an impact. So whenever that you think this person is not working out, you have to sit down tell them about it and then find them and help them find a better place. Right.
And I saw twice it think that’s it means that it’s truly the end but there’s people that are like we don’t care we still have questions. So I’m gonna be respectful of the amazing Culture Summit event people and call the end here. But it doesn’t have to end with this. You guys can send me an email firstname.lastname@example.org or @steli on Twitter. Ask me your questions there. Let’s keep the conversation going. You guys are awesome and enjoy the happy hour, have extra drinks for me.
I fired half my team
This blog post covers the same material as the video above but read it if you want to see a video of Steli dancing to "Bye Bye Bye" ';).
Firing for founders: Shitting people out of your startup
After Culture Summit, Steli and Hiten recorded an episode on The Startup Chat about firing people. Even for experienced entrepreneurs, firing people is hard but here's what they've learned over the years to make it a better, more humane process.
Conflict Resolution 101 for startups
Another challenge that faces startups is conflict between founders or other team members. According to Paul Graham, 20% of the startups Y Combinator has funded have had a founder leave. Take these steps to prevent conflict from tearing your startup apart.