Help with RIF
I am at a small shop and manage a couple of analysts and associates and a couple of VPs. We need to reduce overhead. There are some B players that in a better environment I could begrudgingly carry because I like them. I know what I would do with a portfolio company and no tears would be shed but this feels harder.
Any advice?
Do I make all the cuts at once as I would with a portfolio and remove the morale overhang, or incrementally because if things improve we could hold onto more people and I want to treat them as adults with transparency.
Would the juniors be better off if given the option to stay until promotions so they get a new title before recruiting season starts? Would they even appreciate it if they don't any credit for this when comp is decided. Bonuses are not guaranteed here.
When you are on the chopping block, how would you prefer to be let go?
People are going to struggle to give you an answer here - being let go is difficult regardless of how it happens.
Incremental is how most people would probably choose, as from a financial and career standpoint (e.g. promos), that is favorable. But if you do an incremental and then put everyone who is potentially still to be cut on notice, then you're destroying team morale. The best course of action would be to let go of the bottom tier now but not tell the second to last tier that they're in danger of layoff, rather have say mid-year reviews telling them that "this is where you are at and you need to improve." Clear message around improving, but also not a signal that a second RIF is coming.
All this being said, it also depends on your team's culture. Some cultures really struggle if they feel they are carrying people, and those in that situation will almost naturally wither at the vine, because they perceive they're on a "PIP" from you mentally and have observed that you tend not change your mind that they're not performing so they'll get demotivated. Others are more OK with tolerating people who can then turnaround.
Hard to say tbh - but I will say that in my experience people in PE struggle with HR / people management. Top investors aren't necessarily the most skilled managers, they kind of don't need to be and many choose not to exercise that muscle.
I’m facing a similar situation and it’s incredibly uncomfortable because team sizes are small
Have you decided how to handle it?
Stop the moral pontificating. "Oh its so easy to layoff my portfolio companies employees with years of service to boost irr after throwing a ton of debt on their books, but gosh, I'm a good guy so firing my own staff sucks...how should i proceed?."
You realize how many employees at your portcos got their lives turned around to help your returns? But this never bothered you that much...only laying off Chip from princeton with the GS background?
Go back to Reddit.
Found the biggest loser, we can cancel the show
Having planned a couple layoffs at different companies and having been laid off myself, it is never easy. I’m of the opinion that layoffs should be swift and not prolonged. Doing layoffs in rounds could result in people you want to keep leaving. This could be fine at a large company but at most PE firms, a couple extra good people leaving could result in a worse adverse operational impact vs. the severance reduction and optionality benefits.
if you want to help your employees deal with the layoffs, offer some of them roles at portfolio companies if feasible. Position the move as a benefit to their careers allowing them to gain operational experience with the potential to move back to investing down the road. This could allow you to hire back people that were good but not great if needed and allow them to gain experience that should benefit the firm.
Every layoff that I’ve been a part of was a reorganization, and I thought this strategy was more effective than simply reducing HC. Most of the people who were moved to other departments ended up staying and there was less cultural impact. The employees who were not laid off or moved appreciated the thoughtfulness as it lessened the burden on them.
Great idea, thank you
Fwiw we have started offering secondments at my fund. It's been a way to help portfolio companies loads (given motivated, hardworking and smart people) and also address some of the complaints we get from C-suites ("you guys know finance down cold but you've never run a business from the inside, you need more empathy"). We won't send complete duds though to be clear - if you have true underperformers, better to let those go.
What roles/titles are you generally seconding people into? What level are the people being seconded?
So far, mostly corp dev aka the M&A teams, as this is what we’d be best at, but also a product role and (I think) someone who is deployed trying to prep the business from exit (data gathering and cleaning, storylining, etc.). Ranges from senior associate to principal mostly - at least 2 years of experience.
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