In Cannabis, It’s Now ‘Survival of the Quickest’

“Big will not beat small anymore. It will be the fast beating the slow” Rupert Murdoch

Last week I wrote about why cannabis firms need to adopt a survival mindset. Some COOs & CFOs DMed me asking:  what is the best way to reduce headcount?

There is no hiding the fact that headcount reductions will be a part of any serious cost reduction effort.

While every firm and situation is different, there are ‘best practices’ to culling your workforce. A key one focuses on the speed and boldness of your cuts.

When consulting in this area, I channel Sequoia’s 'Survival of the Quickest' strategy.  Sequoia is a leading global venture capital firm – and a funder with decades of experience scaling up and shrinking businesses in emerging sectors. 

Below are Sequoia’s observations and approach in a nutshell-

Pre-work
Analytically, separate the fat from the muscle when it comes to people, initiatives and expenditures.  It helps to have a clear strategic direction as well as an understanding of your cost base relative to your cannabis peers.  This pre-work is important. You must have a sensible plan ready to go should the firm need to shrink headcount fast.

Acting
If you have to let people go, cut once and cut decisively. Do not employ salami tactics of small reductions here and there while you avoid what really needs to be done.  Incrementalism often leads the firm straight into The Death Spiral.

Rebasing
Focus your operating model around profitable categories & markets, soothe your culture and methodically rebuild from a stronger foundation.  This is also not a time to be crass.  Treat exiting and remaining employees with class, generosity, and sensitivity.  Otherwise, those exiting will simply trash your brand while many of the remainers will become cynical ‘quiet quitters.’
  
My hypothesis is that most cannabis firms have been too slow to make the necessary workforce and production cuts, despite serious operational issues, rising capital costs and margin compression.  Their financial performance bears this out; many will soon run out of time. 

Still, we should be mindful of the complications that arise from industry realities.

The static nature of operations (you can’t quickly downsize and sell assets), the importance of key initiatives (that cancelled project could be your growth engine) and the necessity of some functional personnel (for example, laying off financial staff just before an audit is not smart) can all thwart quick and easy cutbacks.

All the more reason for cannabis businesses to plan headcount reductions and the future organizational design sooner than they may want. And then act decisively when the timing is propitious.

#costreduction #layoffs #failure #sequoiacapital #MSOS #LPS #headcountreduction