Hope for the best, prepare for the worst: Advice for founders preparing to retrench amidst COVID-19

Retrenchment adivisory from ConnectOne as startups struggle with COVID crisis:

In mid-March 2020, 21 founders from SEA Founders got together on a Zoom call to discuss the impact of COVID-19 on their startups. The top three concerns were delayed revenues, burn rates, and movement restrictions.

In order to preserve the runway, many founders are keeping a close eye on cash flow. Especially the salary cost, which is the largest component of many budgets.

Shorter workweeks, unpaid leave, salary and bonus cuts, and freezing hires are some of the early cost-containment measures already in place.

The Singapore government has also unveiled new support measures in the Resilience Budget, for example, bridging loans, job support scheme, tax, and fee deferments to help businesses stay afloat.

Despite all these measures and the best of intentions, many founders are facing the grim reality of letting some people go.

Yes, that dreaded ‘R’ word. Retrenchment.

Up till now, the startup scene has only seen the growth story. This sudden downturn has caught some founders and their fledgling HR teams by surprise.

I think managing planned exits is a delicate process. The key is to balance the needs of all the stakeholders while minimising disruptions to your core business.

At ConnectOne, we have developed the 3C Model to help founders and their HR teams manage exits: Compliance, Compassion and Communication.

Compliance revolves around laws and regulations that are in place to protect both employees and employers. These include notice periods, severance payments, tax declarations and cancellation of employment passes for foreigners. Startup founders need to be aware of legal requirements in order to manage their financial and reputational risk.

Compassion is the vital ingredient required in any retrenchment exercise. It is emotionally-draining and mentally-exhausting for all involved. From founders to retrenched employees and even those who remain. My advice is that “while many may prefer to remain in the comfortable realm of data and the rationale, this is one instance when founders will have to dig into their emotional reserves to ensure that people exit with their dignity and self-confidence intact.”

Communication is crucial during times of crisis. It’s not a single step — but a continual process. In order to balance compliance and compassion, there are internal and external stakeholders to identify, assess and target messages for.

While this black swan event continues to unfold, let’s continue to hope for the best but prepare for the worst.

As a gesture of support to the startup community, ConnectOne will host a one-hour free webinar on retrenchment advisory. This is exclusive for founders, their HR representatives and VC partners only. Register here.