When it comes to building a company, lots of things can and do go wrong. Margit Wennmachers — an operating partner at Andreessen Horowitz and long one of the most powerful public relations pros in the startup world — knows this firsthand.
Thankfully for all of you, Wennmachers was able to join us for our recent Early Stage event, where she shared some of her tips and tricks for dealing with everything from fast-ballooning crises that reporters catch wind of, to laying off people during a pandemic, to why lawsuits can actually fuel some companies’ growth.
It’s advice you might save for future reference. As she noted, how a crisis is handled can make or break a startup, and the list of things that can go wrong at even the smallest outfit is “long,” including a product needing to be recalled, a site going down, a cyber breach, a founding team that doesn’t get along, inappropriate behavior, lawsuits and cultural issues.
Some of her most actionable advice included:
Prepare for the inevitable crisis
First, said Wennmachers, spend time modeling out the scenarios, and “let your imagination run wild” as you do. Spend a month on this if necessary. As you’re thinking of worst-case scenarios, also figure out the team that would be involved in a crisis response. Legal will always have to be involved but also, often, HR, outside counsel, and, if a startup can afford it, the help of an outside crisis communications team. If it’s a product failure, you’ll also need the product lead, too, she noted.
Use code words. Wennmacher said that at a16z, if one of its portfolio companies has a problem, and she calls the general partners with a particular code word, they know to drop what they are doing so they can collectively talk about what’s going wrong and what to do about it.
Not last, she said, focus on having a productive culture as it relates to crises. If management tends to scold people when things go off the rails, employees will be terrified of speaking up. Make a team understand that if not everything goes as planned, the first response will not be to assign blame or threaten repercussions but instead to collectively figure out how to solve the problem.
Move quickly — and be thorough in that initial response
It sounds like a no-brainer, yet companies get this very wrong. Wennmachers pointed to Volkswagen, which took far too long to admit that it had cheated admissions tests in the U.S. as “an example of how not to do [crisis management]” because it lost the trust of many loyal customers in the process.
In fact, she suggested managing the situation as a kind of “whodunit. You want that book that people are going to read — your employees, your customers — to be as short as possible and to answer all the questions. Then people will move on.” Otherwise, said Wennmachers, if you “make up stuff” or “deny stuff you don’t know” because perhaps your engineers are still figuring out the problem, you’re going to lose a crucial window to win everyone’s trust. Instead, put forth someone who can put out statements of fact as they are learned.
Wennmachers pointed to a16z portfolio company Airbnb as a company that has consistently turned crises into opportunities by acknowledging problems, then very publicly addressing them. An example of a company that did not acknowledge earlier problems and that found them written about endlessly as a result, she noted, was Uber (which, it’s worth noting, was not backed by her firm).
“When you read a book, and it’s a good book, you read it, and you’re finished. You know what happened,” she’d said.
Part ways with employees as productively as possible
Layoffs are a kind of crisis, too, as interviewer Miguel Helft noted while talking with Wennmachers for the event. She agreed, adding that the medium used (including, for the time being, Zoom) is less important than conducting one round of layoffs alone, which startups often get wrong, to their detriment. Said Wennmachers, “Your first attempt at a layoff is going to be too small, I will almost guarantee it.”
No manager wants to cut deeply, she noted. It’s especially hard right now to send employees into an economic calamity prompted by the pandemic. But you have to keep in mind the employees who are staying and to assure them that they aren’t next on the chopping block.
First, she suggested, handle the layoffs during an all-hands meeting where employees are made aware that a layoff is coming, then immediately schedule separate meetings with those impacted by the layoffs. (These meetings “shouldn’t already be on the calendar,” she said.)
One way to keep up morale afterward (to the extent that it’s possible) is to help those who are being laid off transition to other jobs. “Provide as many resources as you can,” she said. Try to also produce as “humane” an exit package as you can, so they have a softer landing. With particularly loyal employees who may have been with the company from its earlier days, Wennmachers also suggested keeping in touch and checking in with them regularly. It’s something that might not be top of mind for stressed-out CEOs, but “employee morale internally is dependent on how you are talking with folks who are no longer there,” she said.
Meanwhile, back at the office — virtual or otherwise — it’s important to keep having all-hands meetings, Wennmachers said. The reason: “You have to have the employees who stayed back feel okay and excited [and] that takes time. Remember that you’ve had time to think about this, and you are viewed as in charge, and everyone needs to be able to catch up with you.”
How to deal with a lawsuit
Unexpectedly, Wennmachers said she likes lawsuits “a lot,” explaining that they can serve as a means of communicating to the outside world that a startup has become a threat to incumbents. She pointed to Good Technology, a handheld device company that was represented by Outcast Communications, the public relations firm that Wennmachers co-founded in 1997 with Caryn Marooney, who would later serve as Facebook’s communications chief for many years. In the middle of their work with the (then) young company, Research in Motion, maker of the Blackberry device, “just sued our asses, and it was the best marketing event for the company ever.”
Not every lawsuit works out so well, naturally, but if you’ve “done nothing wrong and a company can’t keep up with your innovation and they panic and they sue you … from a marketing and visibility and awareness standpoint, you’re just going to be taken a lot more seriously.”
With Good Technology, she recalls, after RIM’s lawsuit, “All the financial analysts who wouldn’t give Good the time of day because it wasn’t publicly traded … they all wanted to meet with us. It was amazing.” (Ultimately, Blackberry acquired Good.)
Watch the full interview below: