Your Company Might Be in a Deathspiral
What Meta gets completely wrong, and what you need to do to lead well in tough times
Yesterday a NY Times article caught my attention: Mass Layoffs and Absentee Bosses Create a Morale Crisis at Meta. It went on to say that “workers at Facebook’s parent have been increasingly alarmed by job cuts and the company’s direction.”
Job cuts and direction. These two factors are not insignificant. They are just ways of saying culture and strategy, the only two levers a CEO really has: where are we going and how are we getting there. If you can’t get these right nothing’s right.
Just a short time ago we were talking about the “great resignation” and how employees had all the power in the post-pandemic world. Now, the same, mostly millennial, employees are reeling after going through their first major recession, as company after company lays off up to 50% of their tech workforce and freezes hiring.
There are two important lessons here for every CEO and every employee:
1. You can’t bet wrong and erode culture at the same time
Zuckerberg likely will not be CEO much longer because he’s spiraling the wrong way around the Momentum Model. I doubt he’ll get fired because he’s got a lot of stored goodwill, but there is a high chance he will “step back” to a board role this year by “choice.” (Whoever takes over won’t last long either, by the way. That job is a death sentence.)
How can I say this? I don’t have any insight from inside Meta. I’m not currently coaching anyone there or any former employees. It’s a simple fact that he’s heading in the wrong direction on all his markers. Markers that reinforce each other and can drag each other down.
I covered the Momentum Model in depth when Liz Truss lost her job as Prime Minister in days. At a high level, it’s quite simple: power follows results. When you don’t get expected results your brand suffers. People lose trust in you and pull back support such as resources, time, and patience. This can lead to more underperformance and if you don’t catch it you can quickly start to spiral. (This same spiral goes both up and down, and can move slowly or quite fast: it’s the same model that got Zuckerberg to where he is in the first place).
This spiral was started when Zuckerberg, from a position of power, bet against the market to create Meta, putting all his chips on VR. This was a “bold” bet. (*Bold is a codeword for dumb in British English, but means exciting in American English.)
Betting against the market gets you outsized returns when you’re right, but ruins you when you’re wrong.
The same happens in the workplace: if you do what your boss expects, whether that’s a junior manager or the shareholders, you’re only being judged on your execution. Fail and it’s not great but you can usually dust yourself off and try again. Succeed, and, well, there are no outsized returns. You did your job, do you want a medal?
This is perhaps why so many hungry, ambitious employees work so hard to do the unexpected and impress their boss. Succeed and you can be catapulted into promotion, fast-tracked for the best jobs.
However, if you “do it different” and fail, now you’ll be judged on your judgment. That’s a big deal because humans often see judgment as innate, unchanging. So if your judgment is off, then your whole brain is too and things probably aren’t going to work out here for you, after all.
(This is what happened to Liz Truss, too. It wasn’t that she failed at doing the job, she bet big on a pet project that was marginal to her job and immideatily failed, showing bad judgment all along the way.)
It’s this same paradigm that stops most corporate change initiatives in their tracks: someone from management calls for everyone to be innovative, to break stuff and change the company, yet fails to recognize that at an individual level that’s where all the risk is. On the other hand, there’s no risk in doing things how they used to be done. Individual risk and corporate risk are fundamentally misaligned. As a result, mostly everyone freezes until the person yelling about change gets fired or reassigned.
This trust cycle leads us to the second point: If you do things differently you have to succeed, but success is harder in a down market, not just because there’s less cash around, but because trust is gone.
2. Trust is not a nice-to-have, it’s the lifeblood currency inside your company
Trust isn’t a simple culture or HR thing, a touchy-feeling nice-to-have.
Just as the economy is trust, your company is trust.
Economies enter recessions when trust erodes: People stop spending money, companies stop making money, companies lay off people who stop spending money … repeat. You can get into a recession in lots of different ways, but they all involve hitting consumers or companies with a trust bomb.
The exact same thing happens inside companies between leadership and employees. Managers trust less, employees trust less, repeat. This is exactly what’s happening inside Meta.
It’s often started by management reducing the workforce and breaking trust with employees. You can’t exclaim “we’re a family” at corporate offsites for a decade then kick half the people out of the house at the very first blip in the market. (Especially to the millennials that are used to living in mom’s basement. They have no mental framework for this lack of empathy.)
What Zuckerberg and other leaders are working out now is that it’s a fundamentally different skillset to manage when times are good than when they’re bad. Of course, everyone is happy when the market is growing, cash is abundant, and there are promotions every 6 months. But how do you manage when nobody is certain about their job, when friends are being let go daily, when the snackbar is closed, and when there are no other jobs in the market?
You can’t do it “the same, just better” that’s for sure. You have to manage fundamentally differently. Most tech workers have no clue how to do this. Why should they? They’ve never been through this cycle before.
This is especially bad when management loses the plot, as seems to be the case at Meta and others (Disney also comes to mind): when no one can tell employees how to be successful, what are they supposed to do? There’s nothing crueler than telling everyone their job is at risk and then not telling anyone how to succeed.
No wonder most tech companies feel like Lord of the Flies right now: they’re full of smart desperate people that have never been through this. Meanwhile their leaders are absent — both figuratively and literally as they work from the post-Covid diaspora in home offices around the world.
What’s the solution if you’re a leader and find yourself in this pickle?
Put on your emotional oxygen mask first. If you want others to be calm and focused then you have to be too, even if you have to fake it until you make it. Do whatever you need to do to be energized, abundant, and clear during uncertainty. One way to do this is to really understand the strategy and the needs of the board and shareholders. When in doubt, look past the internal bureacracy to the clearest north star you can find.
Deepen your connection with your team. You can only influence your team informally. That means out of the office, as a human, not part of some internal formal process. When you listen to their actual concerns and needs, you can help them. But because most of their concerns are about life you have to connect with them about life, in life, or there won’t be enough trust to get to the real needs. Do it formally and everyone will just play the corparate game.
Do less better. You can’t cut most of your workforce and still expect those that remain to keep working on the same agenda. Cut back. Sometimes drastically. Know that it’s not permanent. Often too many leaders try to do 80% of the agenda with 50% of the people. You’ll just burn them out. Why not do 40% of the agenda with 50% of the people and start to see some wins? Reverse the negative momentum. Reward everyone emotionally and professionally if you can. When your team’s confidence returns, so will their capacity. Better to get 40% done well with a focused and energized team than 30% with a team bleeding talent and goodwill.
Summary
Corporate deathspirals are created by mismanagement. Every company is going to have to deal with one at some point. Don’t just manage for cash, manage for trust: after all, tech companies haven’t laid people off because they are short on cash (they have years of cash reserves on hand), but because they were trying to signal trust to their boards and shareholders that they can be well run in lean times.
Ironic that the first thing most of them did to build trust was kick their employees in the teeth.