The $200,000 mistake & what we learned
This one is painful. Times have been so great for Seer that I haven’t had as much pain to share in a while, well that changed at the end of December 2018, as we wrapped up a great year.
First, we lost our largest client after a great run with them. So we already had to buckle in for a slower growth year in 2019, all good as I was MEGA proud of the team to be able to retain one of the fastest growing companies on the planet in their largest division on a global project for 5 years.. The client gave us a ton of heads up so I appreciated that, it gave me time to prepare our company for what was going to come, we have a strong nest egg, so I thought…we got this.
Halfway through the year I made everyone in the company book a vacation paid in part or whole by the company, the team had been working quite hard and we had profits to deploy.
Then as we approached the end of the year in spite of us knowing that this client was leaving I doubled down on bonuses. I didn’t need all those profits to stay in the company and our nest egg covered us. As the year started wrapping up, I was letting Steve and Crystal know I wanted to deploy these profits to the team in a meaningful way.
Then I got the call from Crystal. Wil, I gotta tell you something, its big.
I found out we overspent for the client that left us by 200k in a matter of 38 days. Which means I also wasn’t going to be in a position to make it back over a year or two, I couldn’t waive fees, I was effing stuck. They were already leaving and we were helping to transition to the new agency. I hadn’t announced the bonuses, so in theory I could have peeled them back a bit and covered the 200,000 overage from just a part of what I was holding for the team, but that didn’t feel right.
Crystal was already communicating this to the client, that we’d make it right. It’s an easy choice, if someone did that to us, that’s what we would want them to do. So there was never a question in our minds that we were going to return this money.
Here’s some of the lessons I learned…
I’m a believer that the people who caused the issue to happen are probably the most dedicated to helping you fix it. Firing them means you’ve just let go the person in your company closest to the issue, who is also feeling some heat and likely would like an opportunity to make it up to the company. That person is probably more dedicated than anyone else in the company to solving the problem. I bet that that person / team is probably thinking “I want to save anyone at Seer from ever feeling this way”. This quote played in my head as I thought about how to address this.
If people see someone fired at the first sign of a mistake, you teach people that the way to keep their job is not fucking up. If your job is to not fuck up, you don’t innovate b/c it could risk your job. While this was more of an oversight than an innovation mistake, this also rang in my head as well. I want people to feel safe to innovate here.
But give them a tight timeline
Remind people of the gravity, in our case it was like this mistake cost us 5% of our profit (200k) and probably 15% of our divisional profit. To make up that hit we would probably need to land 6 new projects that same day and have them be with us all year. This is serious.
The strongest folks will come to you with a plan with an aggressive timeline. If they don’t, push them. At this point if you gotta work on the weekends that’s what you are going to have to do. If you gotta spend $1,000 of your own money to take a class to build the solution, that’s fair, I just lost $200k I think $1,000 is fair and you’ll gain skills.
Get an early feel, do they act like the house is on fire and they are running in to put it out, or are they still leaving at the same time they used to, coming in at the same time, not communicating regularly, etc? This is a BIG deal and you gotta feel them out quick.
Growth brings complex problems
The skills required to run a project of this scale are different then the skills required to run most other projects. If you’ve been growing and promoting internally, you might want to stop and ask yourself, wait a second, do we need some new / different skills to help guide us that have been there / done that? Very few of us do that in the midst of killer growth, but one day something breaks and now what was a small number a few years ago, is a BIG ONE because your clients got bigger.
Stop right now. Seriously this is a threat… where has a division grown from where it was 2–3–4 years ago, and what are you still holding on to?
Pay attention to early warning signs
We missed the opportunity to build the solutions we are building now as a result of this loss. The few times we had a $5,000 overspend here and there we didn’t pounce on it with the vigor that we should have. We chalked it up to an occasional overspend and an honest mistake, we didn’t stop and think, what if we had a client who spent 20 Million a year, that small mistake we learned from last year is in a whole new ballpark.
Respect your growth
We are great with how we manage budgets but this client is the kind of client to throw 1–2 million additional for you to spend on an initiative for 1 month. So our systems worked, but just a few days over starts to add up REAL quick. Don’t wait until it’s too late to pressure test your processes/systems as your clients and their complexities grow; as the human error and mistakes grow exponentially.
Again stop. Ask yourself, what process do I have today that I would need to model out our growth at 2x 3x, or 5x. Steve recently walked our exec team on a conservative growth exercise over 10 years. 10 years from now we’d be about 1,000 people if we kept growing at a similar clip, imagine the things that break down.
Management structure, contract structure, office space, how the hell do we recruit for that many people? How many of our nice perks would be open for abuse that we couldn’t track. When you are flying that many people around, what kind of discounts can we get from airlines, it goes on and on, but it’s worth it. etc etc etc.
Communicate it and let it go
I think about this every day, every. freaking. day. But I can not allow that to impact how I treat my team members, but its going to be effecting me, maybe I put more pressure on getting deals done (to make up for the loss), or innovating on a solution (to make sure this doesn’t happen again), or I get tight on expenses for the next few months, rejecting things I used to approve. You start doing that, if you haven’t communicated this issue team wide, people are going to start wondering:
Why is Wil checked out, why is Wil distracted, why is he freaking out about getting this deal done, why why why…
That’s why you have to communicate it, to have a “dog in the fight” and combat rumors. Don’t let your team “make up” a narrative, but if you don’t tell em, they are going to make it up.
Communicating it also shows the gravity and allows other team members to come in with the firehose to help. (BTW asking your founder “how can I help” isn’t very helpful, it places the cognitive load back on me to think of your skills and how you can help at an already stressful time) try saying something like…I’m going to talk to person X and present you 3 options by Y date.
Letting it go
You are going to be interacting with the people who had visibility over this issue, that lost profit prevents you from doing all kinds of things, that ferrari I wanted to buy (sike), that vacation I wanted to take with my kids and my wife, that bonus I wanted to give to the team, that office build out I wanted to do, that new office opening, all the things I wanted to do with that $$ and its just gone, poof. Seeing those people every day in all honesty can become a reminder of what you “don’t have”, what you couldn’t do, etc etc. You have to just suck it up, you are an executive of a growing company, if you are going to go around giving those people the stink eye every day, or reminding them every day of their mistake that just gets abusive / shitty. It also deflates their desire to fix the problem.
this is the kind of thing that helps you see how your execs and team members act internally and externally in times of crisis. Do they stay transparent with the team, how do they balance telling people but NOT throwing others under the bus? You’ll see your team tested, keep an eye out for it.
Leaders step up
Who is saying to you
“I can’t take my bonus in good conscience”
“Look you in the eye and say I’ll solve this by date”
“Wil, I gotta tell you what I plan to do about this”
To them it’s like putting a man on the moon, exactness is everything. Here’s a running total of how much you lost & I’m going to make half of that up by Dec 31st 11:59 pm. Here’s my plan.
Ineffective leaders in times of big mess ups tuck tail and avoid tough conversations. I’ve seen people make mistakes and basically avoid talking to me for months. I lose respect for those people, you gotta own it.
We hoped insurance would cover this, errors and omissions right? We made an error and we should be covered, right? WRONG. So make sure to talk to your insurance agent, get the insurance before you need it, b/c when you are growing, everything is about team growth, client growth and managing that, rarely does anyone say in the midst of all this growth, what about our E&O insurance now that we’re landing these big deals.
We’ll be better as a result
This mistake, while costly, has caused us to innovate, question processes, and create timelines to improve them. It also was a culture check, did we share this transparently, yes, did we give people a chance to make it up, yes, did my executives do the right thing in the face of this, yes, are our clients better off because of this, yes, did we learn, OH YOU BET WE DID!
On to the next.