During hard times, many leaders make this same exact mistake

Wow, much has happened since I pressed “schedule” on my last newsletter. The highlight reel:

• Silicon Valley Bank was the 2nd largest US bank to ever collapse Friday, March 11

• My company did not bank with SVB, but by March 13 we realized we could be impacted by a long list of other at-risk companies

• The US government backed the depositors, but the bank’s investors lost everything

Don’t worry, this isn’t yet another SVB post. Just give me a few more sentences then I’ll get to the meat of today’s note.

Our company mulled over moving to Silicon Valley Bank for the last few years, and it looked like we were going to finally make the move within the next six months, while also getting a loan from the bank. When it all hit the fan this weekend, that was a distant memory as investors were all checking to ensure we were not, in fact, banking with SVB. In addition to those inquiries, our team spent hours on Sunday emergency planning how we were going to replace some third party vendors, should these companies go under if the bank truly failed. A few hours later the government announced they were making depositors whole, and we were in the clear. Most of the country has no clue how close we were to a total disaster. Imagine mass casualties among the tech running your payroll, healthcare, food services, payment providers, etc. That was a pending reality.

This whole thing is still going to continue impacting startups and growing tech companies. Funding is already—a mere week later—harder to find as a result. Angel investors got skittish or are afraid to liquidate. Limited Partners (LP), who fund the VCs, are likely in a similar position.

We are in turbulent times for startups, and it’s rippling through larger companies as well.

When stress like this hits companies, your company’s inner gremlins are most likely to rear their ugly heads. Those gremlins are most likely to be your bad clients or customers, and your toxic employees.

And it may be time to let them go.

It sounds harsh—it’s not. It's actually the most compassionate thing you can do.

Complacency often delays hard decisions—fear compounds them

So many companies allow egomaniacs to stay—whether as clients or team members—because they're afraid of the sudden consequences of letting them go. They fear losing the bad customer’s revenue or the narcissist’s talent. The truth? Being scared to flush your environment of these turds usually means you're stuck with a rotten atmosphere.

And everyone suffers.

Revenue suffers.

Your team suffers.

You will eventually suffer.

This is not being sensitive or defensive, it’s playing offense. By keeping your team free of toxic employees and not making them work with awful egomaniacs, you are scoring wins for your A team. This is one of the most critical components to maintaining a good culture. In hard times, a good culture is absolutely critical to win. When leaders make these hard decisions to let go of customers or talent that are dragging you down, it also can compound to create a great working environment that has benefits. Those strong leaders will retain talent and foster a culture that fights through adversity.

Years ago, I worked at an ad agency and we had a client—who I still despise as a result of years of bullying—who would slam his fist on the desk, curse at me or the account manager, accuse us of lying, and so on. I still remember watching his cheeks shake while he yelled at me and a coworker one time, telling us we were “putting lipstick on a pig.”

The company should have fired him.

But we didn't.

In fact, one boss in particular would defend him when I would report the abuse and absurdity of the client's behavior.

This client was exhausting—I mean, the absolute worst. We spent more time trying to appease him than the relationship was worth. We ended up sinking in far more hours than he was paying for to make him happy. He was getting free work, but he was an egomaniac who was never going to be pleased.

The account manager eventually quit. We lost our best account rep due to the actions of one client amid dozens.

Bad employees are no different

On the employee side, I've worked with team members who, while talented, were psychos in the workplace. These people cause a horrible raucous anytime they don't get what they want. Eventually the rest of the team doesn't even want to contribute if it means going against this person to pursue a good idea. The company’s creative funnel is depleted, morale decays, the work suffers and eventually, it will shake out on the bottom line.

This type of environment will drain your A+ talent. They will leave to find more supportive environments, and you end up with a bunch of subpar players who are fine tolerating the bad behavior of one super talent. It is possible to have strong talent and opinions, but you have to have a culture designed to process feedback for everyone. I’m not diving into building that culture today, but for good lessons in this I recommend reading “Creativity, Inc.” and “The Culture Code.”

My advice to leaders and job seekers alike

Leaders can avoid these scenarios by making hard decisions sooner, and job seekers can avoid these environments by asking the right questions in their interviews.

If you're on the job hunt, ask leadership how they handle the bad clients and egomaniacs. Their answer will be incredibly telling for the company's culture. If they stumble, run.

Strong leaders understand this ecosystem I’m describing. They get it takes a team to get the work done, and they protect that team. They make decisions today that positively impact the future.

Weak leadership is always afraid of losing. They won't make tough decisions for fear of losing ground. However, failing to act means you’ve already decided to build for the future on an unstable foundation. It’s only a matter of time before the sands shift, talent leaves, and your infrastructure falls apart.

3 tips for leaders to prepare for turbulent times

1) Make note of and course correct the bad behavior now

It’s bad enough when you have one of these egomaniacs on your team, but if economic conditions are taking a toll on your business, too, you have a ticking time bomb on your hand. Bad cultures and hard times create uncertainty among the team, so it’s critical you start working on your culture now. Do not turn a cheek to your team or client’s bad behavior. Take stern action to course correct, and if it persists, cut bait. Consider this an investment in your future—you’re playing offense by scoring points with your A+ talent.

2) Build opportunities for feedback into your process

Whether it’s clients or your team, you have to have opportunities built in for feedback. Otherwise when you do give feedback, it feels out of the blue and it always feels negative instead of constructive. The best process to model from that I know of is the “Brain Trust” as described in the book “Creativity, Inc.” It clearly lays out how Pixar Animation Studios built a process for providing feedback to any and all employees in the company when making films. This one process created the a generation’s most successful movie studio, and it’s a process that scales down to small teams incredibly well.

3) Don’t delay the decision

Thinking you just need a little more time and delaying hard decisions is the worst thing you can do in this situation. Toxic behavior compounds so quickly, and it’s really hard to undo these actions once they take root in a team. When burnout sets in, teams start polishing up their résumés. They’ve mentally left the building, and that is really hard to overcome once you’re in that position. Make strong, swift decisions to cut bait when you see these problems in your culture or clients. Not only will you keep your team, you’ll earn their loyalty at the same time.

Who I’m listening to: Drayton Farley

What I’m reading: “The Rise and Fall of the Third Reich” (I’ve finally broken the halfway point in the 56 hour audiobook)

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