The FTX DNA Debacle : Ensuring Your Crash // Flawed Offboarding Process in Web3
Today we cover offboarding contributors for Web3 projects and a candid C-level guide 📉🏛️, offering insights and self-diagnostic questions derived from FTX's collapse to avoid similar pitfalls.
Offboarding Contributors in your Web3 project 🌐👋
As the market downturn leads many Web3 projects to adjust their teams, the way they handle the offboarding process becomes crucial. Let's explore 7 significant challenges managers should consider when gracefully offboarding contributors from their Web3 projects, with an amalgamation of prudence and support in mind.
1. Token Dump Risk Management 💸📉
Challenge: Contributors suddenly selling tokens might create market instability. Of course, cliff and vesting arrangements are in place to protect you, but if these are over, there's a better chance that those who have to leave the project will get rid of them. The risk increases if several contributors leave with significant bags of tokens.
Actions:
Set up an incentive staking mechanism reserved for your contributors.
Providing former contributors with a paid ambassadorial role in tokens to keep their interest aligned with the project. These are people who know your project very well, and it's a way of telling them that you're still counting on them.
Example of Nexo’s ambassador program
2. Intellectual Property Security 🛡️💡
Challenge: Safeguarding artistic or intellectual property post-departure. This is crucial for separations with contributors who have worked on key elements of your brand, art direction or products: art director, designer, product manager, etc.
Actions: :
At the initial signing of service contracts, secure these terms with the support of a lawyer.
Don't hesitate to have a specialist re-assess the risk of potential conflict after the break for the sensitive professions mentioned above.
3. Financial Risks 💳💸
Challenge: Contributors having company credit cards, non-cancelled subscription and personal subscriptions charged to the company post-departure.
Actions: :
Ensuring that the employee's credit card is blocked.
Ensuring the cessation of all subscriptions and mitigating potential financial risks.
Making sure they no longer have control over your crypto wallets.
🚨 IMPORTANT : Be sure that blocking the credit card won't stop your business-critical subscriptions. For example, your hosting service or your entire collaborative suite.
4. Loss of Company Data 🗄️🔒
Challenge: Securing vital company information during the offboarding process.
Actions :
Implementing stringent data security protocols during and after departure.
Be sure to revoke access to sensitive systems, applications and data as soon as the employee leaves.
5. Reputationnal risk 🌐
Challenge: An inadequately announced and unprepared plan can tarnish your company's image. Stay deeply engaged with your community, especially in Discord, Telegram groups, and on Twitter. The departure of key historical figures from the project can create a bearish atmosphere.
Actions:
Monitoring social channels and addressing misleading information swiftly.
Organize AMAs to reassure your community. This will avoid fud on social networks
6. Demonstrating Support & Employer Responsibility🤗🤝
Challenge: Showing your support publicly and helping contributors secure employment as a responsible employer.
Action: :
CEO must show his support and do so in a forceful and public manner.
Providing external placement agency services, career coaching, offering recommendations, etc
Joseph Lubin - CEO and Founder at ConsenSys - publicly announcing all the support offered to the laid-off employees.
Excerpt from ConsenSys' decision to lay off 96 individuals at the beginning of 2023. Full version here
7. Ensuring a supportive offboarding experience 🤝👋
Challenge: Ensuring structured and insightful final moments in the company for both parties.
Action:
Implementing a standardized departure checklist. Download our template here.
Ideally organizing two feedback interviews (one with the direct manager and one with the HR department) :
🚨 IMPORTANT : The contributor's validation of the entire checklist before their final payment is a prerequisite. It's challenging to demand actions after the individual has left and received their final payment.
Offboarding contributors in a bear market presents multifaceted challenges. Employing strategies that encompass legal, financial, ethical, and supportive measures can navigate these challenges, ensuring a smooth offboarding process for both the contributors and the project. 🐻💼✨
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A Candid Guide to C-Level Management: Lessons from FTX's Fall and self-diagnostic questions
The implosion of FTX, once a titan in the crypto exchange world, serves as a stark reminder that poor management and inexperienced leadership can lead to disaster. Here's a guide, with a touch of light humor, on how to avoid similar pitfalls:
1. Centralization: A Cautionary Tale
FTX's meltdown was partly due to the concentration of control in a few hands—hands that lacked experience. For C-levels, it’s a reminder: diversify decision-making. Don't be the single point of failure—or success. Delegate wisely, or you might end up with too much on your plate.
🤔 Am I enabling my team to make decisions independently?
🏛️ Do our corporate governance structures facilitate diverse input and checks on power?
🔄 How can we better distribute decision-making to reduce risk?
2. The Basics Matter: Bookkeeping and Financial Records
FTX skipped some Accounting 101 lessons, like basic bookkeeping and maintaining reliable financial records. As mundane as it sounds, keep your financial house in order.
✅ Are our financial records up-to-date and easily auditable?
💾 Do we have the proper accounting software and expertise in place?
🔍 How often do we reconcile our reported data with actual assets and liabilities?
3. Internal Controls: The Invisible Safety Net
FTX’s absence of internal controls was shocking. Controls are like the grammar of your company's language—they might be invisible, but their absence is glaringly obvious.
🚫 What processes do we have in place to prevent unauthorized transactions?
🕵️ How do we detect and respond to breaches in controls?
🤝 Are responsibilities segregated to avoid conflicts of interest and fraud?
4. Systems Integrity: No More 'It Works on My Machine' Excuses
Without clear records of employees or secure systems, integrity goes out the window. Ensure your IT infrastructure is more Fort Knox and less lemonade stand.
🛠️ How secure and reliable are our IT systems?
🆘 Do we have an incident response plan for IT failures or breaches?
🔄 Are we regularly updating and patching our systems to maintain integrity?
5. The Old-Fashioned Embezzlement: A Modern No-No
Using client funds for other ventures is as outdated as a flip phone. FTX's blending of customer assets with risky trading moves is a no-go.
💲 Are client funds and company funds properly segregated?
🗣️ How transparent are we with our clients about the use of their funds?
🔍 What mechanisms are in place to prevent the misuse of funds?
6. Proper Tools for the Trade
FTX used an accounting tool for small and mid-size businesses, to manage their billion-dollar enterprise. It's like trying to tow a cruise ship with a fishing boat.
📈 Does our current software scale with our business growth?
🧰 Are we investing enough in tools and technologies that provide us with real-time, actionable data?
⏳ Are we using any outdated systems that could hamper our efficiency or accuracy?
7. Email Security: Because 'Password123' Isn't Going to Cut It
FTX used an unsecured group email for sensitive data access. In the age of cybersecurity threats, that's akin to leaving your car keys in the ignition.
🔒 How secure is our communication infrastructure?
🔐 Do we enforce multi-factor authentication and strong password policies?
🏫 Are we conducting regular security training and phishing tests for our staff?
8. Accuracy in Records: Because 'Approximately' Doesn't Work in Finance
Lack of an accurate list of bank accounts led to FTX's downfall. It's finance, not horseshoes—close isn't good enough.
🧾 How accurate and accessible are our financial records?
🕵️♂️ Do we have a system in place for regular audits of our accounts?
✍️ Are we proactive in rectifying discrepancies in our financial records?
By incorporating these questions and checks into your management style, you can keep your company's ship sailing smoothly, avoiding the icebergs that FTX hit. Remember, in management, the devil is often in the details—or in this case, the lack thereof.
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Disclaimer : The goal of this newsletter is to inform and produce content related to management in the world of Web3. It is not investment advice. Investments in crypto-assets and NFTs are risky and can result in the loss of your entire capital. Always conduct your own research and exercise caution.