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Who?

Karen Scarpetta is a creative, curious, and passionate business leader. She loves creating impact through the sustainable growth of the organizations and teams she leads, aiming to make a difference in the lives of those around her. She was formerly the CEO of WeWork Latam and is currently a board member at Dunna and an advisor and speaker.

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Defining failure

FuN: What's your personal definition of failure?

Karen: It's astarting point.A change of direction that takes you somewhere new, with more experience, more lessons, and probably better results. It's something we try to avoid, but when we understand that it helps us embrace the process instead of just focusing on the outcome, it becomes the factor that builds the courage to throw ourselves into the world.

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FuN: How Was Everything Before the Failure?

Karen: Pandemic1a. Second half of 2020. I was General Manager in Colombia right after leading one of the most complex restructurings of my career. Changes in the team, the processes, the roles… everything. We were trying to figure out how to keep the business going amidst the numbers, external uncertainty, and my conviction to make it sustainable. I was always clear that our mission was to bring our partners real value in optimization and growth.

I dreamed of growing again, of hiring—not closing. A few months later, in 2021, a purchase came through with new investment and capital.

For a moment, I let go of the pressure of seeing how the time to survive was running out each day and that daily urgency in decision-making to stay afloat.

Then, in the second half of 2021, I began leading the entire Spanish-speaking Southern Latin American region with greater responsibility to cut operating expenses as much as possible.

Yes, cutting, not necessarily optimizing.

It was a drastic process; we even questioned whether some key services should continue. Whether the services of the past should remain part of the present or even have a place in the future.

It made sense. After an initial period of abundance, we were entering a time of great austerity, of adapting and learning to operate under a new reality.

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The Actual F*up 💩

Karen: We went to the extreme. Not knowing that we were compromising the true brand value and what that was going to mean to some of our customers.

While there were many opportunities for improvement in our supplier selection process, we fell into a black-or-white dynamic. That's not how life works.

‍We cutthe most delicate thing: quality (one of my non-negotiables in life).

‍Wewere able to significantly reduce several cost lines that (initially) positively impacted the margins of the business' income statement. But as with everything, there are always consequences, and customers began to take their toll. And as in any "top line" business, if the operating cutback also negatively impacts revenues, we're screwed.

At the beginning, when we saw that the reductions had exceeded our target expectations, everything sounded fine and dandy. That money bought us time, especially at a time when sales were naturally still on a pandemic recovery curve.

The problem came when satisfaction metrics began to drop, when we began to have conversations of contention with our customers and not of long-term construction.

The first (internally) to jump up and down and even express their own dissatisfaction were the operational customer service teams, the annoyance was notorious.

Our message from leadership was: "We are surviving, it is time to tighten our belts, we are reviewing every line, every detail to mitigate all kinds of risks . We are reviewing every line, every detail to mitigate all kinds of risks." When you live in a situation like this, you have to focus on the present, because without it today there will be no tomorrow. However, the reality is that we were not being aware of the true cost of some of these decisions.

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FuN: How did you realize the mistake?

Karen: The critical moment happened when after months, the renewal rate of our clients started to drop. They felt they were not getting the value they were investing for.

First retention strategy? "Let's talk pricing."

Error, value and price are two completely different conversations. However, we were not going to allow our customers to choose to end our relationship without us taking responsibility and we acted.

In the meantime, there were very high customer churn rates, many of them intended to try the service for a few months, but after 6 months they did not come back.

Point of silence. It was time to understand that more savings is not more and better business impact, and that we had to revisit line after line, service after service, supplier after supplier and turn absolute focus to quality.

The most important thing: to know that cutting and spending are two very different concepts from INVESTING, because that is exactly what any business needs. Understand how much you invest to make your structure work, always with the customer at the center, developing a "human centric" vision with suppliers, customers and collaborators in balance.

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Fun: How did you feel at that moment?

Karen: The first thought was very simple: bitch, we messed up.

Fortunately I'm an extremely practical and completely action-focused person, so I got my entire leadership team together with finance and said, let's restructure this, because we went too far and it's time to do a D-Tour.

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Is it okay to change your mind? YES.

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Because while months ago everything was a conversation about cutting at any cost, today with the business information, we could conclude that this is not the smart way to go. The reality was still to survive, but not in the drastic way we had implemented in the past.

FuN: How did you overcome that situation?

Karen: With recognition and context. With review and reinvestment. Adjusting every aspect based on results, with data that was shared to all stakeholders of the teams. With many construction spaces composed of people from all teams at all levels that we call 'Talks with Ka' in addition to "All Hands" with actions and that allow us to give visibility of the adjustments executed.

Ultimately that is the leader's responsibility, to see all the paths, analyze the one that has the best chance of success, provide tools to the teams to execute and identify if they are indeed working, if not, adjust the path and move on.

That's what I call humility, because no human being likes to say that we are wrong. But we are all human beings, not perfect beings. So accepting the process with the team was fundamental to nimbly set up corrective processes based on feedback from our customers, team and moving forward.

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FuN: How was it to share this situation with others?

Karen: As a leader, there was containment with the team. Spaces for listening and acknowledging learnings, ownership. Accepting and embracing mistakes, maintaining why we got there and explaining that if we hadn't moved forward in that way, we simply wouldn't have been where we were and with the information we had.

Most of the team understood that making mistakes is the best way to determine if something works or can be better. That the worst mistake is to stand still, do nothing, or worse, KEEP DOING THE SAME THING. If we had not gone through that process, we would have basically had to close the business. The key was that thanks to the follow-up, of course there was damage, but it was reevaluated in time to turn it around.

Personally, I live in duality. I am very demanding, starting with myself, I always set the bar high because I know that everything is possible. So do I get frustrated when things don't go as I expected? yes for sure. However, in this particular situation, I had a special drive to fulfill my purpose of impact, beyond a goal, beyond a profit and loss, beyond a business, it was a commitment to myself and my entire team, which made it easier for me to see the big picture WITHOUT fear.

I assure you that saying "What is the best thing that can happen to us?" is a better mantra than thinking about the worst thing that can happen and not acting.

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FuN: Would you do anything differently?

Karen: Nothing, I would be wrong anyway and I would use the detailed follow-up to make adjustment and change decisions more quickly. It's easy to talk when you know how it all ended, but life doesn't work that way.

It was a great learning experience to avoid falling into polarized decisions and eliminate extremes. Yes, take a stand, but going from black to white is not necessary. I would make the initial decision with the same determination, I would focus more on following up to have identified clear signals and act on them instead more quickly.

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In Conclusion…

• Never stand still, it will always be better to act and be wrong, than to do nothing different. If we want different results, we cannot keep doing the same thing.‍
• Direct and assertive communication with the team. Make them part of the process so that they are not only individual executors but that they all feel part of the construction of the collective objective.‍
• Do not go from black to white.
• Adjusting expenses does not mean losing value, but rather making an intelligent investment. Finding that balance that allows us to have a financially healthy company, without compromising the essential: the quality of what we offer and what represents our identity, value and brand. What makes us unique.
• There is no customer centricity; the goal is to be human-centered.

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