Layoffs are coming to Silicon Valley and tech companies can get better at it if they want to keep a bad situation from getting worse.
Last week, Twitter fired half of its staff. Stripe laid off 14 percent. Now, Meta is reportedly preparing to lay off thousands of employees — the first major staff reduction in the company’s nearly 20 years of existence. There may soon be first-time layoffs at other tech companies as they deal with falling ad sales and other headwinds across the economy, such as inflation and rising interest rates. However, how they execute those layoffs will not only affect their financial performance now, but could have far-reaching implications for the success of these companies.
Either way, it’s better to be a Stripe, who got credit for carrying out compassionate layoffs, than a Twitter, who definitely didn’t.
Compassionate Dismissals, experts say, are the ones that are as small as possible and done only as a last resort. They are clearly communicated and performed with respect. They are also aware of the feelings and workload of those left behind.
In other words, they are the exact opposite of what Elon Musk did on Twitter last week.
Layoffs from Twitter started in the middle of the night after a week of fear, uncertainty and… crazy long hours. Many of the roughly 3,700 people who were fired didn’t find out through Musk or even a manager. Rather, they learned of their resignation when they couldn’t log in to their company email.
Ideally, layoffs are carried out individually and personally, according to Liz Petersen, manager in the knowledge center of the Society for Human Resources Management. If that’s not possible, video is the best option, followed by a phone call. Email is the “lowest-level option.” Obviously, individual meetings are harder when you fire half the company.
Even those who made the cut on Twitter were mired in fear and confusion. Instead of communication from management, employees ping colleagues on Slack to see who would respond by adding their names to a Google doc. Some employees who have stayed with the company have told reporters that they: wish they were fired.
Workers are already suing Twitter for violating labor laws by not giving them enough notice, though it appears the company they pay for a two-month non-work period to avoid the lawsuit. Advertisers, concerned that the company has lost several key content moderation roles, have their spending pausedwhich makes up 90 percent of Twitter’s revenue.
“There’s a kind and respectful way to let an employee go, and I feel like this last round was neither,” said Brooks E. Scott, executive coach and CEO of Merge path, Recode told. “You have a number of employees who have been working there for years. Don’t you owe them at least a phone call or a zoom?’
He added, “People remember those things about a company’s culture.”
It was certainly a far cry from last week’s layoffs at Stripe.
There the CEO wrote a company-wide letter, explaining why they fired 14 percent of the company and then contacted the affected employees individually. CEO Patrick Collison blamed the broader economic environment, as well as himself, for hiring too quickly and rising operating costs. He expressed what appeared to be genuine grief over the loss of employees, and said they set up an alumni email account for them so they could stay up to date with the company. Importantly, he communicated how the company would care for departing employees (14 weeks of layoffs certainly helped soften the blow).
The situation on Twitter may be an anomaly because Musk includes a wildcard, but his decisions nonetheless have a cascade effect for his company.
When you have to lay off people, it’s best to do it with compassion, says Robin Erickson, vice president of human capital at Conference Board, who studies how companies behave in crisis situations. But it’s better not to fire anyone at all. She says savings from layoffs are often short-sighted and rarely improve a company’s financial performance after a quarter or two. They also result in a number of negative outcomes, such as loss of institutional memory, productivity, and morale. Layoffs can also lead to burnout, as the remaining employees pick up the slack, causing more people to leave. Twitter workers have already reported insane workload to make up for all the layoffs and to tackle new Musk projects.
Importantly, layoffs — especially if poorly executed — hurt a company’s future hiring prospects.
“Why would anyone want to work in a place where they’ve just mistreated people?” said Erikson. “The organizations that have laid off workers will have a harder time recovering if they try to hire workers.”
Twitter will probably run into this problem right away. The layoffs were so poorly thought out that the company is already trying to reach dozens of former employees rent them back. That can be a tough sell since those employees still have options.
The unemployment rate for tech jobs is at a remarkably low 2.2 percent, according to The latest analysis from CompTIA of Bureau of Labor Statistics data, and the industry continues to grow. The recruitment market also remains strong outside the tech sector: employers added and unexpectedly high 260,000 jobs last month. Experts are calling the economic downturn a ‘jobful recession’ as it doesn’t seem to have any effect on jobs yet.
While there are certainly layoffs, they aren’t making a big dent in what is otherwise a healthy job market.
In many cases, employers hate firing people because it was so hard to hire them in the first place. Companies that took massive layoffs early in the pandemic were handicapped when the economy came back online. Twitter’s high-profile layoffs and volatile situation won’t make it an attractive place for employees to join.
Silicon Valley companies won’t always have to deal with an economic downturn, but how they behave now will affect their ability to grow when the economy is better.