In the wake of the Better.com debacle, 3 CEOs who have laid off workers explain how they deliver bad news
First he fired 900 employees over Zoom. Now, he’s out of a job.
Vishal Garg, CEO of virtual mortgage lender Better.com, received widespread ire this week for the tone deaf video meeting he held last Wednesday. After several days of backlash from all corners of the internet, and among Better’s remaining staff, on Friday morning, the company’s board of directors announced, in an email obtained by Fortune, that Garg would be taking time off from the company, effective immediately. Better CFO, Kevin Ryan, will be replacing him on an interim basis.
Though Garg later apologized and admitted he “blundered” the layoff, workers say his haphazard approach is far from unprecedented. Two current employees and an ex-staffer told Fortune this week Garg known to be erratic both on the company’s Slack channels and in meetings. “His tone was extremely harsh and threatening,” a current employee who was on a recent inflammatory company call with Garg told Fortune; two others said Garg had said the next year would be a “bloodbath.”
While Garg’s odyssey has been an almost comical case study in bad leadership, it has led to some soul-searching in certain quarters as leaders ponder how best to deliver bad news to employees, especially if it’s something as severe as mass layoffs right before the holidays.
It’s an issue that Robert Chmielwski, co-founder and CEO of digital real estate leasing platform ShareSpace has thought a lot about, especially given the real estate sector’s constant boom and bust cycles. “At the end of the day, there is no way to fire someone compassionately,” he told Fortune. At ShareSpace, he approaches layoffs in the most ethical manner possible, both in terms of social dynamic and the compensation. “We see layoffs as a cost of doing business, and the time an individual invested into our company should still be duly compensated.”
Chmielwski has developed a rough script for laying off a worker that highlights that person’s individual contributions during their tenure. He starts by acknowledging that most of these workers are likely in the midst of longer-term projects that they won’t be able to finish by the end of their notice period. “‘Let’s now identify projects that are important to you and figure out how to pass the rest on to others in the company.'” He adds that, “‘As an employer, I’m going to help you do that, and we’re going to come out of this meeting with a plan for the near future.'”
With this script, a laid off worker can leave with a clean slate and some degree of satisfaction, Chmielweski says, which goes a long way toward how they feel about the time they spent there.
Danger of bad communication
Rajeev Kapur, CEO of marketing firm 1105 Media, says, despite what the leaked Better video may imply, in a typical mass layoff, people aren’t surprised. “There was a big failure of communication here,” Kapur told Fortune. “When Covid-19 hit, I told my company we’re going to be challenged, and I pointed to where we had problems.”
Better.com, on the other hand, had just received a $750 million cash infusion from SoftBank, its primary backer, less than a week before the 900-person layoff, which Kapur calls “the absolute worst case perfect storm.”
It’s not just Garg who should leave the company, Kapur said. Better’s board of directors, who must have known the layoffs were coming, “needs to be completely expunged.”
“There’s blame all around, but I think the damage is done, from a reputation perspective,” he said. “Bigger criticism needs to come for the company for not communicating their problems.”
Hedda Bird, founder and director of HR consultancy 3C Performance Management, agrees with Kapur that the botched layoff is mainly tied to a failure of communication.
“It was a mass layoff of 10% of the workforce, not 50%,” she told Fortune. “All those people would’ve had a manager somewhere; they should’ve gotten the news one-on-one from their manager, really clearly, up-front.”
The most compassionate way to approach layoffs, which are always a difficult task, is to start with the reassurance that the move is unrelated to performance but rather about needing to reshape in response to the market, Bird said.
“Then, put stuff in writing, and invite people to join later in the day with questions they’ve got, because they aren’t going to be listening immediately after they get the news.”
This could’ve been executed at Better, had Garg considered it a priority, she said. “That’s a lot of time for 900 people to have a one-on-one call, but wouldn’t that have been better? Ninety percent of the company is still left; how do they feel about the way they handled that—showing no empathy with the people they laid off, especially since it’s about to be Christmas?”
Avoiding further fallout
An ethical approach to layoffs has never been more crucial. Today, and especially during the pandemic, mass layoffs, to the tune of even several thousand workers at once, are not at all uncommon, and have become more a representation of a company’s shaky financial standing than its failure of character.
This hasn’t always been the case. Until the 1970s, the rare mass layoff was considered “a sign of corporate failure and a violation of acceptable business behavior,” Louis Uchitelle wrote in his book, “The Disposable American,” according to a Quartz article on the history of mass layoffs.
Companies have an ethical obligation to help laid-off workers get settled in a new role, Sucher told Quartz. “If you liked the person well enough to keep them employed, you should care enough about them to hope you can help them with some dedicated effort to get them reemployed,” she said.
She called out tech giant Nokia, which, after laying off 18,000 workers in 2011, invested over $50 million in a program called Bridge that was aimed at helping them move forward. Bridge included everything from job-search assistance to grants for returning to school or launching a business.
If remaining staff disapprove of the CEO’s approach, they’re more likely to leave en masse, Bird said, which only worsens the company’s position. “Employees look at the CEO and think, ‘do I want to stay around and risk being treated like that?’”
The answer to that question is often no; in a 2018 Harvard Business Review article, professor Sandra Sucher cited a study finding that downsizing a workforce by 1% leads to a 31% increase in voluntary turnover the next year.
The wheels are already in motion. Better’s three most senior communications representatives, marketing head Melanie Hahn, public relations head Tanya Hayre Gillogley, and communications vice president Patrick Lenihan, have all resigned.
The perils of an echo chamber
Bird said she knows many CEOs who believe they understand the people who work for them, but don’t. “it’s hard to get good feedback from people around you; they’re yes men,” she said.
To ensure a steady stream of honest feedback, all CEOs should have a solid internal comms crew who do internal pulse surveys, gather broad data and deliver honest assessments on leadership and trust levels within the company.
Kapur agrees; if the boss believes they’re the smartest person in the room, he said, they have to make a change. “The CEO just can’t be surrounded by yes men.”
“CEOs don’t realize how much they’re being watched all the time, and constantly being judged,” Bird said. Organizational culture comes from the CEO, whether they like it or not, she added, but they have the option to remove their personality from their business identity.
“Maybe if you’re a founder, your identity is tied to the brand,” she said. “But part of being successful and growing the company is saying, this isn’t just about me, I’m not the only voice here.”
Even CEOs who witnessed the fallout and Better and avowedly believe they’re nothing like Garg and would never do something similar, Bird nonetheless encourages those CEOs to seek out external views from people they trust not to flatter them.
“External input could really actually change their view of who they really think they are,” she said. “It doesn’t matter how the CEO thinks he’s doing; what matters is what everyone else thinks. There’s now a narrative about Better.com, and whether that’s what was intended is neither here nor there; it’s the narrative, so it’s become the truth.”
“If your internal comms feedback says something you don’t like, there’s an instant reaction to weed it out, but that’s a red flag,” Bird said. “The moment you reject feedback because you don’t like it, that’s when you, as a leader, need to call a halt.”
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