Last December, Vishal Garg, CEO of mortgage lending company Better.com, convened 900 staffers on Zoom to inform them that they were laid off, effective immediately.
“If you’re on this call, you are part of the unlucky group that is being laid off,” Garg told employees, according to a recording obtained by CNN. The callous announcement came one day after the company announced it had received a $750 million cash infusion from its SPAC backers. To add insult to injury, Garg took to the anonymous workplace message board Blind the same day to accuse the laid-off employees of committing time-card fraud. When news broke of Better’s boorish firings, Garg took a monthlong hiatus from his duties, returning in mid-January.
But Better.com’s layoff troubles had only just started. An additional 3,000 employees were let go in March. And in the company’s haste to roll out severance pay, employees prematurely received severance checks in their payroll system, leaking news of the job cuts a day early. In April, a recorded staff meeting was again leaked. In the meeting, Garg confessed that the company “probably pissed away” most of the $250 million it earned last year, partly blaming the loss on a bloated workforce. Better.com’s expected SPAC merger with Aurora Acquisition Group sits in limbo as of May.
The ordeal has made Better.com the poster child for poor layoff conduct in a primarily remote world. But other tech firms, facing challenges like rising inflation and falling profits, are now resorting to slashing headcount as well.
The month of May was rife with tech layoffs. Netflix announced it was cutting 150 of its 11,000 employees on May 17. Entertainment platform Cameo announced layoffs for 25% of its staff on May 4; used car retailer Carvana announced 2,500 job cuts on May 12; and e-commerce retailer Zulily cut nearly 10% of its staff on May 16. Many others, including PayPal, Uber, Meta, and Reef Technology, have announced layoffs or hiring freezes this year. In late May, “buy now, pay later” platform Klarna announced a 10% staff cut, affecting 700 employees worldwide; fintech startup Bolt announced layoffs soon after. Both companies cited overall economic conditions as reason. More than 7,200 tech workers were laid off that week alone.
Most tech layoffs haven’t reached Better.com levels of insensitive indifference, but they still reveal widespread corporate ignorance about how to handle job cuts humanely and with tact. One Twitter executive was axed in the middle of paternity leave by the CEO, while Klarna’s clumsy approach has stirred up confusion between managers and their direct reports.
The shift to remote work has changed not only the onboarding process for new employees—with recruiting, training, and other tasks taking place over Zoom—but also the way employees are offboarded. That means companies must be especially mindful about how they go about the task, remembering that outgoing workers could be future customers and that a company’s layoff process is likely to affect its brand reputation. Terminating employees requires sensitivity and sympathy, and should not be treated like a routine staff meeting.
Communicate with empathy
Internal communication is critical for situations like layoffs, says Paige Scott, a senior partner at Kingsley Gate Partners, an executive search consulting firm. Before reaching the point where layoffs are inevitable, companies should communicate to employees the factors leading to the decision and alternative approaches that were considered as a means to avoid layoffs. The latter can include lowering salaries, reducing benefit costs, furloughs, or reduced hours. Offering transparency helps employees understand what led to this decision and not feel left in the dark, or “shafted,” as one Bolt employee wrote online.
“That becomes really important in an environment where people are not only remote physically, but they’re isolated,” Scott says. “We see some of the better firms overextending themselves with regular communication.”
When layoffs become inevitable, keep the “golden rule” in mind: Treat people the way you want to be treated. Layoffs are not a pleasant experience for either party: One side is losing its livelihood, while the other has to break the bad news. Approaching the conversation with empathy should be a top priority.
“Many tech companies are having layoffs because their fortunes are turning… They’ve got to reduce their expenses, and labor expenses are oftentimes the number one expense,” says Johnny Taylor, president and CEO of the Society for Human Resource Management. “How you deliver that to affected employees with a level of empathy is critical.”
Instead of flatly telling employees their last day is tomorrow, employers should show compassion and understanding that “people are being separated and loss of any kind is rough,” he says.
It may seem easier to rip off the Band-Aid and cut everyone loose en masse, but making these meetings as personal as possible—preferably, virtual one-on-ones—can make a big difference for those on the receiving end, burnishing the company’s reputation as an exemplary employer.
“In a perfect setting, it’s face-to-face, in person. But in this virtual environment, it’s really tough to do that,” says Scott.
Offer a hand
Providing support or employment connections for laid-off employees can be hugely helpful. Companies can offer severance packages, outplacement services, career coaching, or résumé writing benefits to exiting employees. Many are already doing so: A 2021 survey from Mercer found organizations utilizing outplacement services increased from 72% in 2018 to 80% in 2021.
SHRM has not been exempt from layoffs. When it had to cut its own payroll, the organization offered to connect employees with companies in the area that had openings. SHRM preemptively connected with these employers to ensure its workers would land an interview. “We give a soft handoff so that people have hope. That’s a big part of what we expect employers to do now.”
Losing employment also often means losing health insurance coverage for an indeterminate time. One former Netflix employee who was laid off shared on Twitter that their partner’s cancer treatment was no longer covered.
Though employers are legally required to offer continuation of health coverage (COBRA) in the U.S., the process can be confusing and tedious. Educating employees on these protections and how to access them can lessen the burden when laid off.
“People don’t even know where to go. They don’t know what COBRA is; they don’t know how to approach it; they don’t know how to apply for it. So it’s really about providing those resources, but also educating on what they are,” says Crystyl Swanson, a principal with Mercer’s mobility management program.
Expect turbulence
Now more than ever, public perception online affects employer branding. About 38% of laid-off employees have left negative reviews on their employer’s Glassdoor page, and more than one-third of job seekers have turned down a job because of poor company reviews. A 2022 survey from Mercer found that company brand and reputation are the No. 2 reason people joined their current employer. Avoiding negative fallout from layoffs is an essential factor in long-term risk reduction.
“It’s about taking a longer-term mindset around talent, brand, and really wanting to do the right thing for people, and preserving the option down the road that you may want to hire them back,” says Scott.
