On Friday, online furniture and home goods retailer Wayfair announced it was laying off about 1,650 global employees—13% of its workforce.
Despite the fact that Wayfair, per an email co-founder and CEO Niraj Shah sent to “Wayfairians” announcing the news, has been “consistently profitable” and is “gaining market share at a fast pace,” the cuts were necessary to establish a “clean organizational model.”
“I want to say thank you to the 1,650 team members who will be leaving us today,” Shah wrote. “You are all valued and talented individuals, and you have each made incredible contributions to Wayfair and our customers.” He regrets the impact the layoffs will have, he added, and will be offering severance.
The reason for the layoffs, Shah wrote, is because Wayfair “went overboard in hiring during a strong economic period,” which gradually led it away from its “core principles.” By 2019—five years after going public—Wayfair suffered from “lack of focus: Too many good ideas led to too few getting done.” That led to the company’s first round of layoffs in February 2020. Two more would follow in 2022 and 2023.
While those layoffs were challenging, Shah doesn’t regret them, saying he found that “after each reduction, we have gotten more of our goals done faster.” That’s what pushed him towards layoffs once again.
“In many ways, having too many great people is worse than having too few,” he wrote, arguing that a bloated workforce causes inefficiency, poor coordination, and investments in “lower return activities.” The company is currently struggling with each of those, “and [that’s] what we need to end.”
Work at all costs
If that email seems a bit brusque, it’s nothing compared to Shah’s email last month to employees, in which he essentially galvanized them to keep working tirelessly—eschewing work-life balance—despite strong stock performance and a return to productivity. (Wayfair’s stock surged in spring 2020 when the pandemic led to an explosion of online shopping, but then fell again in the beginning of 2022. Following Friday’s announcement—and Shah’s statement that he anticipates the layoffs will result in $280 million in yearly savings—the stock jumped over 10%.)
“Working long hours, being responsive, blending work and life, is not anything to shy away from,” he wrote in an email obtained by Business Insider. “There is not a lot of history of laziness being rewarded with success.” He said the very thought that staff need not work late is “laughably false.” For continued success, hard work is “essential” and “a key part of getting things done.”
The memo didn’t go over well. “He’s basically saying if you don’t work late then you’re lazy,” one person wrote on Reddit, as Fortune’s Orianna Rosa Royle reported last month. “Long hours don’t prove anything about productivity. It just means you worked long hours!” To be sure, poor work-life balance and too many hours on the clock is proven to worsen productivity. Some CEOs forge ahead regardless; as Royle wrote, Musk praised the workers in his China Tesla factories for “burning the 3 a.m. oil…whereas in America people are trying to avoid going to work at all.”
Then there’s the issue of morale for remaining employees—to say nothing of their ability to do their work at all. As another Wayfair employee wrote on anonymous employee review site Blind, “Repeatedly laying off and hiring workers is bad for productivity.”
Each new round of layoffs and replacements “produces more tech debt, and more time is needed for onboarding,” the employee wrote. “Documentation gets poorer and poorer as everyone is busy producing documentation that is impressive to higher-ups and not one that has technical details.”
It’s well-documented to be costlier and more time-consuming to replace a worker than to ensure longtime employees stick around. That’s to say nothing of the negative attention emails like Shah’s might draw. Even more bad news for Wayfair: There’s never been more places for discerning customers to shop online.
