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There’s no such thing as a perfect layoff

Dear readers,

Covid-19 continues to wreak havoc on the economy, and founders are forced to find ways to reduce burn and extend runway. As a result, layoffs have become increasingly common among tech companies, and there’s a lot of advice floating around on how best to do it.

Common tips include:

  • Do it fast and communicate transparently.
  • Do it once and do it well. Don’t suffer death by a thousand cuts.
  • Be humane. Speak with everyone personally and help them move on as soon as possible.

While these are sound suggestions that founders should consider, I don’t believe there’s a perfect layoff plan. Carrying out layoffs is like cutting off an arm to save the whole body. You know you have to do it, but just the thought of it and the act itself will hurt a great deal no matter how much you prepare for it. After the surgery, you will need time to heal and so your body can get used to its new normal.

We cover a fair bit of layoff-related stories and regularly receive letters from employees complaining about their employers. By sharing my thoughts candidly, I hope to provide some helpful perspectives during this difficult period:

1. It’s likely our first time to experience a layoff.

What goes up must come down. And hey, even a titan like Alibaba once went through a rough patch.

We enjoyed a tech boom that lasted for almost 10 years. Even if Covid-19 didn’t happen, a market correction was imminent. Most companies were set up less than a decade ago, so this pandemic is likely the first big challenge we’re facing. And for many founders, this is probably the first time that they have to let go of staff.

The same goes for the relatively young employees in tech – this is probably their first encounter with layoffs. And just like any kind of breakup, the outcome tends to be unpleasant, no matter how well we plan it out.

2. It is OK to be angry or upset.

No one likes layoffs – not the executor and definitely not the receiver. So it’s OK to be upset or get angry. Take your time to grieve, but don’t do anything that may jeopardize your future.

The best people I know always look at the bright side of life and move on to their next adventure. There are three zones you can live in and you get to choose where you want to be:

  1. Fear zone (unhealthiest): You think that life is unfair, so you complain and forward all the silly messages you can find.
  2. Learning zone (healthy): You recognize that this is happening to everyone. This enables you to identify your emotions and become aware of the situation.
  3. Growth zone (healthiest): You’re patient and on the lookout for opportunities. You’re making good use of your time.

Don’t forget the colleagues who are still at the company. It’s hard for those who are going, but it also ain’t easy for those who are staying. It helps to leave with gratitude in your heart.

Last but not least, founders are humans too, and they have emotions. They have to continue running the show and protect the rest of the company. They’re doing their best, but it’s understandable if disgruntled employees don’t think that’s the case.

3. Founders have to be transparent.

Whatever is causing the fuck-up, own up to it and explain why. It’s better to take responsibility for the problem and work on the root issues – usually it’s the founders themselves. Don’t deflect and put the blame on something else.

Covid-19 is the perfect storm for masking failures that lead to hard decisions. If you’re a founder, have some heart and speak honestly. Your teammates deserve to know the truth.

4. There’s no one-size-fits-all severance package.

Everyone has different needs and wants. Some want money while some want to save face – it can be hard to decipher. There were occasions when unhappy employees have demanded “better treatment” to get a more favorable severance package. The conversation usually goes along these lines:

“Hey, Mr. Bossman! Please just look at XYZ company and learn how they lay off their employees with kindness. What you did really isn’t fair because [insert reasons]. You mean all of our hard work is worth just [X severance package]? We deserve better!

Let me tell you, it’s not even about the money. It’s how you communicated the layoff and treated people. The values you printed on the office walls aren’t real. You should be ashamed of yourself.”

I believe founders should follow local regulations and give what they can without putting the company’s cash position, existing employees, and future growth on the line.

On the other hand, it’s really OK for employees to ask for a better severance package. If that’s what you need for the next chapter of your life, just go for it. Don’t put on a show and beat around the bush. It’s unhealthy and reflects badly on you.

5. There’s no perfect layoff plan.

Planning for a layoff is a herculean task. If you cut too deep, you may lose the opportunity for future growth. If you don’t cut enough now, you risk having to cut more later, which will dampen morale further.

If you communicate swiftly, you’re seen as reckless and emotionless. But if you drag it out, people will question why you have to prolong the pain,  “Just tell me the truth already!”

There are so many other factors to consider, including:

  • Are layoffs necessary or will pay cuts suffice?
  • If layoffs are necessary, who gets cut?
  • How can the company justify it? Is cutting just a numbers exercise?
  • How does the company communicate the move?
  • How much severance can the company give without killing the business?
  • How does the company maintain the morale of existing team members?
  • How can the company help ex-employees to move on?
  • How does the company engage with the press?

Some are pointing to Airbnb as the gold standard for executing layoffs, and I agree. Brian Chesky wrote a beautiful letter and has a good heart. But let’s also be honest: Airbnb can do such an amazing job because it has capital and resources. Can you imagine writing an emotional letter but offering a severance package worth only two weeks of base pay?

Unfortunately, that isn’t the case for most companies. The core reason for layoffs is the lack of cash – there isn’t enough in the bank for everyone.

6. Our July 2018 layoff wasn’t perfect, either.

About two years ago, we executed a layoff. Because of my poor leadership – building too many products at one go – I had to let go of 31 team members. Morale took a hit and that number ballooned to over 70 good people who left – most of them voluntarily – at the end of the emotional ride.

It took me a while to recover from that, so I can empathize how hard it is for employees and founders who have to walk through the same path. My heart is with you. If you persevere and pull through, you will discover a lot about yourself. You may even find the ordeal as a necessary lesson.

This was my endnote in the company-wide letter addressing the layoff two years ago:

“This will forever be a sad week in Tech in Asia’s history, and we are truly sorry for causing hiccups and friction in everyone’s lives. We don’t wish for this outcome while building a company.

For those who are staying to fight, let’s make this week’s pain and sacrifice count. Make it count by winning, make it count by being profitable, make it count so we don’t further let down the team members we have painfully chosen to leave behind today.”

This dreadful but necessary optimization and our readers’ support helped us move on and build a better Tech in Asia for everyone.

To those who got hurt during the layoff, I’m sorry. It was never your fault. I hope that you’ve recovered and I trust that you’ve gotten to a better place in life.

Thank you. 🙏