The prolonged funk the economy is experiencing is hitting the tech sector particularly hard. As in previous economic downturns, one of the ways companies can deal with deteriorating business prospects is by trimming head count, the dreaded "L" word. Last time this happened was in 2020 during the COVID-19 pandemic when layoffs were rampant throughout many sectors of the economy. Though unpleasant, sometimes layoffs are inevitable. That said, there is a right and a wrong way to trim your workforce, and the past few weeks have afforded an opportunity to witness both.

How is there a right way to do layoffs you may be asking yourself? One FinTech firm put on a very public masterclass in precisely how layoffs can be handled. Last week, Stripe CEO Patrick Collison sent an email to Stripe employees announcing a 14% reduction of their workforce- roughly 1,100 employees. In said message, he gave his view of the world since 2020 and the challenges it has presented to the company's business, pointed out the mistakes the company has made and took accountability for said mistakes, he explained in detail the severance package offered to those employees affected by the layoffs, and outlined the in-person conversations that would take place to reduce the company's workforce. Lastly, and details matter here, he sympathized with the grief that many talented team members would be impacted and signed the letter "Patrick and John (his brother & co-founder). You can read the letter for yourselves here.

The memo to Stripe's employees was clearly written explaining the rationale for the layoffs, showed respect and appreciation for all of the employees who've helped build the company, acknowledged mistakes in a very personal way, and even discussed how the layoffs would benefit the company's strong growth rates going forward. Generally speaking, if you are an employee not being affected by the layoffs at Stripe, you feel your management team made a difficult decision but one that was necessary for the health of the business.

Now let's look at the opposite end of the spectrum. According to an internal email sent to Twitter employees, every employee received an email stating that they will be informed of their employment status at 9 AM PT on Friday, November 4th. Here's the catch, if an employee was keeping their job, they’ll be notified via their standard work email — else they’ll be notified via their personal email address on file. No one-on-one meetings here, and notifications by 9 AM so - “If you are in an office or on your way to an office, please return home.” Hope no one was finally getting through rush hour and a few minutes from their office before having to turn around and go back home.

Twitter's layoff memo didn't disclose how many employees would be losing their jobs, severance plans provided to the affected employees who helped build the service up until that point, took no accountability for anything, gave no specifics in general - and of course left no one remaining at the company giddy and excited to work their tails off to help move the business forward. Not to mention, ex-Twitter employees are suing the company for allegedly violating the WARN Act - so there can be legal repercussions to this bull in a China shop approach taken by the company. (To learn more about the WARN Act, click here.)

Unfortunately, mass layoffs are sometimes required in order to stave off bankruptcy by a failing business. Layoff communications are not easy, but clearly though one of these two firms treated their employees with respect and dignity - and one did not. Improperly handled layoffs have consequences. Some of these include the erosion of loyalty by remaining employees, loss of institutional knowledge, destruction of their employer brand, potential legal liabilities, not to mention the chaos that is sure to ensue. There is already news of several additional key C-level executives stepping down voluntarily at Twitter.

The jury is proverbially still out on whether or not Musk’s takeover of Twitter and subsequent layoffs will put the company on better footing and eventually succeed, but his ownership has not gotten off to a promising start.

If your business is struggling and you need help with a workforce reduction plan, let’s talk. We’re here to help ensure you do so with a minimal disruption to your business as possible.