Stay tuned (or skip ahead!), the survey results are in…
Twelve loyal employees hop on a Zoom call. Less than two minutes later, they’re booted off all accounts. Half-written messages to co-workers expressing their shock are forever left in suspension on Slack.
Some of these employees have been with the company for years. They stuck around even when offered bigger, better jobs. They didn’t want to leave their team hanging.
In return, they get a 15-second explanation: the market is volatile. We needed a longer runway.
Sound familiar? That’s because this story is far from unique…
Click to jump ahead:
- Infographic: Is there a “right” way to do layoffs?
- What’s causing tech layoffs in 2022?
- Where are layoffs taking place in 2022?
- Which tech industries have been hit the hardest by layoffs in 2022?
- How can companies better handle layoffs? [Survey results and analysis]
- Case study: Coinbase’s layoff
- The bottom line: planning, compassion and resources go a long way
Over 1,100 layoffs and counting
Since day one of the pandemic, 1,100+ tech startups have laid off portions of their staff. Most of these layoffs happened in 2020 — companies reacted to unprecedented times. (I know, that’s my favorite sentence too.)
But 2022 has seen a new surge of layoffs. Since January, tech layoffs tracker, Layoffs.fyi, reports over 72,900 tech workers around the world have lost their jobs. In many cases, over truncated Zoom calls with no time to ask questions, let alone blink five times fast.
Suffice to say, this is not the way.
But is there a “right” way to do layoffs?
I set out to answer this question by surveying HR and business professionals far and wide. Turns out, 71% of professionals agree there is a “best” way to do layoffs remotely. And when it comes to supporting affected employees, these pros have some sage wisdom too.
So to all the execs and HR leaders out there faced with these difficult decisions, check out this infographic and survey analysis first…
Infographic: Is there a “right” way to do layoffs?
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<img src="https://venngage-wordpress.s3.amazonaws.com/uploads/2022/08/Layoffs-Infographic-Aug-22-2022-1-1.png" alt="[INFOGRAPHIC] Is There a Right Way To Do Layoffs"/><a href="https://venngage.com/blog/layoffs-infographic">[Infographic] Is There a Right Way To Do Layoffs</a> created by <a href="https://venngage.com/">Venngage Infographic Maker</a>
What’s causing tech layoffs in 2022?
You may be wondering how we got here in the first place…
Like most major events in the last couple years, the COVID-19 pandemic played a huge part.
With normal life on hold, more people turned to online services, and the tech industry burgeoned with customers seeking digital solutions. Despite initial concerns, the economy bounced back: interest rates lowered, stocks buoyed and venture capital followed by funding many-a-startup.
Boom: tech companies ballooned in valuation. Bam: pandemic “unicorns” were born.
At the same time, employees’ priorities changed. The shift to remote work made life a lot easier for many, so when asked to return in-person, the Great Resignation began. Fueled by deep pockets and seemingly endless growth, tech companies started snatching up talent. (Coinbase, for example, nearly tripled its workforce in one year.)
We all know what happens next: in 2022, the Ukraine War hit. Stocks plummeted. Inflation reached record highs. With decreased spending and a “post-pandemic” world altering consumer behaviors, venture capital slowed too.
So now, here we are. Tech companies everywhere are being forced to reevaluate, because insane growth no longer applies. Left with no choice but to cut costs, a popular solution emerges:
Layoffs. And lots.
Where are layoffs taking place in 2022?
All of the above set the stage for the experiences of tech workers lately. In fact, over 550 tech companies have conducted layoffs this year alone, impacting the livelihoods of more than 72,900 knowledge workers around the globe.
A deeper data dive finds the United States outstripping all other countries as far as layoffs go, with the San Francisco Bay Area, New York City and Los Angeles topping the charts. Since the U.S. has the highest rate of startup investment relative to population size, it follows that the aforementioned economic deterrents have really taken a toll.
For more information, check out: Where Are Layoffs Taking Place? [Data Visualizations by Region & Company]
Which tech industries have been hit the hardest by layoffs in 2022?
Given the uptick of layoffs in tech, our next question was whether certain industries proved more susceptible than others. A dig through worldwide data revealed two industries topping the charts: finance and healthcare.
FinTech has seen over 70 layoffs this year, including investment unicorn Robinhood and Canadian investment service Wealthsimple. Meanwhile in HealthTech, San Fran-based Invitae and healthcare automation startup Olive contributed to the list of 60+ companies who’ve conducted mass layoffs in 2022.
And despite industry differences, virtually all whistle the same tune: after unprecedented pandemic gains, miscalculations followed. Then, volatile economic realities — paired with shifting consumer behaviors – led to fizzled out fantasies of growth.
For more information, check out: Which Tech Industries Are Susceptible to Layoffs? [Data Visualizations by Industry & Region]
How can companies better handle layoffs? [Survey results and analysis]
For tech startups caught in the post-pandemic economic downturn, layoffs are a sad reality — one only complicated by the complexities of remote work. But, heightened distress caused by poor management choices don’t have to be.
To avoid these situations, Venngage surveyed 30+ HR professionals, corporate leaders and experts to gain insights on how companies can better handle cutbacks.
The next section explores these findings.
What’s the best way to do a layoff remotely?
Mass layoffs can be devastating — even more so when employees are treated indiscriminately. That’s why 71% of HR professionals surveyed believe remote layoffs are best done on a 1:1 basis.
Addressing individuals as, well, individuals shows respect and consideration for the time they’ve dedicated to your company. It’s also an opportunity for leaders to explain why layoffs are happening, and take responsibility for the decisions leading up to it.
While this may be time-consuming (depending on the number of employees affected), speaking individually with your employees is the ethical choice. Human decency trumps efficiency when people’s livelihoods are on the line.
(But, if 1:1s really are too much of a logistical headache, small groups that invite dialogue are an option.)
How can companies best support laid off employees?
A good leader takes care of workers while they’re employed; a great leader continues to care for employees after they’ve moved on. So when it comes to layoffs, providing resources is your best option to ensure those impacted can smoothly transition.
From sharing unemployment resources and creating talent hubs, to introducing those affected to your networks, well over 75% of those surveyed said providing resources was key. Which is good news, because research shows 70% of employees who received outplacement services improved their opinion of former employers — and those reviews matter.
Should CEOs release a public statement when their company does a layoff?
In the same way clear communication is important for employees, 61% of respondents say addressing the public is vital.
Beyond quelling the rumor mill, a well-executed statement gives leaders a chance to explain their actions and strategic intentions on record, while providing a boost of assurance to corporate stakeholders as well.
AirBnB CEO Brian Chesky’s open letter is a great example of public statements done right.
What lesson should companies take away from the layoffs in 2022?
Two choices ranked highest when we asked respondents how companies can learn from the recent influx of layoffs:
Keep lines of communication open
No one likes being left in the dark — especially when it comes to their career. That’s why over ¼ of all respondents recommended keeping lines of communication open.
By inviting communication and being transparent about your layoff processes, you not only show regard for employees’ contributions and clear up any confusion, you affirm your understanding of the weight this decision carries. (Companies who suffer most in the court of public opinion usually fail on all three fronts.)
These will be difficult conversations to have, no doubt. But you owe employees a dignified exit. And while ongoing communication doesn’t lessen the impact, it does ensure the experience isn’t any harder than it has to be.
Hire conservatively moving forward
It should come as no surprise that ¼ of professionals surveyed urged for more conservative hiring approaches.
As you’ll recall, much of 2022’s tech layoffs were wrought from ballooning venture capital and overestimated growth. (Even big kahunas like Apple, Meta and Microsoft have instilled hiring freezes.) Faced with the need to right-size workforces and return to a more sustainable pace, we recognize now that 2021’s growth targets are no longer feasible.
Does that mean all those in tech should pump the breaks entirely?
No. But being proactive against future layoffs means learning from past mistakes. When the tides inevitably change, we’d all do well to remember that sustainability is key.
Do you have any other advice for leaders who need to do a layoff?
After analyzing the survey results from our open-ended prompt, a few themes emerged:
DON’T get caught up in personal details
When conducting layoffs, the focus should stay on laid-off employees. Yet time and time again, leaders are caught making their emotions the star of the show. (Remember the Better.com blunders? How about the HyperSocial CEO’s LinkedIn posts?)
So do your best to center those affected, be honest with them and share the facts. No matter how difficult the situation is for you, know that they have to process something a lot more challenging.
The actions you take moving forward are your key to communicating real empathy.
DON’T cut off access without explanation
Communication transcends speech and body language; our actions speak a thousand words.
With this in mind, don’t initiate conversations after you’ve already barred laid-off employees from accessing their workspaces. Beyond being confusing for the uninformed, cutting access without clarifying the reasons comes off more like a callous reprimand than a tough decision made for strategic reasons.
Again, you owe laid-off employees clear communication and a dignified exit — surreptitiously pulling the plug accomplishes neither.
Of course, there will be sensitive situations that require a nuanced approach. But by and large, you should always aim to provide an explanation, via two-way conversation, before pulling the trigger.
DO plan the process start to finish and consult professionals
Selecting which roles to eliminate is just the beginning. If you want the bad news to be received as positively as humanly possible, you’ll need to plan every aspect with diligence and care.
From notifying staff and preparing your explanation, to fielding emotions and following up with next steps, make sure to consider not only your company values, but your employees’ experiences in the actions you take.
One suggestion from the survey that I find particularly salient is to seek outside advice from experts. Whether that be lawyers, labor relations specialists or HR professionals external to your company (like those featured here), this move informs your approach with fresh perspectives, and ensures your bases are covered to boot.
DO communicate a clear path forward to support existing employees
Remember: layoffs don’t happen in a vacuum. Those left behind won’t only have to reconcile questions over their own job security — they’ll need to handle increasing workloads, a rocky workplace culture and the absences of close colleagues.
That’s why acknowledging survivors’ guilt and giving everyone time to process is just as key as communicating your company’s next steps. In the same way keeping lines of communication open with laid-off employees is vital, your remaining staff will need the confidence boost that comes from your transparency and proactivity moving forward.
Make sure those still standing are well aware of your expectations, and know who will pick up responsibilities left behind. If you’re unable to meet with team members individually, scheduling a Q&A period is a great call.
So, how do companies stack up against this advice?
In most instances, layoffs include a mix of “right” and “wrong” moves. Let’s take a look at a concrete example to put everything we’ve talked about into context…
Case study: Coinbase’s layoff
Remember how Coinbase nearly tripled its workforce?
Well, the writing on the wall prevailed: this past June, the cryptocurrency exchange platform joined the growing list of tech companies conducting layoffs. Nearly 20% of employees, or about 1,100 people, were affected.
In an email to employees later posted on Coinbase’s company blog, CEO and founder Brian Armstrong attributed the layoffs to a coming recession, a “crypto winter” and the now-familiar refrain of growing too quickly.
If our survey is anything to go by, Armstrong’s public statement was the right move to make. But, there were also a few missteps along the way.
Let’s take a look at what worked, and what could’ve been handled better:
Coinbase did well to acknowledge the decisions leading up to layoffs. They also succeeded in offering a robust severance package and resource pool:
- Minimum of 14 weeks of severance plus an additional 2 weeks for every year of employment beyond 1 year
- Access to Talent Hub, where members of Coinbase’s team will work to connect with you with open positions at other firms (including portfolio companies from Coinbase Ventures and other top crypto VC funds
- 4 months of COBRA health insurance in the US, and 4 months of mental health support globally
After all, the cost of layoffs is not solely financial — it’s emotional: a capstone meta-analysis of 324 studies found unemployed people were more distressed, less satisfied with their lives and more likely to report psychological problems. Emotional and financial upset go hand-in-hand, and Coinbase seemed to recognize that.
Yet despite taking responsibility and offering material support, many ex-employees decried their actions.
Here’s where things get a bit sticky…
What could’ve been handled better
For one, news of the company’s financial problems was not exactly…news. The value of cryptocurrency had dipped dramatically in the preceding weeks. And as the first publicly-traded crypto company, Coinbase’s stocks tanked in return.
Many employees reported flagged concerns to leadership in the days leading up. Instead, they were assured layoffs were “not in discussion”, that they should “keep chugging along as normal”.
What followed was a hiring freeze. Then, existing job offers were rescinded. Some resigned. A vote of no-confidence rumored.
And yet still no word from leadership.
Which brings us to that Tuesday, when Coinbase’s CEO broke the news by stating those affected would be notified via their personal email addresses. Armstrong cited the need to “cut access to Coinbase systems…to ensure not even a single person made a rash decision that harmed the business or themselves.”
Unsurprisingly, this move caught many off-guard — especially considering the preceding warning was M.I.A for most: their work email accounts had already been frozen.
Beyond the dismay that echoed across LinkedIn, the survey results explain why Coinbase’s remediation efforts fell short. Because despite a robust severance package, our respondents know there are some things money can’t buy…
Transparency, clarity and human-to-human conversation.
The bottom line: planning, compassion and resources go a long way
If one thing’s for sure, it’s that layoffs are difficult.
But HR, leaders and managers can help employees and companies by listening and learning from other industry professionals. With careful planning, a healthy dose of compassion and a thoughtful provision of resources, you can prove your company culture through the actions you take.
And as someone who’s been on the receiving end of a layoff, I’ll leave you with this: there are silver linings to be found.
The overall job market is still robust. Camaraderie exists amongst the chaos.
More opportunities await.