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Better.com teaches us how not to downsize a company

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Better.com's vishal garg
Image Credits: Bryce Durbin/TechCrunch

Over the past four months, digital mortgage lender Better.com has conducted a mass layoff not once, but twice. The company also badly botched a mass layoff not once, but twice. 

First, on December 1, Better.com laid off about 900 employees via a Zoom video call that ended up going viral. It was hardly the first company to lay people off over Zoom during a global pandemic. But it was the manner in which it was handled that offended so many.

CEO and co-founder Vishal Garg was universally criticized for being cold and unfeeling in his approach. He also added insult to injury by days later publicly accusing affected workers of “stealing” from their colleagues and customers by being unproductive.

On top of that, just one day before, CFO Kevin Ryan sent an email to employees saying that the company would have $1 billion on its balance sheet by the end of that week. In the weeks following the layoffs, Garg “apologized” and took a month-long “break,” employees detailed how he “led by fear,” and a number of senior executives and two board members resigned.

Then, on March 8, the company laid off an estimated 3,000 of its remaining 8,000 employees in the U.S. and India and “accidentally rolled out the severance pay slips too early.” Many workers reported that they initially found out by seeing a severance check in their Workday accounts — the payroll software the company uses. When execs realized their mistake, those employees said, they deleted the checks from some people’s Workday accounts. According to one affected employee who wished to remain anonymous, the severance checks arrived without any additional communication from the company.

As we look back on these two layoffs, it’s clear that we can all likely agree on one thing: Better.com could have handled both incidents better. Obviously, layoffs are hard no matter the circumstance but sometimes necessary — especially in times like these, when we’re seeing startups again considering layoffs as a way to control cash consumption and attract new capital. We spoke to a trio of HR experts who offered some advice on how to make a layoff less painful for all involved.

“This is an example to all companies of what not to do,” Lisa Calick, director of HR Advisory Services at Wiss & Company, said of Better.com’s handling of the situation. “Communication around involuntary terminations should always be handled with tact, respect and consideration for the affected individuals.”

In the latest case, she adds, Better.com officials may have had the right plan of action, but management should have been aware of the timing of the severance payments when deciding to change the timing of their communication.

“When conducting a group layoff such as this, it is crucial to get it right,” Calick told TechCrunch. “Companies should have a clear, documented process and timeline, which is tightly managed, including a strategy around the messaging to the impacted employees. This communication should also precede any other form of notification to the affected individuals. Any company hoping to have a strong culture and trust within their organization should learn from this type of mistake.”

Allan Jones, CEO and founder of Bambee HR, agreed with Calick and pointed out that the process of laying off people takes on a new dimension in this new world of scaling remote work.

For example, in the old world, conducting a mass layoff during a Zoom call would have been “completely not OK,” Jones said.

“The new world where Zoom is the primary way in which you interact, shouldn’t that make it OK, some would say. I think that the learning here is really taking principles that have come from the old world, which is creating a respectful, honest, graceful exit for individuals,” he told TechCrunch. “I think the biggest glaring one here, which is very clear is when you’re looking to do a layoff, is that you should have a people team to help you do this gracefully. The fact that certain employees got payroll payouts before the layoff announcement is just completely unacceptable.”

In Jones’ view, companies have to be careful to not lose the care campaign, meaning that they should pay close attention to ensuring a layoff doesn’t feel like a transaction. For example, rather than notifying hundreds or thousands of people at one time that they are being let go, Jones recommends breaking them out into smaller groups.

“And maybe the burden is put on the operating executives. Maybe it takes more time. However, it’s done more gracefully,” he said. “It doesn’t matter if it takes you a couple of days. You need to give people a space where they feel comfortable vocalizing how they may feel on their exit and to make sure that the way you’re terminating and severing the relationship with them is as respectful as their engagement was with you when you employed them.

“I think the learning is, just because we’ve been able to get mass efficiency from working remotely doesn’t mean we should still try and harness that same efficiency when terminating someone.”

Charles Simikian, an HR consultant and trainer at Alliance HR Partners Consulting, spoke more generally on “how not to downsize a company.” He sent me the following list of things leadership should not do:

  • Fail to communicate the situation properly to employees.
  • Forget about the law and the WARN Act (if you have 100 or more employees).
  • Forget to cut off access to emails.
  • Not have a plan to notify vendors of new contacts.
  • Not have a plan with current projects and who will pick them up.
  • Cut employees off from health insurance immediately.
  • Cut off pay immediately — not offering even two weeks of pay. Many companies request two weeks’ notice from their employee … so companies should offer at least two weeks of severance pay.
  • Fail to have a survivors meeting after the downsizing is completed.

The WARN Act – more formally, the Worker Adjustment and Retraining Notification Act – requires that certain companies provide written notice to workers at least 60 days before layoffs. While we can’t speak to all the ways Better.com did or did not do all the things on Simikian’s list, it does appear that Better.com did in fact bypass the WARN Act in both rounds of layoffs — no Better.com WARN notices appear on the New York Department of Labor’s website

And Insider reported in December that a group of laid-off employees was geared up to file a class-action lawsuit against the company for not filing a WARN notice but ended up dropping it after the company doubled its severance pay from four weeks to eight weeks.

Many employees also expressed disappointment with the ways in which the layoffs were handled, some of them very publicly. Lan Chu, a former Better.com market sales and operations manager, in a post on LinkedIn compared her experience at Better to the one she had at Opendoor when it laid off staff. 

In her post, Chu wrote:

Several years ago, in the heat of the coronavirus pandemic, I witnessed a layoff at my former employer, Opendoor. Despite holding on to my job, I noted how the CEO exemplified a special kind of humanity within business. He, open to any public discourse, explained why the company needed to reduce staff and in what manner. After the Zoom call, those that were let go were notified by their manager: they had the day to say goodbye to their colleagues. We all had a voice to chime in on Slack for how we could help those who were affected. Opendoor created a fundraiser to support them. The CEO donated his entire yearly salary to that fund.

THIS is leadership. At the end of the day, business is business. However, a company’s success does not rely only on top-down singular decisions but the multitude of bottom-up contributions producing an afloat, flourishing, innovative, and sympathetic company.

Last Tuesday, Better had a choice to be truthful to their employees, and a second chance to instill a BETTER process to let everyone go. That didn’t happen. I, with thousands of my colleagues discovered we were no longer a part of the company by having our slack, email, and computer shutoff without notice.

Another example of a company that conducted layoffs in a more transparent and respectful manner can be found in Airbnb, according to former employees.

Eric Blattberg, a former Better.com worker who has been publicly vocal about his efforts for the affected employees to be provided health benefits for a longer period of time, shared the following statement with me:

“It’s nice that Better.com has promised to pay 12 months of COBRA premiums for 19 expecting parents and one cancer patient they laid off after our employee-led campaign internal and external pressure created a PR crisis for the company, effectively forcing Vishal to act. But that leaves 3,180 others who will only receive paid health-care coverage through the end of June. For some, that will be sufficient. But too many—single parents, non-binary workers, veterans, those with chronic illnesses—are falling through the cracks, their asks for help falling on deaf ears. Better.com should follow the example of Airbnb, which paid for 12 months of health care coverage for each of the 1,900 employees it let go in May 2020. That was just the right thing to do. It’s not too late for Better.com—or Vishal personally—to step up and do better than they have so far. They can and they should. It’s not like Vishal has a mortgage to pay.”

While it may be too late for Better.com, here’s hoping others can learn from its mistakes.

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