Tech layoffs may get worse before they get better — which means that the next few months will be full of companies trying to pivot their way to survival during this extended downturn.
At least that’s what entrepreneur Nolan Church, who helped lead Carta’s 2020 layoffs as its chief people officer, thinks. He estimates that another 30,000 to 40,000 tech employees around the world will be laid off in Q1 2023 — a number that follows the more than 100,000 layoffs so far in 2022, according to layoffs.fyi data.
Church chatted with me on Equity this past week about how his experience in the people operations world, at both Carta and DoorDash, has influenced his perspective on the best playbook for layoffs. He’s also building Continuum, a venture-backed startup that wants to match executive talent with startups for full-time and fractional opportunities. Unsurprisingly, his vision for a more flexible workforce fits well into the fact that tens of thousands of employees are now looking for work after just this week’s layoff stampede alone.
My entire conversation with Church lives now wherever you find podcasts, so take a listen if you haven’t yet. Below, we extracted four key excerpts from the interview, from canned CEO statements to how he’s thinking about Twitter’s workforce reduction.
The conversation
Let’s talk about Twitter and ownership. We saw Jack Dorsey tweet a few days after the layoff that he ultimately owns responsibility for the fact that Twitter overhired. That delay in his response created a lot of attention, which made me wonder if the bar is getting higher when it comes to the way that employees expect CEOs to take responsibility for large-scale layoffs.
Over the last 12 years, the pendulum between who has power between employees and employers has drastically swung toward employees. Now we’re in a moment where the pendulum is swinging back. If I predict where the next five to 10 years are going, the best talent is ultimately always going to be sought after. And I think employees now will continue to hold more power as they go forward. And they will remember how companies handle this moment.
To your point around Jack, very candidly, I thought [his statement] was so weak. He waited to say anything; he sent out like two sentences. As somebody who has followed Jack and has been a fan of Jack for a very long time, I thought that this was the definition of weak leadership. And I would have expected more from him. And if I was an employee thinking about working for Jack in the future, I would think twice about it.
But when we compare his statement with Elon’s statement, which was all about how Twitter was burning $4 million a day, I feel like it’s two extremes. I do feel like it’s probably a very confusing time to be an ex-Twitter employee figuring out how to make sense of this — and not see either of these leaders take ownership.
I mean, in Elon’s case, the only thing that he could own is that he paid a really high price for Twitter, given today’s current market conditions and ultimately decided to act swiftly to get their expenditures under control. He did not make the decisions to make Twitter burn $4 million a day.
Could he have had more empathy? Certainly. But him taking more responsibility? I don’t know if that’s his job. I think that that was Jack’s job. And I think Jack did a terrible job at it.
Another tactic we saw from Twitter was that it’s asking people to come back days after they were laid off. How often does this happen?
It’s an easy sound bite in the press to be like, oh man, this didn’t run well. Clearly, it could have been run better. But it’s not the first company to do this.
Very candidly, it happened when I was at Carta. And we did a layoff and the thinking from the executive team was we wanted to cut incredibly deep and cut once. And then for us, it was about a couple of months later when we saw the business rebound post-COVID.
We very quickly realized that we actually needed a lot of those folks back because the business was growing faster than we had expected, which was a good problem. At Twitter, you know, we’re talking about a number of days here. So I don’t think anything’s like, quite changed the business fundamentals. And so clearly, it was rushed with how they were going about their business.
Again, how he’s doing it, how he’s making people feel, is where I would be critical about him. But the fact that he’s doing it, I would have to say that it takes a lot of brass to make those kinds of moves. And I think a lot of founders are going to look at Elon and start to move a little bit more decisively than what we’ve seen up to this point.
Let’s zoom out. What’s the best way to conduct a layoff?
So the steps that I think about when running a layoff are:
The first thing is looking at the market and being realistic about where the world is today. Now, people should have an understanding of the new business reality, and what it will take to get to either profitability or get to something tangible to raise your next round.
From there, it’s really important to cut non-headcount expenses. Headcount is going to be 70% to 80% of a company’s operating expenses, unfortunately, so we’re going to have to get there. But if you can cut non-headcount expenses, ultimately, you could potentially be saving jobs and saving resources for you to get back on the right track.
The biggest thing is to cut once and to tuck in your top performers. So this is somewhat counterintuitive to what I’ve been seeing with other companies and startups specifically in the space right now. Many people are doing multiple cuts, which just totally zaps morale internally. It’s a bad reflection of leadership; it’s a bad reflection on our ability to plan. And ultimately, I think the best employees in those companies are wondering like, what is actually going on? And is this the right place for me to stay at? Because you’re doing these cuts, I think it’s critical to look at your top performers, and potentially to even give them increases in salary and or equity, because you need them in order to survive and reach the next milestone.
When I interview executives who are conducting layoffs, one of the first questions I’ll ask them is: Have you considered cutting executive salaries as part of this? What do you think about that tactic, because I do think we see some people do it, just to show that if the C-suite wasn’t impacted with their entire job being lost, they are taking some sort of a cut. Does it make a difference?
It really doesn’t make a difference. If you’re talking about a Series D company with hundreds or potentially thousands of employees, cutting executive pay could save a couple of jobs, certainly, but the reality is you need your best people. And so if you are making them take a pay cut, they are now loose in the saddle. And so if they leave, then you have a double whammy of a problem. And that’s why I don’t recommend it for startups, because it is symbolic. I do not believe it actually impacts the ability of the business to reach the next milestone.
Off mic
The excerpts above all share the same message: There’s no perfect way to conduct a layoff, but there are a few best practices you can use to influence how it is received by the staff, the press and the public. It feels like ownership and accountability are two of the top principles needed from chief executives during these tough times — and maybe, just maybe, the end of the canned “well, the macroeconomic environment is challenging” statement is ahead of us.
I’ll be honest: I was surprised at Church’s optimism during the episode that Musk may still come out on top here. His point that Twitter’s massive layoff may help founders move more decisively going forward is complex. Sure, Musk showed the importance of fixing operating expenses in a company losing $4 million a day, but he also showed that it’s very hard to cut deep and cut once in a way that doesn’t interrupt service (or require a reversal of that very layoff). I agree that it’s not Musk’s fault that Twitter got to this point, but I disagree that his handling of this situation may inspire a wave of startups to act similarly.
If anything, the inspiration may simply be to be more empathetic when making hard decisions. And maybe, looking at Dorsey’s response, not take too long to address the lives impacted by your mistakes.