Want to lay off workers more smoothly? There's a startup for that
You might have heard about the fintech company Klarna, whose CEO recently played a prerecorded video at an all-staff meeting to tell his employees that many of them were about to be laid off. The company then made them wait for up to two days, in agonizing suspense, to find out whether they were the ones getting axed. Delivering the bad news with a boilerplate script as if they were robots, Klarna's HR execs ended up sacking about 700 workers — ten percent of its workforce — via video calls. The calls lasted 2-3 minutes, and no questions were allowed. Ouch.
Or, how about Better.com, a tech mortgage company whose CEO laid off hundreds of employees in a single Zoom call — and then decided to kick them when they were down, accusing them of "stealing" from the company by not being productive enough. A few months later, in a second round of layoffs, the company accidentally sent soon-to-be-terminated workers severance checks. The problem: they hadn't yet been told they were laid off.
Sacking stories like this seem to be everywhere these days, as the tech industry grapples with nosediving valuations, stingier venture capital, and an economic slowdown. Big names like Tesla, Microsoft, Netflix, Coinbase, Lyft, and Twitter are cutting workers loose. Meta — aka Facebook — recently signaled its gearing up for layoffs. "If a direct report is coasting or is a low performer, they are not who we need; they are failing this company," a company executive told managers in a leaked memo. Low performers at Facebook may soon find themselves coasting to the unemployment line.
Smaller tech companies, which are struggling to raise money and woo investors, are getting hit even harder than the big dogs. According to layoffs.fyi, which tracks terminations, 387 startups have laid off over 56,000 employees in 2022.
But there's at least one startup that is thriving in the market turmoil. And it's sort of the perfect metaphor for the current state of tech. The company is called Continuum, and it's cashing in at layoffpalooza.
"We were not thinking about creating a layoff product when we were founding the company," says Nolan Church, Continuum's CEO. But now, if you're a startup that wants to lay off workers, this new startup can help you with that. And it just convinced a group of venture capital firms to fork over $12 million in new funding, which is pretty impressive in the current market environment.
The Layoff-Time Continuum
Church describes Continuum as a "labor marketplace for fractional executives." What are "fractional executives," you ask? That's techspeak for part-time consultants. The company, which Church co-founded in August 2020, aims to connect startups with seasoned executives who work a few hours here and there providing advice. His pitch: why spend millions recruiting and employing executives full time when you can spend only thousands employing them part time?
Continuum is basically TaskRabbit, but for high-paid executives. Whereas with TaskRabbit, you can hire gig workers to assemble furniture or repair your home, with Continuum, you can hire gig executives to consult your business — including, now, how to more smoothly, strategically, and "humanely" lay off workers.
"What ended up happening was in about March and April of this year, we had three or four customers that were already engaged with executives, leveraging those executives for layoff advice," Church explains about his company's recent shift to focusing on layoffs. "Then we started to see companies coming inbound, asking for more layoff advice."
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Continuum charges a flat fee for layoff consulting services, and the fee escalates with headcount. For companies with up to 100 employees, it costs $10,000. For those with between 100 and 250 employees, it costs $15,000. And for those with between 250 and 500 employees, it costs $20,000. If a company has more than 500 employees, Continuum's layoff services can cost more.
For this fee, Continuum offers ten hours of advising from "elite executive advisers," a plan to communicate layoffs to employees and the broader world, and an analysis to help with diversity, equity, and inclusion goals. They launched their layoff product line earlier this month, and, Church says, they've already had twelve prospective customers, in addition to six existing ones.
It can be in a company's self-interest to handle layoffs with tact and compassion. "If the company is lucky enough to survive, people will remember how they were treated during this time," Church says. "And if they were treated poorly, that will have an effect on your employer brand."
Seeing how they laid off or maltreated employees in the past, valuable workers might think twice about working for companies like Klarna or Better.com in the future. Moreover, the morale of a company's remaining employees obviously matters. If some workers are treated like garbage, it can damage overall performance and loyalty.
Church recommends that companies be kind to workers they let go and offer them at least four weeks severance pay. He advises companies cut once and cut deep to try and prevent a drip, drip, drip of agony at the company. And he says companies need to think strategically about their workers who remain, including "tucking in" their highest performers, with either cash or equity. "You want to make sure that they are there to help you get through this moment," Church says.
With the new launch of their layoff product line, a cynic might accuse Continuum of shameless opportunism, profiting from others' misery. But Church sees tremendous value in the services his company provides. He responds to this potential criticism: "I would say have some empathy for the founders and early HR people who have never done this before and who want to do this the right way."
Of course, we should also have some empathy for the workers themselves. Economic research finds that those laid off have higher mortality rates and potentially a lifetime of lower earnings. Church says one of its partners, a company called Dover, offers a website called "One Soft Landing," which tries to help laid off tech workers find new jobs. But, he admits, "there is a gap in the market to help these people, and, frankly, I wish there was more we could do."
Being laid off tends to be more harmful to workers than losing a job due to a business closure, research finds, because a layoff serves as an ominous signal to future employers. In a world of imperfect information, employers look for cues to assess the value of potential recruits, and a past layoff can brand workers as unproductive or lazy or untrustworthy. Call it the Scarlet Cover Letter.
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