Much of what is written about startups captures the excitement —the ambition, the process of building new businesses, and rapid growth. But inherent to these ventures is a great risk. And when things go south – as they often do- entrepreneurs face the tough task of pivoting and rationalising to survive. Frequently this involves layoffs – as we’ve seen recently with companies like troubled ed-tech company Byju’s, (laid off more than 500 people) or the health app HealthifyMe (laid off more than a hundred employees). What does it mean as a founder/ leader to let people go?
Announcing Layoffs: A Difficult Reality
Announcing layoffs is one of the hardest tasks for any leader. It’s not just about numbers; it’s about people’s lives, families, and dreams. One CEO said, ‘these are people who put their faith and effort behind you when your business was nothing’. The weight of responsibility, the sense of failure, the struggle to do right by your company can be overwhelming. It’s how you choose to do the inevitable – that really distinguishes good leadership. Navigating layoffs with empathy and integrity, acknowledging the needs of all stakeholders, and focusing forward is the key.
Be clear in your decision-making, focus forward
Layoffs often bring a sense of failure, especially in startups where every employee may have contributed to the company’s growth in the past. Leaders may struggle with the decision, feeling they’ve let their team down. It is useful to focus instead on what is critical for the company to survive to fight strong another day. Needs evolve and the team configuration must respond to that. Sachin Bansal often referred to how after eight years as CEO, he was replaced by co-founder Binny Bansal because it was the right choice for the company. Being clear as to the why and how will enable clear decisions on who needs to be let go.
Communication is key
Layoffs are nerve-wracking for all involved including leaders. Perhaps because of this, it is frequently mishandled as was seen with Better.com’s CEO Vishal Garg, who fired over 900 employees via Zoom. However scary, be available to your team. Make the announcement yourself instead of delegating to HR, be available to take questions and remember that you have multiple stakeholders to communicate to – those laid off, those staying, investors and sometimes also customers (whose points of contact with your org may change). For each of these stakeholders, have a clear consistent message. List FAQs and define your answers in advance. Communicating with empathy and courage is the key. It sends better signals about your leadership and the future prospects for the organization.
Do the best you can for those leaving
Support those having to leave in the best way possible for you. For e.g. Bhavish Aggarwal, CEO of Ola, emphasized empathy during pandemic-induced layoffs, providing extended medical insurance, outplacement support, and mental health counselling for affected employees. Similarly, CRED CEO Kunal Shah ensured those let go due to performance issues during the challenging period of the pandemic received severance packages and extended benefits. Leaders can support laid-off employees to find new opportunities. This not only helps individuals but also reinforces a leader’s commitment to their employees. Jack Dorsey, CEO of Twitter and Square, aced layoffs on two occasions but managed to maintain relationships with those let go. His engagement with Leslie Miley, an engineering manager at Twitter, led to broader discussions about diversity in tech, elevating Miley’s profile. Dorsey’s continued support for former employees like Nicole Wong, who later secured advisory roles and a position at the White House, exemplifies compassionate leadership. Similarly, Marc Benioff, CEO of Salesforce, is known for his compassionate leadership. During layoffs, Benioff didn’t just offer severance packages; he actively used his network to help employees transition to new roles. This gesture, although challenging at scale, underscores the importance of extending support beyond the employee’s time with the company.
Do it quickly and focus energies on building for the future
Because layoffs are hard, most leaders drag their feet postponing the inevitable. This deepens the uncertainty for teams and leaves a trail of unpleasantness. As middle managers are tasked with communicating to their teams, fear of “what if I’m next?” is not uncommon. Poor morale means the team cannot coalesce to rebuilding. ‘This downsizing has been going on in waves and each time they say it’s the last time. Even those left behind are really angry and nervous and it is hard to focus on building what is needed.’ – one Intel employee stated.
Leaders must be out there to respond to such anxieties. Just mere presence and willingness to take accountability can be a big signal for the commitment to rebuild. Leaders have to communicate clearly to employees to mitigate backlash and at the same time, maintain a realistic view of the company and its prospects. Offering a roadmap of how you will rebuild is reassuring and gives the team clarity on expectations and targets. Listen, be available, show a plan is in place, and show you will be at the forefront to drive it.
Get personal support for yourself
Healthcare professionals will tell you that delivering bad news brings real emotional stress for the messenger and in lay-offs, you’re doing it over and over to individuals you care about. Create support for yourself and the other leaders involved in the process. Whether it is through sessions with a counsellor, a regular circle of support, ongoing mentorship from a board member/ advisor. Invest in building personal resources to tide through this difficult time.
Announcing layoffs is never easy, but it’s a reality that start-up leaders must confront at some point in the journey of their companies. By remaining focused on the ‘why’, acknowledging the emotional toll, maintaining empathy and prioritizing support, leaders can navigate these difficult decisions with integrity and care for all involved. These principles will help you conserve your energy for the critical build forward.