How to Lay People Off Well
At a crypto event this week, it’s pretty much the first time in many people’s careers here that things have contracted as a sector. For others, the last time there was a correction was 2018; before that, the industry was too small to really have institutions, so there weren’t institutional layoffs, just small projects which kind of died, and founders which went on to do other things. Right now, we’re (maybe coming out of the depths of?) a crypto industry correction, while the broader tech industry is also cutting back (but, mostly just going back to pre-Covid trend).
Lots of superficial signs: Way less stupid flashy wealth being shown off, even by people who do have a lot of money. Smaller event staff budgets at what events are happening, and a lot of cosponsorships of things which previously might have been solo. This event (ETH Denver) isn’t really known for being flashy or corporate anyway, so maybe it’s not that big a change, but it all feels much more like 2016/pre-ICO insanity, which is very nice.
One thing that has come up today in talking with people: projects and companies cutting back, and some people newly being without jobs. I’ve been in tech since the 1990s, and somehow always avoided the epicenter of pain myself, but know people who have been affected each time.
Some basic advice for companies cutting back:
Highest duty is to keeping the company/project alive (while complying with the law and other obligations).
Keeping people around while the company dies because it’s starved of resources is actually worse for them than letting them go early and trying to save the remaining business.
Come up with a plan (with senior leadership) quickly once it’s clear you’re running out of money/additional funding isn’t coming. You’ll want to keep this planning secret.
Work with legal counsel (and HR) to ensure you’re complying with all applicable laws and regulations.
One single sufficiently-deep cutback, explained to the company clearly, is far less damaging to morale than losing a few people at a time over months — because everyone will worry if they or their specific partners on projects is next in the latter case.
Treat people well as they’re leaving — lots of ways to do this. Layoffs on the first of the month vs. the end of the month provide health insurance for a longer period. H1B or other visa-dependent workers need as much time as possible to find other employment.
If financially possible, provide the most generous severance possible. This helps those leaving, and also makes those remaining more confident that the company is treating people well.
Ideally, cut back on other non-personnel expenses at the same time, for things which are not absolutely critical. It both saves money and demonstrates that the company cares about its financial health.
Ensure a clear path to success is communicated to staff, and that these reductions were all necessary to accomplish it.
It may be the case that some entire projects and parts of a company are cut, while other parts are expanded; this can be hard to communicate to employees and to the overall market.
Generally, best practice is to handle termination through locking access to systems. This can disrupt the lives of employees who have made incidental personal use of email addresses, etc., and there are various ways to address this. Also, from an information security perspective, ensure all access is terminated; if you do not have an effective single sign on/identity management system in place, this can be challenging.
Help people find new jobs through recommendations/referrals/etc. Especially at smaller teams, a personal referral from founder/CEO to others can be very valuable.