What is the most important trait of a leader? While being a great leader requires a lot of qualities, the most important is accountability. I firmly believe that a leader should be the last to reap rewards in the good times and the first to sacrifice in a crisis; which is why I am disappointed with how the recent layoffs went down.
188,386. That’s how many people lost their jobs and had their lives severely impacted between 6/1/2022 and 1/20/2023. Regardless of size and industry, company after company announced their plan to shrink workforce. Even the best of them such as Google, Amazon or Microsoft had to take the drastic measure. The message is crystal clear: cut expenses now and gear up for a brutal environment that is expected to get worse in the coming months.
The current bleak outlook is mind-blowingly in contrast with what happened just a year ago. After the WHO declared Covid a global pandemic, folks expected an economic recession. Markets nosedived in March 2020. People were forced to stay at home. Businesses and personal life disrupted. But there was no recession. Instead, the once-in-a-lifetime pandemic pulled forward years of growth for companies and industries. Stocks repeatedly hit record highs. CEOs were optimistic about the future and thought that the favorable market conditions were here to stay. As a result, companies went on a hiring spree to accommodate the growth prospects.
Until the harsh reality set in. Over the past year, the war in Ukraine, the persistent supply chain issues, the change in consumer behavior, high inflation and rate hikes by the Fed created a volatile and hostile environment for businesses. Suddenly, everything didn’t look as rosy as expected. Growth was hard to come by. The stock market contracted. Companies were left with a bloating operating expense due to over-hiring and hyped optimism. To evolve, they needed to get leaner and more efficient. Hence, tens of thousands of good people lost their livelihood.
To be clear, I don’t blame CEOs for optimistically anticipating a growth run and hiring accordingly. As top executives, they must do what is right for stakeholders. If there were actually an opportunity to grow and they didn’t act to take advantage of it, they wouldn’t do their job properly. I give them the benefit of the doubt that they made the best decision with the information they had at the time. Business is always risky and this time, the dice just didn’t fall the right away for a lot of CEOs.
With that being said, I was a little bit disappointed when I read some of the memos that were shared publicly. I applauded CEOs that were candid enough to say that they were responsible for the decisions that led to the layoffs. Below are a few examples:
On 1/20/2023, Google announced that they were cutting 12,000 jobs:
I have some difficult news to share. We’ve decided to reduce our workforce by approximately 12,000 roles. We’ve already sent a separate email to employees in the US who are affected. In other countries, this process will take longer due to local laws and practices.
This will mean saying goodbye to some incredibly talented people we worked hard to hire and have loved working with. I’m deeply sorry for that. The fact that these changes will impact the lives of Googlers weighs heavily on me, and I take full responsibility for the decisions that led us here.
On 1/4/2023, Salesforce said in a filing that they were going to reduce about 8,000 jobs, or 10% of their workforce:
However, the environment remains challenging and our customers are taking a more measured approach to their purchasing decisions. With this in mind, we’ve made the very difficult decision to reduce our workforce by about 10 percent, mostly over the coming weeks.
I’ve been thinking a lot about how we came to this moment. As our revenue accelerated through the pandemic, we hired too many people leading into this economic downturn we’re now facing, and I take responsibility for that.
Last November, Facebook decided to shrink their workforce by letting go 11,000 employees
Today I’m sharing some of the most difficult changes we’ve made in Meta’s history. I’ve decided to reduce the size of our team by about 13% and let more than 11,000 of our talented employees go. We are also taking a number of additional steps to become a leaner and more efficient company by cutting discretionary spending and extending our hiring freeze through Q1.
I want to take accountability for these decisions and for how we got here. I know this is tough for everyone, and I’m especially sorry to those impacted.
In November 2022, DoorDash cut 1,250 jobs:
As with all things, I want to start and discuss the factors in our control that led to today’s announcement and take accountability for this decision. Prior to COVID-19, DoorDash was actually undersized as a company. The pandemic presented sudden and unprecedented opportunities to serve the evolving needs of merchants, consumers and Dashers. We sped up our hiring to catch up with our growth and started many new businesses in response to feedback from our audiences.
Most of our investments are paying off, and while we’ve always been disciplined in how we have managed our business and operational metrics, we were not as rigorous as we should have been in managing our team growth. That’s on me. As a result, operating expenses grew quickly.
Stripe shrank its team by 14%
Today we’re announcing the hardest change we have had to make at Stripe to date. We’re reducing the size of our team by around 14% and saying goodbye to many talented Stripes in the process. If you are among those impacted, you will receive a notification email within the next 15 minutes. For those of you leaving: we’re very sorry to be taking this step and John and I are fully responsible for the decisions leading up to it.
It’s admirable for a leader to own up to their mistakes and admit that they were wrong. Not every leader does that. Nonetheless, in addition to the nice words, I was expecting a concrete course of action as a token of accountability and a show of togetherness. Yet, I haven’t read a single memo that mentioned a CEO’s pay cut or relinquishment of stock grants, let alone a resignation. It’s unlikely that a CEO forgoing a portion of stock grants or a year of salary will make as big an impact on a company’s financials as laying off hundreds of employees. But the sacrifice will signal to every employee that they have leaders that share their pain and sacrifice.
If that is not good enough as a reason, think about it this way: those employees that were dismissed were unlikely to have much influence on the decisions that led to the layoffs. They just did their job and followed orders. Yet, they were the first to go while the decision makers still stay. What message does that say about a company’s leadership? In the good times, Sundar Pichai, CEO of Alphabet, made $280 million in compensation in 2019, most of which came from stock awards. His base salary in 2022 dropped to $5 million. But at least he is still one of the most powerful CEOs in the world, doesn’t have to worry about making ends meet or immigration status. And his stock grants will vest again in a few years. I cannot say none of that about some of the folks that lost their jobs.
It’s not like what I argued above didn’t happen in reality. Two weeks ago, Tim Cook, CEO of Apple, requested and received a 40% pay cut. While Apple hasn’t announced any layoff yet, mainly because it is more disciplined in hiring than others, the company is not immune to the challenging environment. If they followed others in cutting jobs to please investors and chalk up their financials, nobody would blame them. Yet, the CEO voluntarily asked to have his salary reduced. That’s great leadership.
After the first two heavy losses of the season, Manchester United Manager Erik Ten Hag ordered his players to the training ground on what was supposed to be their day off. He made them run more than 13 miles as punishment for the lack of effort in said heavy defeats. What stunned everyone was that the 52-year-old boss participated in the run. He wanted the players to know that he was responsible for the disappointing results too. That act earned Ten Hag a lot of respect from his players. The team is currently in the top 4 and will likely qualify for Champions League next season. A prospect that few predicted a few months ago. The togetherness and leadership that Ten Hag showed set the foundation for the team’s current results.
We learn a lot about companies and people in good times. But we learn even more in the time of crisis. I definitely have learned a few things from the past 3 years, especially the recent months.