Workplace

Don’t be Carvana: How to do a mass layoff

Layoffs are happening in tech, and some will happen on Zoom. How can companies handle them in the least painful way?

Upset person on laptop

As the market turns and more tech companies announce cuts, it’s worth asking whether firing employees en masse over Zoom is ever acceptable.

Photo: Luis Alvarez via Getty Images

Knela Tracy woke up to an unsettling email on Tuesday. Carvana, the used car website where she was still in training to work in the underwriting department, was laying off 2,500 employees — but didn’t say who would be affected.

A few hours later, Tracy’s Gmail and Slack accounts were deactivated. One of her co-workers had to follow her on Instagram just to message her about what was going on, she said.

Then came the mass Zoom call. Carvana held more than one to notify workers of the layoffs.

“It was just, like, ‘You’re fired. Here’s your severance package. Have a good day,’” Tracy told Protocol. “There needs to be a little bit more of a human element, to make it feel like they’re actually feeling bad about it.”

A Carvana spokesperson told Protocol earlier this week that the company had “as many conversations as we could in person,” and that fewer than half of the 2,500 layoffs were announced via Zoom. But Tracy still felt “terrible” about being fired on a mass Zoom call, a sentiment that a number of her colleagues echoed on Twitter.

Layoffs are always tough, and the era of remote and hybrid work poses even more challenges when announcing staff cuts. As the market turns and more tech companies announce cuts, it’s worth asking whether firing employees en masse over Zoom — a tactic used by Better.com and TripActions before Carvana — is ever acceptable.

Are Zoom layoffs OK?

TripActions grabbed headlines in 2020 for its round of layoffs, though company spokesperson Kelly Soderlund pointed out that those cuts came at the beginning of the pandemic, when offices were empty and remote layoffs were uncharted territory.

“Essentially, we were the first and we took the hit in the press on that, which is fine,” Soderlund said. “But the layoffs we were forced to do in 2020 feel very different from the layoffs being enacted by companies now.”

Now, companies have more choices — and more precedent — when it comes to how they handle big cuts.

Betsy Leatherman, global president of Consulting Services for Leadership Circle, an executive coaching and assessment company, said she would avoid mass Zoom layoffs “at all costs.” Instead, Leatherman said managers should notify employees directly.

“It would be an hour and a half or two hours of chaos,” Leatherman said. “But I bet you could do that.”

Even laying off employees in groups of five or 10 is far better than telling dozens or hundreds of them at once, Leatherman said.

A former Better.com executive who spoke to Protocol on the condition of anonymity agreed that mass Zoom layoffs are never the right approach.

“It was barbaric. It was inhumane,” the former exec said of the layoffs at Better. “Being told on a mass video call, and then all of a sudden, it spreads like wildfire — I don’t think that’s the right way to do it.” Better.com did not immediately respond to a request for comment.

But not everyone agrees that Zoom layoffs are necessarily a faux pas.

Sandra Sucher, a Harvard Business School professor who wrote “The Power of Trust: How Companies Build It, Lose It, Regain It,” said it can be OK to announce a layoff in a mass email or on a large Zoom call. This is an important opportunity for the CEO or other business leader to apologize for the layoff, explain why it’s happening and take responsibility for the decisions that led to it.

When companies go this route, employees should then get to talk directly with their managers, Sucher said.

“That gives people a chance to connect with whomever it is that they know the most — even in a remote work environment — and to hear the news on a personal basis,” Sucher said. “That also gives people a chance to ask questions.”

Carvana didn’t do any of this, according to Tracy.

“If I was able to just talk to someone for at least 10 minutes, just to get a little bit of clarity,” Tracy said. “We weren’t even told why we were being laid off, really. It was ‘restructuring,’ but obviously that just means they hired too many people.”

Don’t over-hire

Hiring conservatively is one lesson that Khaled Hussein learned when he laid off almost half of his employees at Tilt, the fintech company that he sold to Airbnb in 2017. Tilt had been able to raise funding easily — at one point reaching a valuation of $400 million — and its leaders “drank the Kool-Aid” of hiring faster than the company was growing, Hussein said.

This type of over-hiring is a common story of the last couple of years. Many companies are finding that the huge surge of growth during the pandemic era is leaving them without much room to run.

When job cuts can’t be avoided, Hussein — now the co-founder and CEO of recruiting startup Betterleap — said it’s crucial for leaders to make themselves available to their employees.

“In those moments, every CEO wants to hide. It’s painful. And this is when you need to do the complete opposite: You need to be very available,” Hussein said. “You need to have the Q&A, you need to be there, you need to answer all the questions.”

Open avenues of communication when possible

In Carvana’s case, the Zoom chat function was disabled and employees had no way to ask questions, Tracy said.

“We could have at least been opened up to questions at the end,” Tracy said. “It just felt like it was very transactional.”

Even without an open Zoom chat, Carvana could have offered another way for employees to submit questions, such as a Google Form, Hussein said. Blocking communication is “painful,” Hussein said.

“I understand emotionally what they want to do, that they want to avoid the pain,” Hussein said. “But the best way is just to go through it.”

People leaders are key to handling these processes well. The former Better.com executive said the company should have involved HR, or at least some outside help, “at every aspect.” But the company didn’t have much of an HR team, the exec said.

How much notice?

Sucher recommends giving employees advance notice of the layoff rather than firing them on the spot. Some companies she’s studied gave as much as six months or a year of notice, but that’s in a particularly stable business environment, she said.

Giving advance notice isn’t common, but Sucher sees it as “clearly best practice” in that it allows employees to prepare.

“The notion that you owe people advance notice is both humane, respectful and a responsible way to manage,” Sucher said.

Leatherman is more sympathetic to on-the-spot layoffs. Financially driven job cuts should take place as soon as possible, she said, while layoffs for other reasons — shutting down a product line or selling off part of the business, for example — can merit more advance notice because it gives employees time to transition to another group.

But in cases where employees are leaving the company, news of a layoff can hurt morale and de-motivate employees, Leatherman said. Better.com’s performance has reportedly been hurt by the hit to morale that its series of layoffs has caused. In those situations, it likely makes sense to cut ties sooner.

“Even really, really, hardworking, great, driven employees can change,” Leatherman said. “You don’t want to taint the culture before they leave.”

What about severance?

Tracy is getting four weeks of severance pay from Carvana, which she said was fair, though she worries about her colleagues who are supporting families. She’s also worried about when she’ll receive her severance, because Carvana won’t issue it until employees ship back their equipment. Tracy hasn’t received her shipping box yet, she said.

“They’re notorious for not sending the boxes on time, so that money is going to be delayed for me,” Tracy said, noting that she had to delay her start date by a week because Carvana was late sending her equipment. “And financially, I kind of need that money now.”

Late or short severance payments can certainly rub salt in the wound for workers hit by layoffs. One high-profile example took place at Better.com, where laid-off employees have accused the company of underpaying their severance.

If financially feasible, Hussein recommended letting laid-off employees keep their computers, which can help them look for other jobs.

“Especially [in] low-paying jobs, that laptop would mean a lot more to that individual than to the company as an asset,” Hussein said. “It goes back to the underlying principle of being compassionate.”

This story was updated on May 13 to include a statement from TripActions and to clarify the circumstances of the Carvana layoffs.

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