When layoffs go wrong: a cautionary tale in poor communication

While the tech sector is generally healthier than a few months ago, many companies are still downsizing or, at worst, applying for bankruptcy. 

And what's evolved is a lesson in how not to make people redundant. 

Berlin-based conversational marketing platform Spectrm quietly filed preliminary bankruptcy proceedings on October 29th.

According to sources, no advance notice was given to non-executive staff. 

"Everyone was kept in the dark until the founders shared the news via a company-wide Slack message. 

"Founders assured the team everything was fine, then blindsided everyone with a Slack message out of nowhere. 

They obviously don't want this news out there, but I think it's important for others to know what happened here."

One source shared:

"I hold Max and Jendrik personally responsible for what happened. I feel there was a clear lack of transparency about the company's financial health, leaving many blindsided by the bankruptcy filing. 

While they can blame their investors all they want, the reality is, we placed our faith in these two individuals, and that trust feels deeply betrayed."

Spectrm raised $6.5 million in June 2023 and $11 million in total. I reached out to Max Koziolek, CEO and founder of Spectrm, who told me that specifically, "one of our German subsidiaries is going through preliminary insolvency as part of a restructuring. Spectrm Ltd is a Delaware-based company and is not insolvent."

Bad layoff experiences are endemic

Ask your friends, and everyone has a bad layoff story. I found out one company I worked for had filed for bankruptcy on the front page of the newspaper. And, being a freelancer, being let go is nothing new. Usually, you get an email. Occasionally, it's a Zoom meeting with someone staring at you as you digest the news and try to arrange your facial expressions appropriately. 

One company let half of my colleagues go just before their annual conference, hardly great PR.

And I'm not the only one. 

In late November Adjust, the mobile app measurement and marketing company owned by AppLovin, laid off 304 employees.

According to a company source:

"We got an automated, pre-recorded message from the CEO and then were all locked out of their devices. Such a nice, caring 'family'. 

And it gets worse with  more than one person telling me, "I got a call the following day saying I laid off in error."

For one person, the pre-recorded message was everything. "It really made me lose faith in the company. It had such a positive company culture until recently."

Fortunately, everyone was paid appropriate severance. 

Doing redundancies with grace: Lessons from HR professionals

I reached out to several HR professionals to get a feel for how redundancies should be done. Here are some of the key insights: 

Financial transparency is critical

Christian Højbo Møller,  co-founder and CEO of Zoios, asserts, "I think you have done something wrong, in your culture and communication, if bankruptcy comes as a big surprise to your people and organisation.

"In my experience, the founders and executives who manage to be transparent without losing morale are the ones who navigate the good and the bad times with high performance and more fairness."

Matthew de la Hey, CEO of HRtech startup inploi asserts that how a company handles layoffs is "a defining feature of a company's value. Transparent communication is essential, ensuring people are informed in a way that is sensitive, and which provides total clarity about the situation. Leaders must be visible and approachable throughout."

Take responsibility at the top

Everyone I spoke to stressed that layoffs are stressful for all involved — founders, hiring staff, those laid off, and the staff left behind. 

Nordström asserts that where practical, "management should have the balls to lay people off themselves alongside the person who hired the employee." 

"It's very important that there is the person who has hired this person because they feel that, okay, this person hired me, they've made a promise to me, they promised to take care of me, and now suddenly they are turning their back on me."

He notes that he's seen plenty of situations where management just disappears and leaves it to middle management. This is not only terrible PR — I've written about more than one company where the founders were partying on social media while those left behind did layoffs — but also means those affected receive less support. 

Based on workplace data, Møller shared that companies of, say 200-people that lay off even "just" 10 people or 3 people laid off in a 20 people team typically have pretty drastic implications on eNPS and motivation — driven by a lack of trust and optimism.

"Navigating situations like these is what good leadership is about, and it's not only about the immediate communication, but also how you manage the weeks and months that follow."

One source for this story reminded me that many startups make layoffs before the Christmas holidays and then throw a big Christmas party to keep morale up. Not great. 

Get some support for team leaders and management

Based on his experience as a founder, Nordström admitted that when you need to let people go it feels terrible. "It feels that you have failed them. It feels that you have failed in your most important thing, which is basically taking care of your people."

I think as a leader your most important job is to create a safe environment where everybody can thrive, and you take care of the people that you have put a lot of effort into finding the right people for the company. And then suddenly, you can't afford to have all

And it hurts, it hurts at every level." 

Not all staff are equal

Layoffs often impact the most vulnerable employees — those who lack the ability to fight back, don't have professional connections, or don't understand the legal framework, or have their visas attached to their jobs.

Milan Rataj is the co-founder and People Lead of Sloneek. He shared that company should go to the extra mile to provide support.  

"Even small gestures, like offering career counselling tips, financial aid, or recommendations for future roles, can make a big difference."

Support your staff in the transition to their new roles 

Warm introductions are invaluable in tech. Empower your staff by leveraging your network to facilitate smooth transitions into new roles. 

de la Hey highlights Airbnb's approach during their layoffs in 2020, where they created a talent directory to help affected employees find new opportunities: "That showed real commitment to helping people into their next opportunity." 

Your layoffs matter to your reputation

Rataj believes that fairness and humanity can strengthen your reputation as an employer who values their people, even in tough times:

"Even if an employee is disappointed, they may speak positively about the company if the process was fair and transparent. Ideally, they might leave with the feeling: "Yes, I was let go.

But how it was handled was so professional and humane that I would love to return if the opportunity arises." 

What to do if you are let go

I asked around for feedback, and the overwhelming advice was, don't sign anything without getting professional advice. Speak to the other people laid off, and get a lawyer."

Many people shared stories of startups trying to trick people into signing Aufhebungsvertrag (termination agreement), without giving severance.

One tech worker described their experience as gaslighting, admitting, "I'm honestly relieved I got fired and am away from it. The worst part was they finally admitted 'they hadn't known the law' after my lawyer got involved. 

"I find it hard to believe the Head of People didn't know the law; I'm 100 per cent sure they were trying it on. Especially considering they pulled the same scam on another employee a month later, even after 'finding out' from my lawyer."

Multiple people advised that workers should unionise. Join your works council, e.g. in Berlin IG Metall, ver.di, Berlin Tech Workers Coalition.

Lead image: Freepik.