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Harshly Handled Layoff Underscores Important Lessons for Leaders

December 17, 2021 | Kathy Gurchiek

A woman carrying a cardboard box full of office supplies.

Employers can learn what not to do from the actions of Vishal Garg, CEO of online mortgage company Better.com, who came under fire for what has been called his harsh, insensitive layoff of 900 employees during a Dec. 1 Zoom call.

Garg's virtual announcement took employees by surprise. He later posted anonymous comments on a message board in which he accused at least 250 affected employees of stealing from the company by working only two hours a day, Fortune reported.

His handling of the situation sparked outrage. Garg took immediate leave from work effective Dec. 3 and apologized in a Dec. 7 message to employees for how he handled the layoffs. He acknowledged that he "blundered" in how he delivered the news, noting, "I failed to show the appropriate amount of respect and appreciation for the individuals who were affected and for their contributions to Better."

Better.com is hiring a third party to conduct a culture and leadership assessment to build "a long-term sustainable and positive culture," CNN reported. Additionally, three of the company's top communications executives resigned in the wake of the mass layoff.

Natasha Bowman, J.D., cast a skeptical eye on Garg's mea culpa, calling his actions "insensitive, uncivil" and not reflective of a modern-day leader. Bowman is the author of You Can't Do That at Work: 100 Legal Mistakes That Managers Make in the Workplace (Performance ReNEW Leadership Series, 2017) and is a diversity, equity and inclusion (DE&I) professional who has spoken at Society for Human Resource Management conferences.

"The CEO's apology comes only after a large backlash to his insensitive behavior and likely will not affect the morale of the company," she said. "Additionally, the hiring of a third-party consultant is too late, as well. Why wasn't this consultant hired prior to the layoffs to coach him on how to do this while still maintaining the dignity and respect of those impacted?"

It's imperative that Better.com's new leadership "acknowledges these profound mistakes and pledges to do better," said Jason Randall, CEO of HR outsourcing company Questco, headquartered in Houston.

"This starts with authentic and frequent communication from senior-most leaders that demonstrate that they take these workplace issues seriously. It will take time and consistency to rebuild trust. A [confidential] detailed company climate survey … will also enable leadership to understand the breadth and depth of any remaining cultural damage," added Randall, author of Beyond the Superhero: Executive Leadership for the Rest of Us (ForbesBooks, 2021). "Of course, HR leaders should be front and center in this effort and are ideally situated to guide other senior leaders through the challenges ahead."

Ralf Specht, a columnist for CEO World and author of the forthcoming Building Corporate Soul: Powering Cultures and Success with the Soul System (Fast Company Press, 2022), reflected on the drama that played out.

"As long as behaviors like this are a reality, there is a lot to be done about the disconnect between corporate strategy and value-creating actions," he said. "Company culture is not just who you hire and fire, it's also how you do it. The traumatic impact on those who were let go was immense, but the effect on the 91 percent that stayed will hurt the company for years to come."

While a Zoom call "out of the blue" about layoffs may not be avoidable during this pandemic, Specht acknowledged, "you can do a lot to create a situation in which the workforce is prepared for a major layoff."

He pointed to Airbnb CEO Brian Chesky, who informed staff in an e-mail of the upcoming layoff of 1,900 people in May 2020, as a good example.

"After explaining in a very transparent way why the company had to take such drastic measures … [the e-mail] answered practical questions about severance, equity, health care [and] job support," Specht said, "including an alumni talent directory, an alumni placement team, an outside career service, an employee offered alumni support and even offered everyone to keep their company laptop."

Chesky ended the e-mail, Specht said, by noting, "'To those of you staying, one of the most important ways we can honor those who are leaving is for them to know that their contributions mattered, and that they will always be part of Airbnb's story. I am confident their work will live on, just like this mission will live on. To those leaving Airbnb, I am truly sorry. Please know this is not your fault.'"

Lessons Learned

Specht and other experts shared the following considerations for properly handling layoffs in a remote environment:

Timing. "While CEOs might be looking for budget numbers to come out better nearing the end of the year, mass layoffs are never advisable three weeks prior to Christmas," Bowman said. "Consider the incentive package that may need to carry employees for a few months as well as how they'll now be spending the holidays looking for new work."
Empathy. David Friedman, founder and CEO of Moorestown, N.J.-based CultureWise, noted the importance of recognizing that people hearing bad news will respond emotionally. He is the author of Culture by Design: How to Build a High-Performing Culture Even in the New Remote Work Environment (independently published, 2021).
"They may not be ready to hear the rest of the story or to process what this means for them," Friedman said. "Providing a written document that they can review later that includes more details [and] FAQs can be very helpful."
In his announcement, Garg said he hoped he didn't break down in tears as he had during another layoff announcement earlier in his career. Bowman advised leaders not to foist their emotions onto their employees.
"You can make a point of mentioning that the decision was difficult, but don't go on about it or ask for their sympathy," she said. "Rather, show emotion and empathy for them by acknowledging timing and concern."
3. Delivery. "Terminations should always be communicated by the manager," Specht said. "If it is a team, it might be sensible to be done by the team´s manager."
4. Resources. Garg informed employees that HR would contact them with information on benefits and severance, but they lost access to their company e-mail accounts and computers as soon as the announcement ended.
"Your laid-off employees should never be in the dark about what to expect and when," Bowman said. "Provide them with the contact information of other resources such as employee assistance programs, available therapists, pastoral care or other support resources in addition to HR."
5. Honesty. "People will see through sugarcoating the message or making it sound as if it's not really a big deal," Friedman said. "That doesn't mean a leader should be insensitive in delivering the message as this CEO was, but it's still important to be honest and share what's happening and why."
6. Fairness. "It's important that people don't feel like only certain people are stuck bearing the brunt of the pain. … [If] we're honest about what's happening, team members can better accept the news," Friedman said.