As an organization continues to grow and evolve, there will be a natural need to make changes when it comes to one's most important asset: their workforce.
There will always be a need for entrepreneurs to surround themselves with the right people - those who share the same vision, who are instilled with the same passion, and who want to help accomplish your goals. Unfortunately, as is true in most industries, there may come a time when growth constricts a bit - at which point you may have to reduce that workforce to a certain extent.
When that day comes, it's obviously an unfortunate one for all involved. But there are appropriate ways to do it and then there are certain recent examples that paint a picture of the exact wrong series of steps to make.
Reducing Your Workforce, One Step at a TimeIf you've heard of the organization Better.com, it's no doubt been for a notorious reason.
Better.com is a mortgage lending company that promises to help new homeowners find "the right mortgage to save you thousands." They offer 24 hours a day, seven days a week, 365 days a year support, zero commissions and lender feeds, along with what is dubbed as a straightforward online experience designed to take as much of the stress out of an admittedly complicated process as possible.
Better.com first made the news in December of 2021, not for the quality of their service, but for the actions of their CEO. Vishal Garg, a man who had been with the company since the beginning, made the stunning decision to fire more than 900 of the company's employees. But what was so shocking was not that he did it, but how he did it - over a Zoom call.
It turned out that anyone who had been invited to the Zoom call was getting laid off. The fact that such a mass firing took place was stunning, to say the least - and believe it or not, Better.com wasn't done quite yet. This despite the fact that, after the public relations backlash, Vishal Garg took a leave of absence from the company.
In early March of 2022, Better.com announced that it would fire more than a third of its staff. To put things in perspective, the company still had over 9,000 employees situated in both the United States and India.
Part of the problem is that Better.com had hired very aggressively in the early days of the pandemic and, when the real estate market began to take a significant uptick, this seemed justified. Mortgage rates plummeted to all-time lows and online lending was becoming more popular than ever.
Still, when the real estate market began to fluctuate, coupled with the fact that it was anticipated that the Federal Reserve will raise interest rates at some point in the not-too-distant future, the company's prospects changed.
Therefore, they made the decision to lay off or outright fire a huge number of people. This type of thing is always going to be unfortunate, but the sudden nature at which it is happening is causing a branding disaster that they might not ever recover from.
Nobody wants to lay off employees and no employee wants to get laid off. That's why, if there is any lesson to be learned from Better.com, it's that compassion is always the way to go. Sometimes reducing your workforce will be necessary - but if you go about doing so in the wrong way, you stand the chance of creating the type of reputational damage that will do far more harm in the long run.
The Harvard Business Review wrote an excellent summary of some of the right ways to handle a significant workforce reduction. The author's research indicated a 20% loss of productivity for those that made the cut and remained employed. The researchers listed several alternatives worth exploring; including retraining, a business mission pivot, adding accountability structures, or training grants for business management and trade-school courses.
The moral of the story is to step back and look at the big picture before making an emotional or short-term decision with regard to your team. The decision can have lasting results.
About Sonu Shukla, CPA, CFP
Sonu Shukla is a Certified Public Accountant as well as Certified Financial Planner. He believes in proactive tax planning and has the skills, education and experience to demonstrate passionately planned financial strategies. His firm tailors highly efficient tax plans for his small business clients, all in a one on one environment where he and the client can bounce ideas around until every detail is worked out. Located in Orlando, FL, he services all of Florida.
