layoffs
Careers Fintech Weekend Read

Fintech Layoffs: What’s the Best Way to Sack People?

Whether it’s sacking 900 staff in a two-minute zoom call or informing 700 employees in a pre-recorded message they’d know their fate via email in up to 48 hours, it seems that fintech bosses have an idiosyncratic way of firing staff.

The question of the right and wrong way to fire staff is currently particularly pertinent, given the recent brutal job cuts across the industry and fears of more to come if we see more Silicon Valley Bank-like collapses.

Earlier this month, accounting fintech Xero became the latest to join the list, laying off between 700 and 800 staff (around 15 per cent of its workforce).

Other fintechs to lay off staff in March alone include TradeWindow, Wave Financial, Catch and Comparis, with nearly 300 fintechs making layoffs this year, according to layoffs.fyi.

In total, more than 127,000 employees have been laid off at 1,525 tech firms since Covid began, with the fintech sector making up nearly 20 per cent of the firms, according to fintech-turned-HR company Deel.

Alex Jimenez
Alex Jimenez

While sacking staff is never easy, particularly in light of an impending recession, it seems fintech leaders have something of an unwanted reputation for misfiring their firings.

Alex Jimenez, a fintech consultant, said: “I see tech firms being much more cowardly by announcing staff cuts via email, texts, or Slack messages.

“This industry is very small. Your firm may someday deal with someone that was made redundant. You want them to have a positive attitude toward the company despite these situations. Be human! Don’t follow Elon Musk’s example.”

David Brent-style firings

Top of the offenders’ list, critics say, is the David Brent-style firings of thousands of staff by the CEOs of Better.com and Klarna, which garnered wide media attention and much public ridicule.

In 2021, Vishal Garg, the founder and CEO of US mortgage firm Better.com, fired 900 workers over Zoom.

“If you’re on this call, you’re part of the unlucky group being laid off,” workers were informed by Garg who, perhaps hoping staff would empathise with his ordeal, added “the last time I did it I cried. This time I hope to be stronger”.

Staff didn’t empathise and reacted badly with one deeming it “very callous”.

“My heart just sank. I haven’t been a part of something like that before”, they added.

Better.com was not alone and six months later US used car firm Carvana let 2,500 workers go in a similar manner, some during Zoom calls, some via email.

Klarna CEO and co-founder Sebastian Siemiatkowski has also been accused of blundering a mass culling of staff.  In 2021, he announced 700 job cuts in a pre-recorded message, after which workers had to wait up to 48 hours for an email telling them whether they were part of the affected group.

Arguably, exacerbating the situation, the Klarna CEO, in an intended act of goodwill, then shared on LinkedIn the names of more than 500 of the employees who had been sacked.

Although the employees had agreed to have their names added to the list, compiled by a Klarna employee, this did not stop Siemiatkowski from being accused of a “tone deaf” approach for sharing it on his social media channel.

The right and wrong way to sack staff

Jimenez says he has experienced two sackings in his career (he didn’t share details of the companies involved), one which was as “good as an experience as it could be” and the other when he was made to feel like “a criminal”.

He said: “Following a merger, I was part of a large group of people that were made redundant. I wasn’t surprised that it happened but nevertheless it was a bit of a shock that I was included.

“In that instance, everyone was told directly and swiftly giving them all the details of why and what they would be expecting.

“I was told what help the company was offering beyond the standard. I was able to ask questions and felt like I had a little bit of control over the situation. Then I had a few days to finish up work and say goodbyes. I believe that was as good as an experience as it could be.

“In another instance, I was part of a small reorganisation where my team was eliminated completely.

“In that case, I was summoned to headquarters, told swiftly but not given a reason for the decision. I was escorted immediately out, making me feel like I was a criminal. My belongings were given to me another day.”

CEOs taking responsibility for sackings

Of late, however, fintech CEOs have been getting some kudos for taking responsibility for sackings, putting the blame firmly on their own shoulders.

Announcing a 14 per cent cut to its workforce late last year, Stripe co-founder Patrick Collison who started the payment company in 2010 with his brother John, said in an email to employees: “John and I are fully responsible for the decisions leading up to it”.

Likewise, Coinbase CEO and co-founder Brian Armstrong said last year that he took full “accountability for how we got here. I am the CEO, and the buck stops with me” when announcing an 18 per cent cut to its workforce.

Similarly, Meta CEO Mark Zuckerberg and Google CEO Sundar Pichal have publicly took made themselves accountable for jobs cuts at their organisations.

Bosses must remain focused on employer reputation
Jill Aburrow, Heartfelt HR
Jill Aburrow, Heartfelt HR

Jill Aburrow, who runs HR outfit Heartfelt HR, said amid job cuts bosses must remain focussed on employer reputation.

Aburrow said: “Fintech bosses would be wise to keep an eye on their employer reputation. Gen Z employees (the younger end, and fresh graduates coming into business now) are much more aware of ethical and sustainability issues.

“This includes the ethics of potential employees and suppliers, so if they see the company is not dealing with layoffs kindly, they will avoid that employer.”

Redundancies should be carried out with “care”, “kindness” and “compassion”, added Aburrow.

“Employers should provide support with outplacement, proper consultation, training for the managers who are giving the message and time for employees to digest the news and come to terms with the situation.

“All of these are investments which any business would be best advised to consider to make the process fairer and run more smoothly.”

Berat Kjamili, co-founder of Turkish refugee-aiding fintech Migport said transparency is key when laying staff off.

“Fintech startups facing the difficult decision to lay off staff can benefit from following some best practices. This includes transparent communication with employees, considering alternative options, and prioritising support for affected employees.”

He also said that laid off staff have the skill sets to go on and launch their own fintech companies.

Employees doubting the stability of big tech players

But amid the doom and gloom of job layoffs, some fintechs believe a change in mindset is upon tech workers, which is proving beneficial to fintechs.

Laurent Descout, CEO of Neo
Laurent Descout, CEO of Neo

Laurent Descout, CEO of Neo, the treasury management fintech, said: “Prior to the recent layoffs, Big Tech was on a recruiting spree, hoovering up all sorts of talent in the market.

“Startups struggled to attract and retain the right talent as workers succumbed to the bright lights of big tech firms which offer large salaries, a wide spectrum of benefits, stability and the opportunity to work for a household name.

“However, given the size and scale of the layoffs, people are now doubting the stability of the largest players and are looking to up-and-coming smaller firms rather than the Big Tech monoliths. We’ve had more applications from senior, experienced, skilled people than ever before.”

Descout believes there is a shift with candidates opting to join smaller outfits, where they can get “meaningful equity”, rather than being a “small cog” in a big tech firm.

She added: “These types of candidates are now rethinking their priorities and there is a growing realisation that playing a bigger role in a small firm and getting meaningful equity can be a lot more fulfilling than just being a small cog in a big machine at a larger tech firm.

“For the first time in years, smaller firms can compete and beat the biggest firms in the battle for talent.”

Opportunities for fintech

Yoko Spirig, CEO of Ledgy, a fintech equity management platform, also said big tech layoffs presented opportunities for fintech and, like Descout, said tech workers were questioning the longevity of a career in tech.

Spirig said: “Hiring and retaining talent in 2021-22 was definitely tough, it seemed that every candidate had four or five offers on the table from companies with big chequebooks.

“It’s never good to see rounds of layoffs, but with thousands of experienced tech workers from the biggest tech companies seeking new challenges, there is now a real opportunity for startups and scaleups to hire top talent that knows ‘what good looks like’.

“People’s impressions of the big tech firms as being super safe and stable employers may now have changed. So in that sense, there is one more card that smaller startups have to play in competing for tech talent.”

Carrot of equity in fintech

One big carrot that fintech cab offer, Spirig, says, is equity and seeing first-hand a startup grow and flourish.

Spirig added: “Importantly, startups can offer prospective employees more competitive equity stakes, as a reward for taking the risk and joining an early-stage business.

There is also the opportunity to have a direct impact on the company as it scales, acquiring incredible experience collaborating right across a business and seeing the whole journey as the company matures.

“It’s easy to see layoffs and jump to the conclusion that there are real pressures on the fintech ecosystem.

“But it’s important to step back and remember that the pace of innovation in fintech has never been greater. I’m confident that we will continue to see innovation in the fintech sector as more legacy processes get disrupted.”

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