What is the best way to fire people?
Whether it’s firing 900 employees in a two-minute Zoom call or informing 700 employees in a pre-recorded message that they will know their fate via email in up to 48 hours, fintech CEOs seem to have a distinctive way to fire employees.
The question of the right and wrong way to fire employees is currently particularly relevant, given the recent brutal job cuts in the industry and the fear that more will come if we see more Silicon Valley Bank-which collapses.
Earlier this month, accounting fintech Zero was the last to join the list, laying off between 700 and 800 employees (around 15 percent of the workforce).
Other fintechs to lay off employees in March alone include TradeWindow, Wave Financial, Catch and Compare, with almost 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 companies since Covid started, with the fintech sector making up almost 20 percent of firms, according to the fintech-turned-HR company Part.
While firing employees is never easy, especially in light of an impending recession, fintech executives seem to have something of an unwanted reputation for botching their firings.
Alex Jimenez, a fintech consultant, said: “I see tech firms being much more timid about announcing staff cuts via email, text or Slack messages.
“This industry is very small. Your company may one day deal with someone who was made redundant. You want them to have a positive attitude towards 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, are the David Brent-style sackings of thousands of staff by CEOs of Better.com and Klarna, which received wide media attention and much public ridicule.
In 2021, Vishal Gargfounder and CEO of US mortgage company Better.com, fired 900 workers over Zoom.
“If you’re on this call, you’re part of the unlucky group that gets laid off,” the workers were informed by Garg, who perhaps hoped staff would empathize with his ordeal, adding “the last time I did it, I cried This time I hope to be stronger”.
The staff had no empathy and reacted badly with one saying it was “very callous”.
“My heart just sank. I have not been involved in anything like that before”, they added.
Better.com was not alone, and six months later became the American used car company Carvana let 2,500 workers go through a similar process, some during Zoom calls, some via email.
Klarna CEO and co-founder Sebastian Siemiatkowski has also been accused of botching a mass layoff. In 2021, he announced 700 layoffs in a pre-recorded message, after which workers had to wait up to 48 hours for an email telling them if they were part of the affected group.
No doubt exacerbating the situation, the Klarna boss, in an intended act of goodwill, then shared on LinkedIn the names of more than 500 of the employees who had been fired.
Although the employees had agreed to have their names added to the list, compiled by a Klarna employee, this did not prevent Siemiatkowski from being accused of a “tone-deaf” approach for sharing it on his social media channel.
Right and wrong way to fire employees
Jimenez says he has experienced two layoffs in his career (he did not share details about the companies involved), one that was as “good as an experience as it could be” and the other when he was made to feel like “a criminal “.
He said: “After a merger I was part of a large group of people who were made redundant. I wasn’t surprised that it happened, but still, it was a bit of a shock that I was included.
“In that case, everyone was told directly and quickly and given all the details of why and what to expect.
“I was told what help the company offers beyond the standard. I was able to ask questions and felt that I had some control over the situation. Then I had a few days to finish work and say goodbye. I think it was as good an experience as it could get.
“In another case, I was part of a small reorganization where my team was completely eliminated.
“If so, I was summoned to headquarters, quickly told, but given no reason for the decision. I was immediately escorted out, which made me feel like a criminal. My belongings were given to me another day.”
Managing directors take responsibility for dismissals
Recently, however, fintech CEOs have received some credit for taking responsibility for layoffs, placing the blame squarely on their own shoulders.
announced a 14 percent cut in its workforce late last year, Stripe co-founder Patrick Collison who started the payments company in 2010 with his brother John, said in an email to staff: “John and I are fully responsible for the decisions leading up to it”.
Likewise, Coin base CEO and co-founder Brian Armstrong said last year that he took full responsibility for how we got here. I’m the CEO and the buck stops with me” when I announced an 18 percent cut in the workforce.
Similarly, Meta CEO Mark Zuckerberg and Google CEO Sundar Pichal have publicly taken responsibility for job cuts in their organisations.
The bosses must remain focused on the employer’s reputation
Jill Aburrow, who runs the HR outfit Sincerely, HRsaid amid job cuts bosses must remain focused on employer reputation.
Aburrow said: “Fintech managers would be well advised to keep an eye on their employer’s reputation. Gen Z employees (the younger part, and graduates entering the business now) are much more aware of ethical and sustainable issues.
“This includes the ethics of potential employees and suppliers, so if they see that the company does not handle layoffs kindly, they will avoid that employer.”
Redundancies should be carried out with “care”, “kindness” and “compassion”, Aburrow added.
“Employers should provide support with redeployment, proper consultation, training of managers who give notice and time for employees to digest the news and come to terms with the situation.
“All of these are investments that any business would be well advised to consider to make the process fairer and run more smoothly.”
Berat Kjamili, co-founder of Turkish refugee aid fintech Migport said transparency is key when laying off employees.
“Fintech startups facing the difficult decision to lay off employees can benefit from following some best practices. This includes transparent communication with employees, assessing alternative options and prioritizing support for affected employees.”
He also said that laid-off employees have the skills to go on and launch their own fintech companies.
Employees who doubt the stability of large technological players
But amid the doom and gloom of layoffs, some fintechs believe a change in mindset is on tech workers, which is proving beneficial for fintechs.
Laurent Descout, managing director i Neo, The Treasury Management fintech said: “Prior to the recent layoffs, Big Tech was on a recruiting spree, snapping up all kinds of talent in the market.
“Startups struggled to attract and retain the right talent as workers succumbed to the bright lights of big tech companies that offer high salaries, a wide range 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 biggest players and are looking for 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 gain “meaningful equity”, rather than being a “small cog” in a large tech firm.
She added: “These types of candidates are now rethinking their priorities and there is a growing recognition that playing a bigger role in a small firm and getting meaningful equity can be much more fulfilling than just being a small cog in a big one machine at a major technology company.
“For the first time in many years, smaller firms can compete and beat the biggest firms in the battle for talent.”
Opportunities for fintech
Yoko Spirigmanaging director i Ledgy, a fintech equity management platform, also said major tech layoffs created opportunities for fintech and, like Descout, said tech workers are questioning the longevity of a career in tech.
Spirig said: “Hiring and retaining talent in 2021-22 was definitely tough, it seemed like 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’s now a real opportunity for startups and scaleups to hire top talent who know ‘what good looks like.’
“People’s impression of the large technology companies as super secure and stable employers may now have changed. So in that sense, it’s one more card that smaller startups have to play to compete for tech talent.”
Carrot of equity in fintech
A big carrot fintech cab offers, says Spirig, is equity and seeing a startup grow and prosper.
Spirig added: “Importantly, startups can offer potential 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, gain incredible experience collaborating across a business and see the full journey as the company matures.
“It’s easy to see layoffs and conclude that there is real pressure on the fintech ecosystem.
“But it is important to step back and remember that the pace of innovation in fintech has never been higher. I am sure we will continue to see innovation in the fintech sector as more legacy processes are disrupted.”