Introduction to the Topic of Layoffs

IWe're going to get into the subject of layoffs. Now, I know it's not a positive subject but it's one that's topical given what's happened at Spotify these past couple of weeks. We just want to talk about what goes into making layoffs why these decisions have to be made and what you should do for employees post layoffs.

With me, I have our CFO and our president actually, Bryan Wolff. Bryan's very experienced in the tech industry, and he's going to have a lot of information and a lot of really knowledgeable insights about the subject. So, he'll be able to explain to you why these things need to happen, and more importantly, how you can help your employees through this tough time.

So Bryan,  thank you so much. I don't know if I should say this, but you're one of my favorite people here at AllVoices. But yeah, if you want, just do a small intro let us get to know you some.

Getting to Know Bryan Wolff

Well, thank you, Jeffrey. I appreciate you're 1 of my favorite people voices too. Yeah, so I, I'm the president of AllVoices.

I was previously the CFO and still run the, the finance department here. You know, I've been operating and investing in technology companies for, I don't know, 13 years at this point prior to that. I worked on Wall Street as an analyst at a hedge fund.  Buying and selling securities. And before that years ago, I worked as a management consultant.

Understanding the Spotify Layoff Situation

I want to just go into the Spotify situation. Some  now last week they had to let go of 1500 employees, roughly around 13 percent of their workforce.

The Decision-Making Process Behind Layoffs

When it comes to making this decision, what goes into it from from your leadership team? What do you have to.  Like debate or, you know, how do you even make the decision of laying off that amount of people?

Yeah, it's a good question. So, I mean, to put it very simply you know, the way I think about a, a company is just a means by which resources are allocated and output gets created.  And so you hire people and amass other resources, you know, build factories and whatnot. And then those assets have together produce output and you need to generate you know, a positive return on that output and the amount of input.

And, you know, people, you hire stuff, you buy gets determined by how expensive money is right. So if rates are high,  money becomes more expensive and the threshold that you need to hit for for output changes and that's why you know, over the past 18 months and Spotify was the most recent 1, but they were also affected by this.

You saw lots of layoffs when the cost of capital changed, right? Interest rates started going up money became a lot more expensive. So even companies that were, you know, incredibly successful, incredibly profitable, you know, your Facebook's your Google's, you know, companies that growing at a fast rate, you know, generating, you know.

Billions and billions of dollars cash, they still made layoffs to because the cost of capital changed the amount of productivity, the return on investment that you needed changed and went up and so Spotify during that period during the period of you know, when money was cheap, they went on a massive hirings, they also took on, I think, a billion dollars of debt that that needs to be repaid.

And I think it comes to in 3 years. Yeah. So they hired all these people when the cost of capital was low, and then, you know, now they're seeing the returns on that investment with respect to growth with respect to different initiatives, you know, for them, whether it's getting into podcasts or increasing their margin by, you know, recommendations and you know, the return wasn't there or the return was slower than they needed. So they needed to make a major adjustment and right sizing of you know, of their company and you know, 1 more thing I'll say on this. It's  you know, days are long, but years are short, right?

Like, the number of companies that have been in the S and P 500 since it's when it was started 100 years ago. I think it was like 1 and that's G and I think they they've like, it's a totally different company now as they've sort of. Shed their  companies, just go look at a list of, you know, who are the top 10 biggest companies in the world, or even the S and P. 10 years ago, 20 years ago, 30 years ago, that list is pretty dynamic. Things change the fortunes of companies change, you know, rather rapidly  and while, you know, layoffs are certainly painful for the individual. And I've, I've been subject that myself,  it's definitely not fun. It is a necessary part of having a  vibrant economy.

Another great Bryan Wolff quote, days are long, years are short.  

The Actual Process of Conducting Layoffs

Now onto the actual process of layoffs, when you're in HR, a senior leader and you're having to make the decision of who's not making the cut what do you take into account? Do you take, you know, things like DEI, productivity, performance just want to hear your thoughts on that.

Sure. Yeah. I mean, it starts top down typically. Yeah. Absolutely.  Right where you know, it's often driven by the finance team and it relates into that you know, cost of capital and that expense level, which says, here's how much money, you know, we're currently spending. Here's our level investment today.

Here's what I want our new expense base to be tomorrow. Here's what I want. Our level of expense is to be right. So let's say in Spotify's case. I don't remember the exact number. They wanted to reduce 14 percent of their expenses. There's 17 percent of expenses. Okay. Okay. So they'll go down and, and again, I don't know exactly what they did, but I'll talk to what we've done in the past when I've conducted layoffs.

It's like, okay, well, what can we cut in terms of activities? Right? So what are our least productive activities? And sometimes those activities are, you know, maybe new products potentially new businesses, potentially new locations. And you sort of look and say, where, you know, are the least productive.

Are the least aligned with our corporate goals, right? Whatever those corporate goals are. And that's sort of the, the, the 1st lens, which is okay. Can we hit our new constraints? Our new cost basis, getting down to this level and 1 exercise that I've performed in the past. Similarly, it's called 0 based budgeting where instead of you start with your current expense base, you sort of start from the opposite.

And you say, okay, well, what do I need? Right? And that gets up to you know a different level with the end product being like, okay, this is the, the number of people we want, right? The, the, the level of investment and then when it gets into actually people, now you have to look and in some cases, you know, you'll, you'll, if you're cutting the whole department or cutting a whole region or having a whole business unit you oftentimes have to terminate everyone.

Maybe, maybe there's some high performers. There that you really don't want to lose that. You may offer other jobs to if they exist. And then you sort of, you know, oftentimes cuts are everyone has to cut a certain percentage, right? The company is, you know, 20 percent smaller the shared services, the finance team, the R and D team, you know, the, the, the.

Support team, they probably need to be 20 percent smaller as well.  And oftentimes you'll put it on the leader of those groups to make the cuts and say, like, hey, you need to shave off 20 percent of your, your department  and then, you know, oftentimes those leaders will do it based on,  you know, performance typically.

Right? So you may cut the 20, the lowest 20 percent of your performers. You know, you, you often may cut and we have to do this  at AllVoices last year, you know, recent hires. Because they're not trained yet, and they're, they're not at scale. Sometimes that's the case. You also need to take into account, you know skills, right?

And you'll need to make sure you have certain coverage.  And then lastly, you sort of end up getting a list, right? And you'll see, okay, here, here are the persons affected. And that's when you sort of shift from you know, the, the, the strategy into sort of the execution mode. And 1 thing you didn't mention, which I think is really important with respect to DEI.

With hiring and with terminating, making sure you run an analysis to, to combat your biases is absolutely instrumental, right? To make sure that you know, the, the people getting terminated is representative of your you know, your, your whole team or your staff and that there isn't some bias, you  know, conscious or unconscious that is causing you to disproportionately target you know, 1 subsegment of worker.

Communicating Layoffs to Employees

I think  kind of touched on in some and I want to go into the topic a little bit more, but you know, communicating to certain departments and like, communicating specifically to employees about the situation and you know, how do you go about communicating to the employees that are about to be laid off as well as your current employees, the ones that will remain on staff?

You know, is there a certain process that you should put into place? Is there a certain, like, protocol? And obviously, are there, you want to take any kind of legal considerations into account when doing that? I want to hear your thoughts on that.  

Legal Considerations and Best Practices in Layoffs

Yeah, so a couple of things, and with respect to logistics of timings, I don't know if there is a right way.

It honestly depends on. The, the circumstances surrounding the, the, the, the RIF or the reduction in force,  whether or not, you know, you tell people before or after I don't want to get into that, but I want to talk about the themes and the concepts that I've used in the past.  So, for employees affected by the RIF.

You know, 1,  you have to unfortunately be really thoughtful from a legal point of view. Right? You know, you have to make sure that you know, 1, when you do the termination, you typically want 2 people on the call so that there is you know, there's not an accusation accusation. If he said, she said, you know, before any sort of riff, you want to, you know, have really good answers for you know, what you're prepared to offer for the person you know, with respect to severance and or, you know, benefits or equity or whatever, whatever, you know, options you're willing to do, you know, to the extent you need something from them, you need to sign them or a release, which is often, you know, best practice.

You want to sort of be clear about that. There are laws that, okay. Relate to the release in certain states, California for older employees has you know, they need more time to review the 2nd stuff. You want to make sure all the logistics is set and then typically those conversations are pretty short and it's sort of a challenge because  you know, there are 2 competing.

Views 1 is,  you know, it's a very negative, you know, it's a challenging experience, right? Most people, if nothing else, they get their income from their job. Oftentimes they get health care, but oftentimes, you know, self worth and community and, and you know, the termination of that involuntarily is traumatic.

And as a human, you want to connect with that person and you want to give them a hug and you want to you know, tell them oftentimes, especially the riff, it's not you, you know, it's like, you know, numbers are numbers but at the same time, you know, you have to also protect the company from a legal point of view.

And, oftentimes, the best way to do it is to, you know, be short and concise and, you know, to the point and unfortunately, sort of, you know, on emotional  and that's sort of the best way to do it. But, you know, in my experience I've, you know, unfortunately, again, I've been on both sides of this, but as someone who's laid off, you know, a number of people, in most cases, I've had the sort of person, you know, after the fact, come back and, you know, maintained a professional personal relationships because, you know, it's not, it's not personal at AllVoices. You know, 1 thing that I'm, I'm proud of we did a riff 18 months ago. I don't know if you remember it was in June of 22 and you know, we had to, one of the, the, the, the departments we had to shrink was our sales team, right?

Because sales were growing a little bit slower than we had thought and cost of capital just increased dramatically. So we had to reduce our sales team and we ended up you know, letting go of a saleswoman who we had just hired. She was literally like 3 weeks on the job  and, you know, we let her go and like, Hey, we're so sorry.

You know and 6 months later you know, as the sales team sort of hit a new ground, start to grow again she applied for the job. We, we brought her on and now she's 1 of our most productive reps. So it's you know, it's amazing. It's just an awesome success story of you know,  of handling the riff in a way that, you know, if nothing else, she didn't take it personally.

And, you know, so great to see her see her succeed here. I have a feeling I know who it is.

She's a superstar, she's great, and I had the privilege of, like, really getting to know her some at the conference we worked at last year. And yeah, that's right, that's right. I was there as well.

Managing the Remaining Employees Post-Layoffs

Yeah,  and 1 thing I want to add, you mentioned I didn't I didn't touch it was is the people who  were not laid off, right?

It is really, really important. And I think 1 of the things that is often. Not executed well on risks is the management of the people who are not laid off. Right? Because yes, you still have your job,  which is good, but you just lost friends and coworkers and or your. Responsibility set now may be meaningfully changed.

Do I have a lot like someone's job just got terminated? Who's who has to do that work? And not only that, like, what does this mean for the company? Right? Is this is the company going to be okay? Am I going to be able to have a job? Is this, is there another RIF coming? Am I going to be affected?

Right? These are the typical questions, comments, concerns folks haven't rightly so and it's really important for managers to proactively address those. anD, you know. One way you can do it is just by good planning, which is, you know, cut a little bit more than you need, right? It's sort of it's,  you know,  not great to think about, but I think you're always better over cutting.

And there's always, there's, there's oftentimes a human tendency to think that, you know, some cut will be enough when you're much better off making a deeper, harsher cut and only doing it once I'm going to use this time to kind of say to mention that.

Promoting Open Communication with AllVoices

Maybe there's a service where managers and people leaders can communicate with their employees about, you know, situations like this.

Do you have any comments to say after me saying that? Well, yes, Jeffrey, I appreciate it. So here at AllVoices, you know, we're an employee relations platform and we offer the industry best anonymous reporting tool by which employees can submit feedback and HR and employee relations managers. Can respond to that feedback address it in a, you know, an easy, equitable, systematic way.

So, yes, we, we,  we do know a way to solve that. And, you know, quite frankly, when we couldn't, you know, when we had to lay people off, our tool is really valuable in understanding how the team was thinking and feeling. And we're not a big company. But even, even with you know, a small company, we're a series that company you know, 30 some employees just being able to, you know, allow people to give them voice to express their feelings and to respond to those feelings both individually. And then as a company as a whole, it was a a really valuable tool for for, you know, for the leadership team.  And so I definitely recommend everyone  check us out and feel free to connect with me.

If you have any questions, obviously,  but honestly, making sure those. Remaining employees feel cared for and, and, you know, are reassured is paramount.  So yeah, this wasn't supposed to be promotional, but I saw the opportunity. I took it. You had kind of alluded to it right there. There's needs to be some kind of communication between both employees, managers, why not?

Right. I love it. I love it.

Conclusion

Bryan, thank you so much. Yeah, we really value your experience and you know, your leadership here at AllVoices. Thank you so much for being a part of this first podcast and look forward to having you on here again and just look forward to working with you some more, man, Jeffrey, my pleasure.

It was great. And I value you too. You are a outstanding member of the team. Excited to see. You know, what you do with these podcasts and I am happy to be at any time.