Coming into the year, business was slow for the country’s layoff experts, as it had been for much of the past decade. Outside of a short period of tumult in 2020 at the beginning of the coronavirus pandemic, the U.S. economy had continued to roar along. Jobs were plentiful, layoffs were at a 52-year low, and the “Great Resignation” had led to worker shortages.
“Everybody was trying to do everything possible to hang on to every employee that they had,” said Dan Davenport,” the CEO and co-founder of Randstad RiseSmart.
That had made life harder for companies like Davenport’s, which specialize in helping employers navigate the emotional and messy involuntary “exit” process.
Layoff-focused companies help with a variety of areas to make a difficult process run smoothly. They help identify priorities and figure out the layoff list; ensure the layoffs comply with local law and do not disproportionately target underrepresented minorities; come up with a day-of communications plan; and make sure people receive the correct amount of severance. They sometimes also provide “outplacement” services, which help laid-off employees find a new job through outside training and guidance.
Such services are in high demand during periods of tumult, but less relevant when businesses are humming along and hiring.
“Our worst times as an industry are when the economy is screaming ahead,” said Darren Kimball, the CEO of GetFive, another such service. The strong economy had proven “challenging” for Kimball’s company, he said, as a bevy of positive headlines gave companies fewer reasons to go through the messy and emotional process of layoffs.
GetFive wasn’t alone. In order to remain relevant during the bull run of the last 10 years, Randstad RiseSmart diversified, adding broader career services on top of its focus on outplacement, according to James Warnette, the company’s communications director.
“Outplacement is great when the recession is here, and everything's going wrong, and people are laying off. But it's a business that gets exposed to positive times,” said Warnette.
Then, the tech industry started to collapse, and the companies came knocking. Rising interest rates had cut off the spigot of easy money that had long propped up the startup industry, and tech firms that had been focused on growth found themselves needing to stop burning cash and make sure they had enough runway to survive the downturn. For many, that meant layoffs, which led to a flood of inquiries to the layoff specialists.
“We've never seen anything like this,” said Kimball, referring specifically to the tech sector. “That part of our business has really taken off.”
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GetFive received a record number of inquiries in July, according to Kimball, who added that early signs indicate “August will be better than July,” meaning worse for workers. Randstad RiseSmart has also seen a “dramatic” increase in requests for help from the tech sector, particularly from high-flying tech startups known as “unicorns,” Davenport said. So have others. “Everyone is preparing for the unknown,” said Sarah Rodehorst, the CEO of Onwards HR, an automated “separations platform” that helps companies avoid screwing up the layoff process.
Sometimes, the startups decide to move at a blistering pace. One company called Rodehorst while she was on vacation and said it only had a week and a half to prepare for layoffs.
Nationally, the unemployment rate remains low and jobs are plentiful. But after more than a decade of rising valuations and good times, the tech sector is suddenly grappling with a far harsher reality. "A lot of these founders are still in a moment of shock,” said Nolan Church, the CEO of Continuum, a new startup that rents out executives with layoff experience to struggling companies. “They didn't expect it. They haven't experienced it.”
Now they have. So far this year, almost 90,000 tech employees have been laid off around the world, according to LayoffsTracker.com. Based on the amount of inbound inquiries, Church expects that number to almost double in the third quarter of the year.
“It's almost like a complete reverse,” said Rodehorst, who has also seen an influx. “And they’re finding—sometimes for the first time in their company's lifetime—that they have to lay off employees, and they don't have that expertise in-house.” That lack of experience has resulted in stressed-out teams racing to figure out how to deliver bad news. “For years, things have been up and to the right. So the HR departments are really scrambling,” said Kimball.
Too often, they've bungled it. Companies have long done a “rotten job” of figuring out who to let go and otherwise messed up the process, and they rarely give enough consideration to the long-term negative effects, according to Sandra Sucher, a professor at Harvard Business School who studies layoffs.
But the tech downturn has led to a particularly large number of missteps, most famously in December, when the CEO of the real estate-focused technology startup Better.com summarily laid off 900 employees over Zoom. Amanda, a manager at a fintech startup, told Motherboard she only realized she had been laid off in April when a member of her team called to say they couldn’t log on to Slack. Amanda had been recovering from COVID-19 at the time, but she tried to log into Slack herself to see what was happening, only to find she had lost access as well. “That was pretty much an indication that I was laid off,” she said. “It was a very abrupt way of finding out.” She had been with the company for three years.
The company had already gone through a round of layoffs, so the decision didn’t entirely surprise her. What did was her inability to figure out who else from her team had lost their job. “Not knowing what their fate was one of, actually, the hardest things,” she said. Amanda ended up finding out weeks later, when people started to post on LinkedIn.
It’s no surprise that companies so often make mistakes during layoff announcements, according to Sarah Rodehorst, the CEO of Onwards HR. Even in the largest of corporate organizations, Rodehorst has found the process leading up to layoffs to be haphazardly managed with Excel spreadsheets, word documents, and dated templates. “It's basically the last corner of—I swear—the world that is completely manually managed,” she said.
“Nobody wants to think about this, and even if they're doing it, they just don't even want to acknowledge they’re doing it,” Rodehorst added. “It's not a fun task.” That goes for HR experts too, she said. Convinced the good times would last and growth would continue, tech companies of all sorts aggressively hired and overextended themselves over the last decade. At a recent trip to a HR conference, where she pitched her startup, she couldn’t help but notice how many startups were dedicated to hiring and how few focused on the exit process. She noted the discrepancy, and her company won the pitch contest.
Onwards HR launched in 2019 after former co-workers of Rodehorst spoke about the issues they faced with layoffs, saying they found companies often paying people the wrong amount of money after laying them off. Now, the company automates and streamlines severance calculations. Onwards HR also helps companies discover discrepancies between how much severance should be and is offered to a given employee.
The startup finds a lot of mistakes. Onwards HR recently joined on to help a billion-dollar company out in California as it prepared to lay off 15 percent of its workforce. The company had previously prepared for layoffs using spreadsheets, and Onwards HR’s software found dozens of severance-related errors in the spreadsheets they had prepared for the current round of layoffs. The spreadsheets included older severance policies in numerous cases.
Considering the manual process—and the speed with which companies undertake layoffs in times of stress—mistakes can feel inevitable. But that doesn’t make it any less concerning. Mishandled, rushed layoffs can cause the remaining employees to want to leave, potential employees to turn down offers, and a process where layoffs disproportionately and unfairly affect women and people of color, which Onwards HR helps companies identify ahead of layoffs.
“It's an area where companies are at greatest risk of bias and discrimination, and it’s difficult for leadership to even know that it's happening when it's managed manually,” said Rodehorst. “It's just a huge risk to the organization, even if it doesn't end up in litigation.
The demand for help has become so high in the tech sector that some startups are pivoting to offer additional layoff expertise. When Nolan Church launched Continuum in 2020, layoffs were not top of mind. After stints at Google, DoorDash, and Carta, Church decided he wanted to start a service that provided executives with different specialties to startups on a part-time basis—a cheaper alternative to consulting titans like Bain and McKinsey.
Like a lot of founders of his generation, he had come of age in the post-financial crisis bull market of the 2010s. “I've had 11 years of just ‘Grow baby, grow,’” he said.
Then, in recent months, Church started to notice something odd. High-flying startups were repeatedly searching out the services of chief people officers. When Continuum tried to figure out why, the company found out that the startups needed advice on how to prepare for and run layoffs. The executives often had just left a board meeting where they had been instructed to cut costs enough to survive a downturn without much additional advice. The founders, he said, were left asking, “What the fuck do we do from here?”
“Because we've been in a bull market for 15 years, very few people have experience actually running layoffs,” he added.
So many ended up asking the company for help that Continuum decided to pivot and make layoff expertise a focus (the company now even has a “layoffs” tab on its website). Many of the tech founders seem genuine when they say they do not want to go through the layoffs but have no other choice, Church said, but he added that some startups also seemed to be using the tech downturn as a cover for their own mismanagement in recent years.
“There's definitely this aspect of some people and their businesses actually being just fine, but leveraging the moment to manage out their low performers,” Church said. “Those are the ones that actually aren't great customers for us.”
Continuum suggests the CEO take “full responsibility,” make sure each laid-off employee meets with a manager and HR representative, and not “herd the cattle into the corner” and impersonally inform them that they no longer work at the company, like Better.com did.
Darren Kimball, the CEO of GetFive, offers an additional service: helping laid-off employees find their next job. He started GetFive after he left the hedge fund business in search of more meaningful work than pushing stocks “up and down,” as he put it. Today, GetFive helps people learn new skills and otherwise “present as modern.”
Older layoff specialists had to diversify during the boom period of the 2010s in order to maintain as much relevancy. The Bay Area-based Randstad RiseSmart, for example, now offers a catalog of more than 1,500 career coaches and “personal brand” experts to people searching for a new job, as well as those who have been laid off. One of those coaches, Charmagne Shearrill, an HR professional, said she has had multiple people come to her who had been laid off twice in recent years, one now and once during the pandemic. “It's absolutely devastating for them,” she said. She tries to help them through their post-layoff transition, serving as a “cheerleader” but also providing resume help, interviewing tips, and an “elevator pitch.”
But the company has seen a recent influx of requests for help from large tech companies who are navigating the downturn, including Peloton.
Hoping to maximize the moment, the company has also been trying to convince other tech startups they need their services, something that has not always been easy when leadership is intent on cutting costs and don’t want to enlist the services of a third-party company, according to Warnette, Randstad RiseSmart’s communications director.
But only thinking about the immediate bottom line can prove short-sighted, according to Sucher, the professor who studies layoffs. Not treating laid-off employees well can end up forever harming a company’s prospects, even if the balance sheet looks better for the moment. One person who has recently used Randstad RiseSmart’s services is Amanda, the fintech employee who learned of her layoff over Slack. She didn’t think much of it at first, but found herself appreciating the advice of her “work therapist,” as she put it.
A month later, she found a position at a new company.
Davenport, the CEO of Randstad RiseSmart, said the tech downturn remains the main area where his company’s services have been in demand this year.
He doesn’t know where the economy is headed or if other sectors will come asking for help, he said. But, he added, there are “certainly a lot of signs pointing to trouble ahead.”