Silicon Valley Chief People Officers Weigh In on the Tech Layoffs

Recently we provided an overview of what’s on the minds of Silicon Valley Chief People Officers (CPOs).

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With this post, we begin a series of deeper dives into the main topics these people leaders are thinking about, starting with layoffs.

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We had 25+ conversations with people who head HR at a range of Silicon Valley businesses on how they think about reductions in force: why these are happening more recently, how businesses are managing them, and what might be ahead. “Layoffs have been almost a constant for the past five months,” one executive said—so it’s critical to put these headline-making events in perspective and understand related best practices.

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Explaining the Rise in Layoffs

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The recent need for layoffs in tech makes sense on multiple levels, as the HR leaders confirmed.

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Specifically, companies, Founders, investors, and Chief People Officers ?were all influenced by a hot tech market and the easy availability of money for investment and scaling, which led to widespread over-hiring. As one CPO noted, “The market was so hot for so long with start-ups and investors putting nearly free money to work by investing in great firms and encouraging those with great ideas to move quickly.” These trends facilitated over-hiring, especially post-pandemic.

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Other leaders pointed out that Silicon Valley uses headcount growth as a success metric. And of course topline growth has been the sharp, if not sole, focus of many businesses in this space in the past decade. Still, tech-business valuations are also more sensitive to interest rates; as those have risen , venture investments have been likely to decline and emphasis has shifted from growth-at-all-costs to shaping the path to profitability —a tradeoff most businesses haven’t had to make in recent times.

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Deciding Who Goes

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Deciding who goes is always challenging, but one clear criterion is to let go of people whose business unit or line has been shut down due to a strategic shift. “It’s clean and clear if it’s aligned to strategy,” a CPO said. Another noted, “It’s about understanding the portfolio of things you really want to do, with a narrower aperture now. And asking what’s your core business.”

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Strategic RIFs are also easier to communicate: “If it’s about a strategic decision it feels less personal,” a CPO said. By saying “we are exiting that geography, segment, or product line” it’s viewed as a rational decision. Another CPO mentioned that “While it’s readily explainable why a whole team is being let go when the strategy changes, that approach lacks nuance and exits top talent in that team. A more nuanced approach would be to let go the least well performing talent, regardless of the team and redeploy the top talent from the team that is eliminated.”

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The HR team, along with finance, can help leadership understand how to align the aspired-to business model with the right-sized workforce, by emphasizing operational excellence, capacity models, and forecasts. And line leaders are more likely to understand and not resist finance’s rationale for a more streamlined team now, given the market environment. As one CPO said, “Without a strong partnership between the people and finance teams, you will just keep over-hiring and have to do layoffs. It typically starts with finance and the board saying, ‘You’re missing your numbers and why do you have all these people if that’s the case?’” The CPO needs to have a clear voice in these decisions, balancing the short- and long-terms goals of the organization.

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With regard to layoffs in general, executives suggested looking at least six months out in making RIF decisions, to avoid “stop-start” hiring. As one CHRO noted, “Layoffs should be rooted in a 3-5 year strategic plan, and not throwing the baby out with the bathwater by laying off people capable of delivering good value.” Another said, “It’s about going as deep as you can with cuts without inhibiting future growth.”

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When companies cut deeper than strategic shifts dictate, decisions are typically based on individual performance as informed through discussions with the leadership team. The CFO, informed through discussion with the executive team, will usually set a company-wide cost-reduction target, and then each of the functional business units will have a goal. “Reduction in force is a blunt object to focus on people not doing their job,” an executive said. “In a growth environment, there’s not a lot of urgency to deal with that. Even the best companies have teams where people are hiding and not really working or excelling.” In short, tighter headcounts force greater accountability.

Are there “untouchable” skills when it comes to tech layoffs? It depends on the business, but strong product managers and engineers are in short supply and more likely to be core to the business however it is being strategically reshaped. “Hold on to your difference-makers,” one leader advised.

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Managing RIFs with Care

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Communicating and executing layoffs is one of the most challenging things leaders must do because peoples livelihoods and careers are impacted. ?“There are no easy answers,” one CPO said. Below is advice the executives offered to handle reductions in force in a human, empathetic way.

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·??????Communicate broadly and transparently: If it’s a broad-based reduction, tell the whole company that’s the case and explain the business rationale behind it, as one CHRO emphasized: “Let everyone know why it had to happen and that you’re treating employees leaving with utmost respect and gratitude. Another noted, “Be transparent. If you aren’t it can be terrifying for your people.”

·??????Make time for one-on-ones: Aim to meet one-on-one with everyone directly impacted. Ideally it’s the direct manager or their manager or someone in the direct reporting line leading these meetings, with HR brought in for larger-scale reductions or as needed for smaller ones to ensure the meetings are well-handled. It’s best if done by someone who knows the impacted employee. For global teams in multiple time zones, HR leaders discussed getting up at 3AM and finishing late into the evenings, to ensure all notifications occur in a specific time frame. “If you do the math, each of your managers and HR leaders can fit in between a dozen and two dozen meetings at 30-minute increments,” said another people leader.

·??????Get ahead of it: With globally distributed teams, it can be hard to beat the speed of the grapevine, but always worth trying. One company sent an initial email—from senior leaders—to those impacted, followed by a “not impacted” email to those who would stay, with a follow-up meeting for everyone after those communications. Another global business faced with making large cuts “followed the sun” for notification, starting in Asia then moving to Europe and the US, with the CEO and CPO running multiple all-hands meetings to get the word out.

·??????Severance and insurance matter, along with the details: Any thoughtful element of the process can help. This usually starts with offering a generous severance package, knowing the entire sector is down and that how you treat the people being laid off will be publicly discussed and could affect future hiring efforts. One business kept those laid off on the payroll for 60 days before exiting them with severance. “Most companies want you off the books immediately,” the HR executive involved said. “But this sent the signal that we still thought of them as employees, which was helpful from a psychological perspective.” Medical insurance is critical to allow employees to care for their loved ones and bridge any gaps between jobs. Getting the details right in the notifications and paperwork are important. One CPO noted, “If you misspell the individual’s name in the paperwork, you have undermined all of the goodwill you created in an otherwise well-done notification.”

Everyone emphasized the need for a thoughtful approach. Many tech companies have been criticized for prioritizing data privacy or speed over a more humane, empathic approach. Sending emails versus communicating in-person, and shutting everyone’s systems off before they arrive to work that morning received the most criticism. “People will remember how we do this,” one HR leader said. “It’s part of our brand.” In short, it’s ideal to take an intentional, proactive approach centered on “dignity and respect,” as one executive said.?

What to Tell Those Who Stay

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The theme of transparency and respect applies equally to dealing with employees who continue with the company post-layoff.

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Enabling people who stay to support their laid-off colleagues is an important part of a humane process for everyone. That might mean helping to crowdsource connections and job leads on LinkedIn or other platforms, for example. One CPO noted that “the recruiting team can focus their work on helping those affected by helping them find new roles.”

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It’s also about giving people space during this process, too; you can’t expect them to be happy the day after. But you can communicate that you believe in the company and its strategy. “I tell leaders to help people by showing up every day ready to build the company,” an executive said. “That builds confidence.”

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But it can take six months for the “am I next?” fear to subside, multiple CHROs warned. Ideally, companies don’t do multiple rounds of layoffs in a short period. That perpetuates the anxiety. While leaders can’t say “There will be no more layoffs,” they can cut deeply enough to make sure they aren’t doing it again in a few months, as noted earlier.

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Ultimately it’s about focus. “People who remain will have survivor’s guilt,” a CPO said. “That’s the reality. Keeping people focused on the business and set up for success is the priority.”

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What’s Next?

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Like most market trends, layoffs tend to be cyclical. Most of the CPOs we spoke to think the tech talent market will generally rebound, driven by the rise of AI and other trends. “VCs still have a lot of money and are not planning on giving it back to investors,” one leader said. “They will need to spend it in the next five years”

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So more than likely, while the War for Talent may be in a ceasefire in some tech subsectors, we expect it will rage on before long. In fact, that’s the focus of our next post in this series: what the War for Talent looks like today, and the right mindset and hiring practices with which to approach it.