Elon Musk’s Twitter is an example of not firing people

Layoffs are coming to Silicon Valley, and tech companies better deal with them if they want to avoid making a bad situation worse.

Last week, Twitter cut half of its workforce. Stripe shed 14 percent. Now Meta is reportedly set to cut thousands of jobs – the company’s first major layoff in nearly 20 years of existence. Other tech companies may soon experience layoffs for the first time as they deal with declining ad sales and other headwinds in the economy, such as inflation and rising interest rates. How they implement these cuts will not only affect their financial performance, but may have a long-term impact on the success of these companies.

Either way, it’s better to be The Strip, which gets praise for compassionate layoffs, than Twitter, which doesn’t at all.

According to experts, compassionate layoffs are those that are as small as possible and are done only as a last resort. They are clearly spoken and conducted respectfully. They also consider the feelings and workloads of those left behind.

In other words, they’re the exact opposite of what Elon Musk did on Twitter last week.

The Twitter layoffs began in the middle of the night after a week of fear, uncertainty and crazy long hours. Most of the 3,700 or so people who were let go didn’t find out through Musk or even the manager. Instead, they found out they were fired when they couldn’t access company emails.

According to Liz Petersen, knowledge center manager at the Society for Human Resource Management, ideally, layoffs are done individually and in person. If this is not possible, the next best option would be a video, followed by a phone call. Email is the “low-end option.” Obviously, it’s harder to do one-on-one meetings when you’ve fired half the company.

Even those who made the cut on Twitter were in awe and confusion. Instead of being contacted by management, employees added their names to a Google Doc and pinged their colleagues on Slack to see who would respond. Some of the remaining employees of the company told journalists that they wish they would be fired.

Employees are already suing Twitter for violating labor laws by not giving them enough notice, even though the company is paying them for two months of non-work time to avoid the lawsuit. Worried about the company losing several key content moderator roles, advertisers have halted spending, which collectively accounts for 90 percent of Twitter’s revenue.

“There is a kind and respectful way to let go of an employee, and I feel like this latest round was neither of those,” Brooks E. Scott, executive coach and CEO of Merging Path, told Recode. “You have some employees who have been there for years. At least you don’t owe them a phone call or a zoom or something?”

He added: “People remember these things about the culture of the company.”

It was certainly a far cry from last week’s layoffs at Stripe.

There, the CEO wrote a letter explaining why they were laying off 14 percent of the company, and then contacted the affected employees individually. CEO Patrick Collison blamed the broader economic environment as well as himself for over-hiring and raising operating costs too quickly. He expressed that the loss of employees seems like a real sadness and said that they will open an alumni email account for them so they can keep in touch with the company. Crucially, he communicated how the company would take care of departing employees (the 14-week severance certainly helped soften the blow).

The situation at Twitter may be an anomaly because it includes wild card Musk, but his decisions nonetheless have cascading effects for his company.

If you have to lay people off, it’s best to do it as compassionately as possible, according to Robin Erickson, vice president of human capital at the Conference Board, which studies how companies handle crisis situations. But it is better not to fire anyone. He says savings from layoffs are often short-sighted and rarely contribute more than a quarter or two to a company’s bottom line. They also result in a number of negative consequences such as loss of institutional memory, productivity and morale. Layoffs can also lead to attrition, as remaining employees pick up the slack, which in turn will cause more people to leave. Twitter employees have already reported a crazy workload to make up for all the layoffs and deal with new Musk projects.

The bottom line is that layoffs — especially poorly executed ones — hurt a company’s future hiring prospects.

“Why would anyone want to work at a place where they treat people badly?” Erickson said. “Organizations that have laid off workers will have a harder time getting back in as they try to hire workers.”

Twitter will likely face this problem immediately. The layoffs were so ill-conceived that the company is already reaching out to dozens of former employees to hire them back. This can be a tough sell because those employees still have options.

According to a recent analysis of data from CompTIA’s Bureau of Labor Statistics, the unemployment rate for tech jobs is a remarkably low 2.2 percent, and the sector continues to grow. Outside of the tech sector, the hiring market also remains strong: Employers added an unexpectedly high 260,000 jobs last month. Experts call the recession a “jobs recession” because it has not yet affected jobs.

While layoffs certainly happen, they still don’t make a big dent in a healthy job market.

In many cases, employers are reluctant to fire people because it was too difficult to hire them in the first place. Companies that made massive layoffs at the start of the pandemic have been crippled as the economy comes back online. Twitter’s high-profile layoffs and volatile situation won’t make it an attractive place for employees to want to join.

Silicon Valley companies won’t always face an economic downturn, but how they behave now will affect their ability to grow when the economy gets better.

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