As we witness much of the world’s economy crumbling and unemployment surging due to the lasting effects of COVID-19, most companies are losing a significant portion of their revenue. Many are scrambling to cut costs to survive, and the tech industry is no exception. In April, Yelp laid off 17% of its staff and furloughed another 17%, and many others have followed suit, including Lyft, Opendoor, and Uber to name a few. The layoffs have shown that one thing is true: transparent communication from leaders is key to gaining employees’ trust and building your company’s brand.
Bird laid off approximately one-third of its staff via a two-minute Zoom call and locked employees out of their accounts, a move that has been referred to as “the sh*ttiest layoff in corporate history.” Employees and critics alike felt the dismissal lacked transparency — some even openly questioned whether the two-minute message was pre-recorded — leaving employees dumbfounded.
On the other hand, Carta’s CEO Henry Ward wrote a thoughtful email to all employees about the company’s layoffs. He demonstrated transparency and compassion for his employees by explaining the decision-making process, such as cutting all variable costs possible. He embodied Carta’s company values by offering generous severance for both voluntary and involuntary departures, gaining trust from remaining employees by showing how Carta will look after its former employees.
Communication is a two-way street. As leaders, in order to ensure you consistently receive accurate information from your employees, you must earn their trust by being open and honest yourself first. Tech entrepreneur and venture capitalist Ben Horowitz explains in his book The Hard Thing About Hard Things:
“When a company starts to lose its major battles, the truth often becomes the first casualty. CEOs and employees work tirelessly to develop creative narratives that help them avoid dealing with the obvious facts.”
He adds:
“Telling things as they are is a critical part of building this trust. A CEO’s ability to build this trust over time is often the difference between companies that execute well and companies that are chaotic.”
Trust is the foundation of transparency, and is built during crucial periods that precede extreme situations like layoffs. Having a solid foundation of trust makes difficult times so much easier, as employees are more willing to give the benefit of the doubt. To illustrate this, I’d like to share some of my own experiences in corporate cultures at both ends of the trust spectrum — they echo what Horowitz describes.
Why Transparency Is Critical
Years ago at a previous job, there was a period of time when things didn’t feel right. Employees were upset with a host of issues, ranging from snack selection to cultural changes to compensation adjustments. A number of longtime employees even openly discussed recruiting at other firms. The company also lost a good number of employees. Morale was falling, and things were not going well.
After catching onto employee dissatisfaction, the executives scheduled a Q&A session and established an anonymous online forum for people to submit and vote on questions. Three hours before the Q&A session, my team looked at the forum: seven of the top 10 upvoted questions were extremely antagonistic. Half of them complained about compensation, such as “Why are we paid so much below market?” and “What’s the point of having equity if we’re never going to IPO and don’t have liquidity events anyway?”.
Collectively, we gasped. “This is going to be a fun Q&A,” one of my team members remarked.
At the Q&A, the executives stepped on stage. The moderator went through each of the top 10 upvoted questions. Some of the questions were issues they could not commit answers to, but they were very forthcoming about them. I recall that at one point one of them divulged, “We hear your concerns regarding compensation loud and clear. We cannot commit to anything right now because it requires board approval, but rest assured that we are actively working with [the CEO] and will give everyone an update in the next few months.”
After the Q&A, half of the animosity was gone. People were cautiously optimistic that the biggest elephant in the room — compensation — would be addressed in the near future.
A few months later, the CEO penned an email to the entire company announcing a new compensation plan as well as a timeline for the upcoming liquidity event. Nearly all of the animosity was gone, and the company has since secured a few high-profile wins.
Angel investor and advisor Paul Arnold asserts, “One hallmark of good communication is that employees will come tell you when things are broken.” Let’s face it: no organization is perfect. Even Google, known for showering employees with good compensation and cool perks, has its fair share of issues. As leaders, acknowledging problems and cultivating a culture in which employees voice their concerns without fear of repercussion goes a long way in building employee morale and maintaining productivity through a company’s highs and lows.
“Leaders who don’t listen will eventually be surrounded by people who have nothing to say.” — Andy Stanley
A few years later, I joined a small startup with a few dozen people. The CEO hosted weekly all-hands, but when multiple weeks had gone by with few or no questions submitted, I suggested to the CEO that submissions be made anonymous. Immediately, questions poured in.
However, people started to notice a few oddities. First, the questions — which were submitted privately — were often modified. For example, one question asked about a 12% engineering churn in a quarter, but that was later changed to an “8% employee churn at the company.” Another inquired about leadership’s commitment to diversity, which got changed to “How are we doing on the diversity front compared to other companies?”.
Second, the responses often did not answer the questions. For example, in response to the earlier question about leadership’s principles and commitment to diversity, which was reworded, the CEO responded:
“As you see in this chart that includes data from Google, Facebook, and Uber, we’re right in line with the industry for engineering. However, most of those companies have larger operations arms, but we don’t, which is why our overall employee gender balance is more skewed towards men.”
What was puzzling was that the chart clearly showed that the female-to-male technical ratio was in fact lower than that of the other companies listed. The CEO neglected to mention that women comprised less than 10% of the business team — far below the industry average. He also did not comment on leadership’s principles or commitment to diversity at all.
A few months later, two questions popped up in the all-hands:
- How exactly are we measuring our goals tracking, and how will bonuses be calculated?
- Do you and [the CTO/co-founder] receive peer reviews for end-of-year reviews?
Before answering the questions, the CEO announced that he would be revoking anonymous submissions for the Q&A because he was “personally offended by the tone of the above questions” and felt that “when you allow anonymity, the content becomes akin to internet trolling.” Specifically regarding the second question, he reminded everyone:
“The CEO Q&A is a forum for you to ask about the company and your own HR stuff, not HR questions about others. It is not appropriate to ask whether [the CTO] and I have peer reviews. However, as a sign of good faith, we decided to open a Google Form for any employees to submit their feedback for us before the end of the year.”
After this debacle, the all-hands Q&A submissions dwindled again, as employees did not feel secure asking hard-hitting questions for fear of reprimand. In the ensuing months, many critical employees departed, leaving the executives dumbfounded and asking, “So what are you upset about again? Why didn’t you tell me sooner?”. As leadership guru Andy Stanley explained, “Leaders who don’t listen will eventually be surrounded by people who have nothing to say.”
In Times of Crisis
A lot of people use company size as an excuse for why certain things are the way they are: “We have a few thousand employees, so we cannot be that transparent,” or “We are a small startup, so we shouldn’t expect to have a real HR process.” However, as the two experiences above demonstrate, the culture established by a company’s leaders is what determines how communication is done. The first company had a few thousand employees but believed that anonymous submission and voting of questions was the best way to surface signals to leadership, whereas the CEO of the small startup compared his employees’ submissions to internet trolling and revoked anonymity.
A few weeks ago, Airbnb laid off nearly 1,900 of our 7,500 workforce. While layoffs are heartbreaking, I felt our CEO Brian Chesky did it in the most compassionate way possible. First, he discussed the business reasons behind why a layoff was needed. Then he explained the principles used in the construction of the layoff list. Finally, he discussed Airbnb’s plan to take care of its departing employees, which includes:
- allowing them to keep their company-issued laptops,
- keeping them on for another week to facilitate transitions and say goodbye to colleagues (another high-trust move),
- providing 14+ weeks of severance,
- waiving the 1-year cliff on their equity,
- offering a full year of insurance coverage among many other measures,
- building an opt-in online directory for potential employers looking to hire, and
- setting up a dedicated “alumni placement team” of recruiters to assist in job hunting.
Airbnb also ensured that all US-based employees, including impacted visa holders, can remain on the company payroll until at least July, which benefits visa holders because many visa programs require them to find a new job within 60 days, which is a challenge in this economy. Airbnb’s actions sent a strong signal to both its departing and remaining employees that the company is committed to taking care of its employees.
In times of uncertainty, it is imperative for leaders to have a clear understanding of their employees’ dissent. The best way to inspire employees to trust is to first demonstrate that you trust them by sharing key information and communicating transparently with them. With the foundation of trust established, even if difficult actions have to be taken, clearly explaining the reasons behind them will assist you in boosting morale, further helping your team or company break through all the obstacles ahead of you — together.
Disclaimer: I am currently an Engineering Manager at Airbnb. This post reflects my personal opinion only and not that of Airbnb.
If you enjoyed this article, check out the following articles in this series:
For more musings on tech culture, organization building, and management, follow me on Twitter @kenk616.
