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This week, nearly a thousand real estate professionals lost their jobs when both Compass and Redfin reduced their respective workforces.
The layoffs were just the latest in a long season of job cuts, which have been linked to rising mortgage rates. Those rates shot up again early this week, and on Wednesday the Fed hiked interest rates in an attempt to slow inflation. The takeaway is that, as experts told Inman Tuesday, there are likely more job cuts on the horizon as the housing business settles into a new and slower normal.
Layoffs are difficult for everyone. For the departing workers it means a loss of income, as well as related emotional and psychological blows. For the companies doing the layoffs, it also means a dip in morale and potentially more work falling on the shoulders of those who remain. Layoffs also routinely raise questions about the overall health and viability of a company.
Corporate leaders who are announcing layoffs have to manage all of those moving parts — and some have done so with more aplomb than others. What follows is a breakdown of some recent layoff strategies, some of which have gotten the job done and some of which proved disastrous. In the best of times, none of these strategies would be needed, but given the rapid changes happening in the housing market right now, it’s worth being aware of what works and what doesn’t.
The viral video layoff
Last December, mortgage financing company Better laid off 9 percent of its workforce, or about 900 people. Company founder and CEO Vishal Garg chose to break the news to his workers in a Zoom video.
The video proved disastrous. It quickly went viral on social media, with thousands of commenters criticizing Garg’s decision to announce the layoffs over Zoom. Other criticisms focused on his tone, his comments about not wanting to cry, and what some saw as an attempt to downplay the experience of the departing workers. Within two days, Garg had apologized for the debacle. He later took a leave of absence.
Garg ultimately returned to his post in January, but in February an internal review ultimately blamed Garg for culture problems at the company.
The episode is a case study in how not to conduct layoffs. Garg’s comments alone might have received some criticism no matter where he made them, but the fact that he appeared on Zoom meant the announcement quickly spread to other platforms such as TikTok. Today, a multitude of people who don’t follow the mortgage or housing industries know Better solely as the company with the viral layoff video. It’s no surprise, then, that conducting layoffs on live video has not proven to be a popular choice for other companies over the ensuing months.
The surprise severance payment
Better had an even larger round of layoffs in March, ultimately letting about 3,000 workers go. The company did appear to learn from its December stumbles, and instead of a video announced the layoffs in an email from the company’s interim president and chief financial officer.
However, some Better employees reported that they first learned they’d be let go not from the email, but rather on their own. For instance in one case, an employee reported seeing his severance check appear in his bank account before receiving any other notice. Another worker said she was suddenly locked out of her computer in the middle of a meeting with her manager.
It’s unclear how widespread these issues were, and Better’s second round of layoffs were not the viral disaster of the December cuts. But letting employees find out about layoffs on their own is still not the way to do it.
The blog post
Probably the most common way for corporate leaders to announce layoffs, either internally or to the outside world, is via a blog post. That’s the approach Redfin took this week when CEO Glenn Kelman announced an 8 percent reduction in its workforce.
Kelman’s blog post hit a number of layoff announcement must-haves. It got right to the point and opened with a statement of regret — “I’m sorry to say,” Kelman began — then quickly went on to explain the reasons for the cuts. It also mentioned the terms, such as severance, that departing employees could expect.
Kelman’s post additionally was clear about the timeline of the layoffs, noting that managers were calling people “for the next few hours.” Redfin also paired its blog post with an all-hands meeting to answer pre-submitted questions. If you have to deliver bad news, Kelman’s post was ultimately a pretty effective way to do it.
Earlier this spring, Blend also used a blog post to announce job cuts. Company CEO Nima Ghamsari wrote the post and included information analogous to what Kelman put in the Redfin announcement. However, worried Blend workers would ultimately have had to skim down to the fourth paragraph before finding the big news that 10 percent of the workforce would be leaving.
Blend is a younger and less well-known company than Redfin, which perhaps explains the larger amount of background information at the top of the post. But any time layoffs are happening, they’re the lede. And as they say in the news business, you don’t bury the lede. In other words, if the blog post is about layoffs, it doesn’t hurt to get right to the point.
The internal email
Another common layoff strategy includes an internal announcement email that is eventually circulated to outsiders, including media. (Companies often use both internal emails and external blog posts, but some forgo a public announcement and simply release their internal statements to curious media outlets.)
The most recent version of this approach involved Compass, which announced a 10 percent cut this week via an email from company founder and CEO Robert Reffkin. The email buried the lede a bit by not explicitly announcing the layoffs until the middle of the second paragraph. But it did outline the tough market conditions that prompted the cuts and attempted to preempt company doubters who might “speculate on the strength or health of the business.”
Such comments appear to be attempts to manage not only the experience of departing employees, but the morale of those who will remain with Compass.
Regulatory filings and earnings calls
Amid the recent round of layoffs, some companies have opted to avoid major public statements, instead letting the news trickle out via regulatory filings. Guaranteed Rate opted for this strategy in January, when the company revealed it would lay off 348 employees in a Worker Adjustment and Retraining Notification (WARN) Act notice filed with the Texas Workforce Commission.
A related strategy is to announce layoffs during an earnings call, which usually involves company leaders talking to big-name investors while reporters listen in. Digital title insurance provider Doma opted for this strategy in May when it revealed plans to lay off 15 percent of its workforce. LoanDepot also first announced layoffs during its May earnings call.
Presumably, companies that announce layoffs in regulatory filings and earnings calls also send internal emails to explain the situation to workers. But its hard to know for sure. And that fact highlights how companies using these strategies risk coming off as lacking transparency.
The buyout approach is less about announcements and publicity and more about the fundamental strategy a company uses for shedding workers.
Take Rocket Companies, which revealed last month that like many firms in the lending business it was suffering from weakening mortgage demand. As a result, the company announced that it needed to cut as many as 2,000 jobs. What makes Rocket’s move unique in the current job cutting frenzy, though, is that the company opted for voluntary buyouts rather than outright and mandatory layoffs.
Details about how the program has played out are sparse — Rocket did reveal the plan in an earnings call — though the company said it involved providing departing workers with several months of compensation, six months of health coverage, payment for banked time off and early vesting of stock incentives.
Buyouts are still painful and involve people losing their jobs. But they do give workers some amount of control over what happens, and ensure financial incentives to those departing. Ergo, Rocket deserves some credit for choosing buyouts at a moment when nearly the entire lending business was shedding jobs.
Email Jim Dalrymple II