Recently Zirtual, a seemingly successful startup, abruptly folded in the middle of the night. Customers and employees alike were notified that the company was ceasing operations via an early morning text. In a Medium article, (now former) CEO Maren Kate Donovan explained the reason for the sudden collapse wasn’t really so sudden, and that the company had burnt through funds.
She writes, “After failing to secure more funds, the law required us to terminate everyone when it became clear to us that we wouldn’t be able to make the next payroll.”
This is hardly the first time a startup has had to deal with this kind of disappointment.
Back in March of 2015, the San Francisco-based 42Floors had to let go nearly half of its workers. And who can forget the whopping failure that the much-hyped Color app was, after raising $41 million in its first round of funding, and then shut down about a year later.
As someone who has been laid off several times in my life, it’s never easy for the employee. And judging from Donovan’s letter, it’s not so easy for the company either.
“I cry for all the employees we hurt. I cry for all the clients we infuriated. And I cry for the investors we let down,” Donovan writes.
Jason Freedman, Co-founder of 42Floors also recently spoke about his experience of letting people go.
“In the course of running a startup, we do lots of experiments,” Freedman writes on Medium, “Some succeed and some fail. But it’s different when these failures cost people their jobs. These last few months have been incredibly painful for me, but at least I didn’t have to worry about how to pay my rent. They did worry about rent. I fucked up and my employees paid for it.”
Tech pundits can speculate all day long about what went wrong and how money was spent unwisely, but more importantly, what happens to the people? And what is the best way to deal with them when it’s time to make the decision to let them go?
When a company I worked for decided to move production to another city, they called everyone into a big room and told them not to bother coming back after the Thanksgiving holiday. It happened the day before Thanksgiving. Another company called me into a darkened office and the HR director pushed a button under her desk which closed the door behind me. I can tell you, this leaves the employee with an unquestionably ominous feeling. Personally, I would not recommend either of these moves.
Freedman writes about how 42Floors prepared for the unpleasant task. For them, their number one priority was to take care of the former employees:
“We had the paperwork and severance packages ready to go. We extended everyone’s health care for 3 months so they wouldn’t have to pay for COBRA right away. We stuck around for one-on-ones to either be a sounding board if people were mad or to start brainstorming next steps and offer introductions.”
Secondly, they took care of the remaining employees:
“The night before the layoffs, after talking with my co-founders and the Board, I called up each of the people who were going to be invited to remain with us and told them what was about to happen. Many of them knew the brokerage model wasn’t working for us but all were stunned to hear how quickly everything was about to move.”
In a small company it’s easy for a team to become very close, so it is not completely unheard of that you may have to lay off a friend - which can make things even more complicated, awkward and upsetting. Chris Miksen of Demand Media wrote a seven step guide to help:
Talk to your friend in private and at work. Even if you frequently talk to and meet up with the person outside of work, laying someone off calls for a professional environment.
Tell your friend that you must lay him off. Quickly explain that the layoff has nothing to do with his performance or behavior and that it’s strictly because of business reasons. Explain that you’re not in favor of the decision, but you don’t have a choice.
Explain the company’s policy for layoffs. Do not treat your friend any differently than you would treat another employee; the same rules apply when it comes to layoff policy.
Empathize with your friend. Tell him that you understand the job market is difficult and that landing another job may take time. Talk about his performance and about anything he did that impressed you. Try to boost his spirits by focusing on the good that he did and not the fact that he’s being laid off.
Give him advice for finding another job. Provide him with a list of companies that you’re aware of that are hiring and that could use an employee like him. Give him a few tips that will help him get his foot in the door, such as resume and interview tricks.
Tell your friend that you’ll talk to other employers and try to get them interested in you. Only do this if you’re impressed with your friend’s work performance. Don’t say that you’ll mention his name and not do it.
Help out however you can. Whether that help is in the form of calling your friend and telling him about a job lead or giving him regular advice, assisting him when he needs it most keeps your friendship alive.
Obviously having all the paperwork and payouts ready to go are important, but probably just as, if not more important, is reminding the soon-to-be-unemployed that letting them go isn’t easy for anyone, including the company.