 410,578. Does anybody know what that number represents? That is the number of tech employees that have been laid off in the last two years. Now, the media has a narrative of what building a company is like. And it typically starts with, I read something on Twitter. I had an idea and had a dream about it. I talked to a few folks. And had a billion dollar exit. But it turns out building a company is a bit more complicated than that. And that's especially true if you've been building over the course of the last three years. And it's supposed to be that way. And it's supposed to be that way because if the skies were always blue and the waters were always calm, you'd panic at the first sign of adversity. And you'd never reach your full potential. So my name is Nolan Church and I'm here to talk to you about layoffs. I was at Google for a few years working on leadership recruiting and confidential projects. I joined DoorDash as the 50th employee and the head of talent. I was at CARTA as the chief people officer through a thousand employees. And I'm now the co-founder and CEO of Continuum. Continuum is a talent marketplace for executives and we're series A. I ran layoffs at CARTA and I've helped more than a dozen founders navigate layoffs over the course of the last two years. And I've certainly learned that running layoffs the wrong way can mean negative consequences for a company. But there's a narrative that exists that if you run a layoff that your company is about to die. But I'm here to tell you that narrative is false. And in fact, if you run layoffs the right way not only can your company survive a downturn or a challenging moment employee productivity and happiness can increase. So over the course of the next 20 minutes I'm gonna tell you three stories. One about layoffs gone wrong the CEO was publicly humiliated and the company is barely alive. And two about layoffs going well to where the company healed and now they're growing faster than ever. And you're gonna come away with the knowledge that if you run the layoff the right way it can be the most impactful day in a company's life. But regardless if you run it well or you run it poorly as my VP of HR at CARTA said people will remember the day for the rest of their lives. So it's 4.30 PM we've all had a long day. Humor me everybody please stand up on your feet. Stay on your feet if you were involved in a layoff or were laid off in the last two years. So if you weren't laid off sit down. Remain standing if you thought the layoff treated impacted employees with respect and with dignity. Keep standing if after the layoff employees move faster and were more productive. Take a look around. That's because it's incredibly challenging to run layoffs the right way. And we're gonna learn about that in a minute. Please sit down. All right let's get into the first story. And it starts on February 24th, 2020 at my house in Salt Lake City. I was heading to San Francisco for a couple of executive meetings at CARTA. And I was just about to leave. I'm kissing my wife. She was six months pregnant with our baby girl and she grabs me by the arm. She goes, Nolan, I'm worried about this coronavirus thing coming out of China. Please be careful. And that was surprising because my wife is hard. She does not scare easy. But it turned out she was right to be worried because by the end of that day the Dow had dropped 1,000 points. And on Tuesday the CDC came out and they expected significant disruption to the American economy. By Wednesday, Balaji said he expected the coronavirus to kill more people than 9-11 and to be more disruptive than the great financial crisis. Also on Wednesday a few CARTA employees decided to work from home and more were asking their managers to work from home for the rest of the week. So in an abundance of caution we were one of the first tech companies to close our offices that Friday, February 28th. We thought people would be back in the office in a couple of weeks, but it turned out people didn't come back for more than a year. So fast forward, it's March 6th, Friday, March 6th. I'm at home, I'm trying to figure out my Zoom background. I'm like trying to get my home office set up. You guys remember that BBC interview where the family ran in on that guy? That was me. It wasn't me, but it might as well have been me. So again, I'm at CARTA and CARTA is a bellwether for the startup ecosystem. And the reason why is because we run cap tables and the majority of startups run their cap table through CARTA. And we had started to see our new business slow down. And so Henry, CARTA's founder, had sent me a Slack. And he said that we needed to look at layoffs. And at this point, I thought Henry was overreacting. I thought he was being emotional. I thought he was moving too fast, but it turned out Henry was right and I was wrong. That day we got my people leadership team together and the entire executive team together and we began holding daily meetings. We were gonna run the first layoff of my career. 10 days later, it became clear that COVID was gonna impact everything. This is actually a photo for my camera roll. People were having a really hard time and my neighbors were trying to encourage each other. Three days after that, I went to the grocery store and the entire store was sold out of paper towels and toilet paper. But like any good entrepreneur, I used tech to solve a crisis and I bought up a day. It's still my favorite purchase of the last five years. All right, so before we go forward, I wanna talk about why almost half a million people in tech have been laid off over the course of the last two years. And that story starts in 2010. So in 2010, post great financial crisis, the Fed had lowered their rates to almost zero. Now they began hiking again in 2016, but they only got to about 2.5% before cutting in order to stimulate for COVID. Also during this time, headcounts at tech companies started to explode. If you look early in the decade, headcounts growing fast, but if you look later in the decade, it almost looks like it's growing exponentially. So this is meta and if you look at 2018 to 2022, they went from about 35,000 to almost 85,000 employees. A similar story at Salesforce. From 2018 to 2022, they went from about 30,000 to about 70,000 employees. And similarly at Google, they went from about 100,000 to almost 200,000 employees. So headcounts at these tech companies are exploding. And so are valuations. In 2015, there were only about 250 companies worth a billion dollars. By 2018, about 250 companies per year became valued at a billion dollars. Then in 2021, 787 companies became worth a billion dollars. So headcounts and valuations are exploding. And if you're a tech company, it's kind of like you're at the club. You're having the time of your life. Drinks are flowing and all you can think about is being in the moment. Biggie Smalls once said, mow money, mow problems. But I think if Biggie was watching these tech companies get drunk on hiring, I think he would have actually said, mow headcount, mow problems. And the reason why is because the chart below, which reflects Brooke's law. And Brooke's law states that for every person you add to a project, it actually moves slower, not faster. And that leads to my biggest learning being an HR for the last 13 years. Headcount is a vanity metric. It is not a sign of success. In fact, the only sign of success is turning your business into a money printer. Such that for every dollar of investment you put in, you get two, three, or four dollars of revenue out. And so that's the story of what happened in tech up until the middle of 2021, when inflation started to spike. Now, the Fed was hoping that it would be transitory, but it turned out to be persistent. And by November of 21, we had the fastest rate of inflation growth in more than three decades. And the Fed said we might have to raise rates a couple of times in order to respond. And boy, they were not kidding. Since March of last year, the Fed has increased its federal funds rate 11 times and 525 basis points. And when interest rates go that high, investors care less about growth and more about profitability. So remember those tech companies that were at the club having the time of their life? It's now 7 a.m., their Mali has worn off and they have to deal with the reality of a new day. And that new day is still the reality we're in today, where we're seeing more layoffs than at any point in time during the pandemic. And here's the thing that nobody wants to hear. It's going to continue into next year and potentially beyond. Okay, a lot of layoffs over the course of the last two years. Do any stick out to you? Two stick out to me. On March 5th of 2020, Airbnb ran a layoff and that makes sense. They're in the travel industry and during COVID their business had essentially stopped. They laid off 2,000 people. But what surprised me was how the media responded. They called it a case study and how leaders can run layoffs. One reporter called Brian, Airbnb CEO, empathetic and transparent right after he had fired 2,000 people. Now on the other hand, there's Vishal Garg. Does anybody remember by a show of hands Vishal? Vishal was the CEO of better.com and they also ran a layoff in December of 2021. Except this time, the media crushed Vishal. They called him cold and that it was a tragic example of leadership. So what happened here? Why was Brian at Airbnb heralded and why did Vishal get crushed? The media wants you to believe it went so poorly at better.com because they ran their layoff on Zoom. But that's false. If you live in a post-pandemic world and you have to do a layoff, of course you have to do it on Zoom. Now I'm not gonna make you watch the entire video because it's quite painful but I will break down what happened. The first thing is that Vishal was clearly unprepared. It looked like he was winging it or going way off script. And because that's true, his communication came off. We actually have a term for it in tech. He came off as a total asshole. He led off by making the event about himself. He then later referred to impacted employees as unlucky and when he had time to process and think about it, he then took to the social media app called Blind where he accused impacted employees of stealing from the company and from its customers. Overall, the better.com layoff did not treat impacted employees with respect or with dignity. Many of the impacted employees said they had trouble accessing their severance, their health benefits and couldn't get in touch with betters HR team. I can't imagine what these people were going through right as the tech recession was taking place right before the holidays. Now, taking a step back, what makes the better.com layoffs even more egregious is that they happened 18 months after Airbnb gave the playbook for everybody to follow. Now, people forget this but CARTA actually ran their layoff before Airbnb and Airbnb followed a lot of their strategies and tactics from what we did at CARTA. And now I'm gonna tell you that story. But before I do, I wanna tell you a bit about Henry Ward. He's CARTA's founder and CEO and I'm pretty sure he has a crystal ball because he has an incredible knack for being right during company defining moments. He's one of the smartest people I've ever met and he's an incredible people leader. He doesn't believe in playbooks. He's a contrarian and he's a first principal stinker. So I get the slack from Henry and every day I'm meeting with the executive team and my people leadership team. Henry gave us a target to cut 16% of the company and we got to work. And there's a typical playbook that most companies follow when they run a layoff. And it starts with getting smart. And the way that you get smart is you update all of your financial models assuming the worst case projections and you also talk to advisors and leaders at other companies who have run layoffs before. You wanna take from them what worked well and leave what didn't. From there, you're gonna wanna cut all of your non-headcount expenses but you're gonna find that it won't get you too far because typically people expenses account for 70 to 80% of a company's OPEX. You're gonna wanna design your cut criteria and most companies begin to look at all non-essential projects, underperforming employees and their GNA teams. It's important at this stage to loop in employment legal and to design a diversity impact analysis. I like to bring in employment legal at this time to dot eyes, cross T's and to limit company liability. About a day or two before the event you're gonna wanna prepare and train your managers. Now it's important that you move quickly at this stage because if you don't rumors will get out. On the day of the event, the CEO will send a company-wide email or call in all hands. And as we learned from Vishal, it's critical that the CEO is prepared and practices. You're gonna impact the ex-employees, the impacted employees will be exited and their severance will be paid. And then usually companies give it a few days to let the team process and then reset them on the go forward goals. And so that's the general playbook for layoffs and that's what we ran at CARDA. But we also followed two principles from Henry that most companies don't. The first is to be humane and treat impacted employees with respect and dignity. And the second is to cut too deep. That's right, I said too deep and I'll explain more what I mean in a minute. So the first step in being humane is designing as generous of a severance package as possible. We gave all employees three months of pay, extended their healthcare until the end of the year given that we were in a global pandemic and also extended their post-terpanation exercise window so employees had time to exercise their shares. We also decided to leave Slack on so impacted employees could say goodbye to their friends and colleagues. Now, most companies don't do this because they're scared that an impacted employee is going to go on to a public Slack channel and talk negatively about the company. We didn't see that at all. We thought it was critical that every impacted employee have a direct conversation with their manager. This was an emotional and logistical challenge given that some managers had 10 impacted employees on their teams and had to be in these conversations all day long. And finally, we deployed our recruiting team and our managers to help these folks update their resumes and find new jobs. Now, as I mentioned, our other principle from Henry was to cut too deep. And the reason why is this slide from Sequoia Capital. It shows two companies that are going through a hardship. Company A, which is the yellow line, decides to wait to run layoffs. And then when they do make cuts, they don't go deep enough and have to run multiple layoff events. By the time they're done, they don't have enough runway to survive and die. Company B moves quickly and cuts deeply. They're able to extend their runway and to survive the hardship. So Henry's meeting every day with our managers and as I mentioned, we had a target of 16% of the company and some of these managers thought that we were going too deep. And to that, Henry said, we can always hire people back. And if that sounds crazy, you're not alone. I thought it was too. But it turned out to be a very helpful framework to managers who thought we were going too deep. And in fact, we actually did hire a number of people back over the coming weeks and more into the summer, all of which received severance in their jobs back. Henry also said, we want people who want to be here. And so similarly to Brian Armstrong at Coinbase and Tony Shade Zappos, we decided to allow all employees the opportunity to take the severance that we were giving to the folks that were being impacted by the layoff. And again, I thought this was crazy, but again, I was wrong and Henry was right. By giving everybody the opportunity to opt out of CARTA, those that stayed were intentionally opting in to another tour of duty. So the day before the event, we're training our managers and our VP of HR said something I'll never forget. She said, people will remember this day for the rest of their lives. And it's powerful because it's true. So that night I go home and I'm dealing with the most anxiety I've ever experienced. I was worried about our business continuity. Would a bunch of employees decide to take the severance and leave? I was worried about our team and our managers. Could they handle the emotional toll? I was worried about the company and our ability to move forward. Would we ever grow again? I didn't sleep at all that night. The next day we called the all hands and Henry informed the company. We ended up laying off 161 people. Now, anybody who runs layoffs should read Henry's entire blog post because it's a case study in internal comms. But I wanna read one line to you because it's an example of Henry taking full ownership as CEO. He said, it's important that all of you know I personally reviewed every list and every person. If you're one of those affected, it's because I decided it. Your manager did not. It was a brutal day. My team was deeply impacted. We ended up laying off almost half of the team about 30 people. I was in these conversations all day and into the evening. And in my last conversation of the night, I was talking to a recruiter who had just lost her job. And she said, Nolan, I'm sure today was brutal for you too. Thank you for treating me with dignity and respect. Okay, so what were our core learnings? Let me first start with what I wish we could take back and it's one thing. About two weeks before the event, we held in all hands and we told the company we were considering doing layoffs. Now, our goal was to be transparent, but unfortunately, we just scared everybody. It wasn't productive and I wouldn't do it again. On the other hand, we got a lot right. And a lot of what we got right was counterintuitive. The first is that cutting too deep is necessary. And the reason why is because of that Sequoia chart. If you don't go deep, you won't be able to survive. The second is by giving everybody the opportunity to opt in, by giving everybody the opportunity to take the severance, those that opted in wanted to be at CARTA. It helped the team get productive and then get working again. We also tucked in a few of our top performers with salary and equity increases. This was only on a select case and we factored all of these increases into our go forward models. It ensured that critical members of the team didn't leave. I learned that the company was more resilient than I expected, but I think a big reason why is we treated all employees with respect and dignity. And that respect was reciprocated not only by them, but also by the people that stayed. So as you can see, running layoffs is a complex process. But after the layoffs at both CARTA and Airbnb, both companies began growing again and both companies healed. To run a layoff the right way, it takes bold action. It takes preparedness. It takes CEOs who own everything. But regardless of how the layoff goes, people will remember the day for the rest of their lives. Thank you.