Joel Gascoigne, CEO of social media tool startup Buffer, shared a 3500-word post in which he explains why he’s laying off 10 of his 94 employees. In contrast to bloodless posts from the likes of Intel and Microsoft, it indulges a different sin: oversharing.
A lot of my correspondents forwarded Gascoigne’s post to me, hoping I’d praise it because it is so different from the other CEO communications I’ve shared. And there is a lot to like here: it’s extremely open, fair, and honest. Gascoigne is living his sincere promise to be transparent.
But a CEO should be communicating the realities of his or her business regularly, not dropping it all at once in a 3500-word lump along with a layoff. What a team wants from their CEO is to share what’s relevant, not to share everything. This is a good example of how it’s possible to overdo transparency.
A great start
Most bad-news posts and emails start by beating around the bush, which is pointless. Gascoigne starts with a title and first sentence that tells exactly what’s happening, including the usually forbidden word “layoffs.”
Tough News: We’ve Made 10 Layoffs. How We Got Here, the Financial Details and How We’re Moving Forward
The last 3 weeks have been challenging and emotional for everyone at Buffer. We made the hard decision to lay off 10 team members, 11% of the team. I’d like to share the full details of how we got here, and the way we have chosen to handle this situation to put Buffer in a healthier position.
It’s great to use “I”, but don’t overdo the mea culpas
Press releases and many other communications eschew the first person. This is a mistake; people want to hear from the CEO, and they want him to speak personally. But the constant repetition of sentences that use the word “I” makes the email too much about the CEO, not the company. We want to more about what’s happening now and less about how you made the decision. (Excerpts here are from throughout the post.)
I believe most startup founders are, by nature, optimistic. We want to solve problems and we believe in going from nothing to something.
Although I know rationally that the size of the team is not something to celebrate, I feel that I slipped into that harmful mindset quite a bit over the last year. . . . Sometimes it impressed people when I told them how big the company was, and I was proud to share it.
I wanted to share more about the tough decision to make 10 layoffs in order to recover to a healthier financial position. Leo and I deliberated in 5-hour meetings each day for days on end with the other members of our executive team, Carolyn and Sunil, as we called in advisors and counsel to help us understand the best way to make these tough choices. No matter how much we deliberated and how much we thought about it, the gradual and terrible realization we came to was that it came down to people.
We know you’re thoughtful. Talking about how long you deliberated and who you spoke with matters less than what happens next.
It’s unusual for a CEO to take so much of the blame for a bad decision. But continually repeating how you made a mistake overdoes the honesty and undermines the confidence that a leader needs to project. We don’t want to work for a fuckup.
And no amount of optimism could prepare Buffer for last Monday, when we had to tell 10 talented teammates that their journey with us was over. It’s the result of the biggest mistake I’ve made in my career so far. Even worse, this wasn’t the result of a market change—it was entirely self-inflicted.
The fact is, the challenge that I created has now irrevocably changed people’s lives. I put the company in this position. I had poor judgement and took the wrong actions in many different areas.
Over the course of the last year, Buffer went from 34 to 94 people. . . . Leo and I . . . decided to embrace the ambition we have for the company, and grow significantly in order to serve customers. . . . Reflecting on it now, I see a lot of ego and pride reflected in that team size number.
We’ve made mistakes like this before—lots of them, in fact. But in the earlier days we were mostly building a product. Now we’re building a company, and the calls we make involve people’s lives.
I’m truly sorry for the disappointment and anxiety I’ve caused, and for creating this difficult situation for the team. I personally feel this is a big mistake for me to make as CEO, and I take full responsibility.
Explain what happened and how things will change
I think it’s great that Gascoigne explains what happened, why it didn’t work, and what will change.
In short, this was all caused by the fact that we grew the team too big, too fast. We thought we were being mindful about balancing the pace of our hiring with our revenue growth. We weren’t.
One of our advisors gave us an apt metaphor for what happened: We moved into a house that we couldn’t afford with our monthly paycheck.
But it’s possible to go too far on any given topic. The level of detail here makes me wonder — is this the first time that CEO shared financials with his team? If not, why belabor them in such detail in this message?
I think Gascoigne did a good job explaining how they will do things differently.
We know other companies who have similar cash flow situations to us but have raised $20–30 million in funding. These companies, which are the more normal path in Silicon Valley, have chosen to operate in a way where they have a high burn rate resulting in a limited “runway” between each fundraising. Generally startups aim for 12–18 months runway from a round of funding.
The traditional fundraising path has deliberately not been the way we have chosen to operate, and so in situations like this we choose not to use fundraising to solve the challenge.
. . . .Additionally, we want to challenge ourselves to improve in these specific areas:
- Adding to our finance/accounting team: We plan to grow our finance team with the addition of someone quite senior who can help us understand all that we don’t know and get us to solid financial footing.
- Catching up on housekeeping: We’ve got some internal auditing to do to make sure our processes have grown along with our team, and there’s quite a bit of legal/accounting catch-up to be done.
- [Two more bullets about what’s changing.]
Spending too much time on mistakes is a mistake
Gascoigne spends 451 words on a section about the mistakes the company made. That level of detail may feel good to get off your chest, but it’s not the way I’d choose to motivate staff in the wake of a layoff.
The key mistakes we’ve made
In hindsight, we made some key mistakes with our hiring and costs. The overall theme is that we weren’t attentive enough in using a financial lens on every decision we made.
In greater detail, here are some of the elements that led us to this point:
- Over-aggressive growth choices: In Q4 of 2014 and the first half of 2015, our pace of growth started to slow a little. This is a somewhat natural aspect of a reaching higher levels of revenue—it’s hard to keep growing a larger number at the same pace you once were able to. We were in a healthy financial position and chose to put our foot on the gas. In hindsight, Leo and I were too aggressive with that change and would have put Buffer in a better position if we had gradually increased our pace, rather than triggering such drastic growth efforts.
- Lack of accountability: In a 10-person company, everyone wears many hats. In a 500-person company, almost everyone is specialized and decision makers are clear. What’s often not talked about is the transition from generalists to specialists. That transition has been messy at Buffer. Especially in areas we know less about, like finance and HR, we haven’t brought on board experts soon enough. As a result, some things have fallen through the cracks and we’ve gotten a lot wrong.
- [4 more bullets about the same thing: poor management and hiring too fast]
The result of these mistakes and getting full clarity on our financial situation was that despite having $1.3m in the bank, we were rapidly trending towards zero cash within 5 months.
Graphics is another great technique that you can overdo
I wish more posts and emails included graphics to explain what was really going on. But at some point, you’ve turned an emotional email about layoffs into an instruction manual. In this case we get a flowchart about how they chose who to let go — which probably won’t make anybody feel better.
We also get a dramatic picture of how the company was going bankrupt.
And even a tweet about how to manage money:
Here’s an approach the Buffer CEO could have taken
When people read my critiques, I’m sure they think, “OK, hotshot, what would you do?” I’m no CEO, but I do think a lot about communication. So if this were my company, I’d do pretty much what Joel Gascoigne did, but much more briefly and with less rending of garments. All this needs is an apology, an explanation, and a plan moving forward. Many of the words in my version are Gascoigne’s, because they’re good — my main contribution is in what I cut. Here’s a 300-word message that I believe would be just as transparent but more effective.
Tough News: Why we laid off 10 people and how we will move forward
We just made the hard decision to lay off 10 team members, 11% of the team. I’ll explain what happened and how we will move forward.
We got into this situation because hired too many people for our revenue growth. If we continued to spend at this rate, we’d go bankrupt. I’ve cut other expenses, including my own and Leo’s salary, and cut a few expensive benefits including the health and wellness grant and vacation bonus. In the end, though, only staff cuts could keep us solvent.
I’m fully responsible for the decision to overspend, and for not managing the situation carefully enough. I recognize that as a result, we’ll have to let people go, and I take that seriously. I’m sorry I let you down.
We made the choice about which people to lay off based on who was irreplaceable, and also factored in seniority. To help these folks as best we can, we’ll provide 3-6 weeks severance and three months of full healthcare coverage.
While we could raise money, to do that on terms that are favorable to the company, we need to become financially self-sustaining first.
To better manage finances in the future, we will add a senior finance person, audit internal processes, put more financial oversight in place, and delay our next retreat until 2017.
I appreciate your confidence in me. Our goal is to achieve $20M annual recurring revenue over the next 12-18 months, and we are doing everything to do so sustainably and with the right team. Growing to well over 50,000 paying customers, I believe more than ever that Buffer has a clear role to play in bringing about the change we wish to see in the world.