In December 2021, Vishal Garg, the CEO of Better.com, a 7-year-old company in the online mortgage brokerage business,abruptly laid off 900 employees on a Zoom call. Since then, the story has mushroomed substantially, with multiple members of his leadership team resigning, and with Garg himself stepping away from the business at the request of Betters board of directors. The sequence of events has become a circus, a viral public relations nightmare for the company that could precipitate its own demise.
What stands out most about this bizarre scenario is the failure of leadership. In stating his reasons both to the group of 900 and in the subsequent firestorm that followed, Garg leaned on two key issues: finances and performance. And by performance, he wasnt speaking about the performance of the company, but rather, the performance of many of the individuals who were being terminated. He said a number of very disparaging things about these people and blamed them for many of the shortcomings and challenges the company was facing. Many on the call expected good news, given that the company had received a significant infusion of cash the day before the call.
Whether there were issues with the performance of the people remains to be seen (there are indications that many top performers were included in the 900). But its important to understand that laying people off and citing their performance as the issue is not only bad practice, but it sets the stage for litigation, most assuredly for wrongful termination, and likely other issues as well.
Garg and his leadership team have pursued a course of action that has been part of the employment landscape for a long time. Performance management by way of widespread termination is a strikingly common and accepted practice in corporate America. There is a long history, hidden to most, of management by pink slip where performance is concerned.
Which begs the question, why do companies use layoffs as a means of managing poor performers out the door?
The simple answer is that managing the performance of your team is hard. If you have someone who is performing poorly on your team, telling them so is hard to do especially because, as their manager, you are at least partly responsible for their performance, good or bad.
This may seem shocking. As owners and managers, your job is ultimately to ensure that your company succeeds. There is only so much you can do on our own.
Sooner or later, you need others to help you do that. In order for your employees to help you succeed, they need to know what is expected of them and how theyre expected to operate. This means you have to be clear and consistent in coaching and guiding your team members. They have to understand the companys needs as well as management does, so that a mutual trust can be developed. Its your responsibility to make sure they know all that. If they dont do their jobs well because they dont know what they need to know, thats on you.
And if your team members are not doing what you expect them to do, especially after youve put the effort into training and guiding them, then it is also your job to let them know what they are missing and help them correct those things so you can get back on track.
Giving the right kind of feedback and providing guidance are difficult and necessary tasks. That said, few people feel enjoy being given even the most constructive feedback. And naturally, most people who have to give it have had the experience of receiving it, and that hasnt always gone well, either.
Managers will often skip over it rather than provide good, valuable feedback to people.
This creates the potential for a downward spiral of poor performance that is not documented or discussed. Some managers and groups will tolerate this trade-off for months, even years until the day comes that the company undergoes a restructuring or downsizing, and the opportunity to eliminate the problem can now be shielded in a larger change that provides cover for taking out that poor performer.
If the logic of this thinking seems faulty, youre on the right track. Unfortunately, this has been a multi-generational pattern of performance management avoidance. Given the choice, many managers and corporations have taken this path of minimal resistance rather than dealing with the messier issue of managing actual performance. In acute cases, managers and groups will even reorganize the workflow around the poor performer, burdening others with work that could be done more effectively if the specific issues were being addressed.
Mr. Garg may be an extreme example of this approach; that he was so explicit in his description of his reasoning only serves to heighten the example. To come out and say the things he did about his staff risks easy litigation. And, given how explicit (and visible) he was, those who file for wrongful termination against Better.com are almost certain to win.
This situation provides the lesson that you must be very good at managing the expectations of work for your staff and be prepared to measure and manage the work they do. If you encounter performance management issues, you must address them professionally and directly. Experience teaches that staff prefer to know what they are doing well and not so well rather than be kept in the dark about it and capriciously carved out later.
Particularly in the cannabis industry, there is an opportunity to be ahead of the curve on this, and to demonstrate that you are more effective at managing these issues, so if you ever need to make large-scale changes, you are making staff decisions based on documented information, good business practice and proactive leadership.
And not behaving like Mr. Garg.