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Better.com fired 900 employees at once – How does this affect company image?

Posted by Deepshikha Shukla

January 7, 2022    |     4-minute read (781 words)

Vishal Garg, CEO of unicorn mortgage lender startup Better.com — whose valuation was recently estimated at $6.9 billion — bluntly informed 900 employees that their employment had been terminated during a Zoom call early December 2021. This represented a layoff of roughly 9% of the company’s workforce, and the way it was handled has been the subject of widespread criticism and accusations of insincerity on Garg’s part. This blog delves further into how the decision has been received and what it might mean for other leaders.

Showed no empathy

The layoff was conducted over a mass video conferencing call, meaning it was completely void of any semblance of a personal touch, and it transpired between the Thanksgiving and Christmas holiday periods. Companies typically hold back from delivering bad news, such as mass terminations, during the holidays. However, Garg did not wait for staff to enjoy the holiday season, nor did he demonstrate any semblance of compassion or understanding while making the announcement.

After the move, Garg was hit by a wave of backlash from the staff, stakeholders and the public at large, with a lack of empathy the common refrain leveled at the CEO. Affected staff said that the firings were unexpected, and that they were also shocked to have been cut off from their work devices almost immediately.

Even if some of those who lost their jobs were provided financial support by the company, an act of this nature close to the holidays surely hurt staff morale, intensified negative feelings and harmed the brand’s image. 

An apology is not enough

The backlash prompted Garg to issue an apology to current employees, and soon afterward he took a leave of absence, perhaps realizing his controversial people management mistake would not blow over quickly. 

In his apology, he wrote: “I realize that the way I communicated this news made a difficult situation worse … I failed to show the appropriate amount of respect and appreciation for the individuals who were affected and for their contributions to Better. I own the decision to do the layoffs, but in communicating it I blundered the execution. In doing so, I embarrassed you.”

Although Garg apologized for mishandling the layoff news, many of the company's top marketing, PR and communications executives resigned to express their anger. 

"Is it fair, or not, to allow a second chance…?" Mahindra Group Chairman Anand Mahindra asked in response to a New York Times tweet about Garg's apology. The post received varying opinions on the controversial mass layoff, mostly negative. 

One person tweeted, "Definitely not. For a CEO, lacking empathy and low EQ is pretty evident." Another user tweeted, "If he can give a second chance to all 900 who he disrespected, handhold them to perform, then would definitely deserve a second chance."

A tragic example of how not to manage people

Garg's firing of 900 employees received criticism from people both inside and outside the company. But this isn't the first time the CEO’s behavior has led to scrutiny. 

Last year, Garg sent an email to employees that stated: “You are a bunch of dumb dolphins and … dumb dolphins get caught in nets and eaten by sharks. So, stop it. Stop it. Stop it right now. You are embarrassing me.”

Garg may be a visionary regarded by some as having founded the country’s most innovative consumer mortgage firm, but he seems to lack people skills. Participants in the layoff call claim he blamed employees and portrayed the layoff as all their fault instead of acknowledging real issues during the call.

The damage caused to the company

The act of firing people over a Zoom call has also caused significant embarrassment to Better.com. Apart from negative news coverage and scathing reviews on Glassdoor, harsh comments on social media platforms have further tarnished the brand’s image and reputation globally. 

James Gerber, brand storyteller and vice president of PR firm Crackle, commented, “Garg also failed to consider how his comments would be perceived if they were made public and how that might damage the company”.

Better.com has delayed the close of its $7.7 billion SPAC merger with Aurora Acquisition Corp due to the mass layoff. Prior to the SPAC deal, the company had raised around $950 million from firms such as SoftBank and Goldman Sachs. The company also delayed its public listing planned for the fourth quarter of 2021. Now the company is undertaking a leadership and cultural assessment.

The controversy surrounding the brand has also put the company stock debut at risk, at least temporarily. Now, potential candidates will think twice before joining, and customers will likely hesitate to do business with the company. 

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