It’s disconcerting that venture capital and corporate leaders turn a blind eye at times to CEOs that may be brilliant, but toxic.
You may recall the viral story of Vishal Garg, CEO of unicorn mortgage lender startup Better.com. After receiving a $750 million cash infusion with a valuation of around $7 billion, Garg bluntly informed his 900 employees that around 15% of the workforce will be fired in a cold, awkward one-way video announcement.
In a monotone voice, he said, “This is the second time in my career I’m doing this and I do not want to do this. The last time I did it, I cried; this time I hope to be stronger.” He continued saying, “If you’re on this call, you are part of the unlucky group that is being laid off. Your employment here is terminated effective immediately.”
In a video version of the termination call, a presumed disgruntled employee cursed out the CEO saying “F*ck you, dude,” over the announcement. Garg did say, “I wish you all the best of luck,” in their new endeavors.
The founder and CEO, Garg issued an apology on the company’s blog saying, “I want to apologize for the way I handled the layoffs last week.” and “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.”
The embattled CEO then accused “at least 250″ terminated staffers of stealing from the company and customers by working just two hours a day. An email to employees from Garg was leaked, stating, “HELLO—WAKE UP BETTER TEAM. You are TOO DAMN SLOW. 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.”
After all this, another cringe-inducing video fell into the hands of the media. The tape was obtained by TechCrunch. The content confirmed rumors of the CEO’s over-the-top antics. “Make no mistake, we did also eliminate redundant roles — who might be strong performers but were in the wrong place at the wrong time, with the wrong task, and weren’t mission-critical,” Garg said. He added that the company will continue hiring, and in particular, bringing aboard interns. His warm, welcoming introduction to the incoming class of interns included, “we expect those people to be super productive and add value, and if they don’t we will exit them, too.”
Garg, managing expectations declared, “ We will not be spending time focused on what investors think. We will be spending time grinding this business forward in what will likely be a bloodbath in the mortgage industry in the next year or two.”
The not-so-warm and fuzzy tech exec admitted he was guilty of not judiciously managing the company’s cash and its hiring strategy. The lack of financial controls and unfocused hiring may have led to the layoffs of around 3,000 workers.
Better said that employees impacted by the downsizing would be properly notified personally over the phone and eligible for extended medical benefits, severance and help to find a new job. In what seems like a glitch, some workers were notified of their firings by seeing a severance payment in their bank accounts, and not in person.
“Today we acknowledge that we overhired, and hired the wrong people. And in doing that we failed. I failed. I was not disciplined over the past 18 months. We made $250 million last year, and you know what, we probably pissed away $200 million. We probably could have made more money last year and been leaner, meaner and hungrier.”
“We should’ve done what we did today three months ago … that’s what I’m saying to you right now, it’s what I’ve said to the board before. …You will not be allowed to fail twice. You’ll be encouraged to fail once, but not allowed to fail twice.”
This sad scenario is a master class in what CEOs shouldn’t do. Real leadership is needed in a time of crisis. It’s important to show empathy when sharing bad news. If there are no other choices, when layoffs are announced, the company’s leadership should prepare for having ready for the impacted workers such as insurance coverage, date of departure, severance packages, recommendation letters, introductions to recruiters who could help with finding new jobs.