Episode 22: How Companies Can Perform Layoffs with Empathy: Chip Conley

Chip Conley — hospitality entrepreneur, New York Times bestselling author, and founder of the Modern Elder Academy — discusses how companies should plan for and conduct layoffs properly, including how he helped Airbnb manage its painful process when he served as Airbnb’s Head of Global Hospitality and Strategy.

Transcript

Chris Riback: I'm Chris Riback. This is Call In with Dr. Alexandria White. We discuss business leadership in our time of social change when to call in, when to call out, and how to build sustainable business value today.

Before our conversation though, an ask from us to you. We hope you like these call in conversations. And if so, we'd appreciate if you take a moment, go to Apple Podcasts or wherever you listen, and if you're so moved, leave a five-star review. The ratings really matter. They go a long way to helping other people find the podcast.

Dr. Alexandria White: Our show is brought to you by Clayton, Dubilier & Rice, which is committed to a more diverse and inclusive future. Let's call in.

Chris Riback: Chip, thanks so much for joining us. We've been looking forward to getting to talk with you.

Chip Conley: Thank you. Honored to be here.

Chris Riback: So let's start with you and the Modern Elder Academy. I think that understanding some of your background, not only what you have done, but what you are doing now will help provide some solid context for the rest of the conversation. So what in the world are you doing now?

Chip Conley: So background is for 24 years, I was the CEO of a boutique hotel company called Joie de Vivre based in San Francisco. We were the second largest in the US. And then I sold the company during the Great Recession right around my 50th birthday. And to be honest with you, I loved it until I hated it. And I went through a really rough patch between 45 and 50 on many levels. And I said, note to self, midlife is sort of a complicated time. I was lucky that a couple years after that, I was approached about 10 years ago by the founders of Airbnb who had this little tech startup that was growing quickly and they wanted me to join them and I became their Modern Elder. So I didn't love that term when they said I'm their Modern Elder, but then they said, "Chip, you're as curious as you are wise, and you are twice the age of the average person here."

Because I was 52, and the average age was 26. So long story short is I spent four years full-time, and then three and a half years part-time as a Strategic Advisor to the founders and loved it. So while I had the midlife crisis in late 40's, my 50's I absolutely loved, and I found all kinds of interesting elements of the new workplace around intergenerational collaboration. At the end of my full-time period there, I decided to write a book called Wisdom at Work, the Making of the Modern Elder. And while I was writing that book here in Southern Baja, about an hour north of Cabo San Lucas, I had a Baha Aha one day, an epiphany, and the epiphany was, why don't we have schools for people in midlife? Midlife wisdom schools where people can actually reimagine and repurpose themselves for the second half of their adult life. And so that's how MEA, Modern Elder Academy...

Chris Riback: Modern Elder Academy.

Chip Conley: That's how it came about. And we've had about 3000 alumni from 42 countries who've come to our programs now.

Dr. Alexandria White: Chip, you are my crush in hospitality. It will be a year since I've actually met you in person, and I am just thrilled to be able to have this podcast and share this time with you. Our listeners are in for a treat. Chip has so much experience in regards to hospitality and something that we want to talk about today, which is laying off. So I want to give you some numbers right now. In January, going on right now, 2023, Amazon is projected to lay off 1% to 2% of their workforce. Salesforce is projected to lay off 10% of their workforce. Even Goldman Sachs, 8% of their workforce. So Chip, let's get started. I want to talk about the context of layoffs, in particular, the emotional context. So first of all, have you ever been laid off before we go there?

Chip Conley: That's a good question. I have never been laid off.

Dr. Alexandria White: Wow.

Chip Conley: Yes, and to be quite honest, when you start a company at age 26...

Dr. Alexandria White: Uh-huh.

Chip Conley: And you've been in business school before that, there's not a lot of time for me to have been laid off.

Dr. Alexandria White: Right.

Chip Conley: So I haven't had that experience. But I will say that as a hospitality leader and the hospitality industry is one of the more cyclical and seasonal in the world. I know a lot about layoffs. And of course, as a leader at Airbnb, when the Covid pandemic came along, I learned a lot about layoffs and I helped advise the founders on how we did layoffs there. So it's a topic I know well. I'll just say one other thought there, Alex, and that is that anxiety equals uncertainty times powerlessness.

Dr. Alexandria White: Mm.

Chip Conley: And so what happens during layoff kind of times, it's usually there's an overall broader economic situation that's going on, and the news is telling this, and there's all kinds of fears out there. And anxiety really comes down to two key variables. One is uncertainty, and the second is powerlessness or the feeling of a loss of control.

So once you know that as a leader, the thing for you to look at during difficult economic times is how do you increase the certainty? Typically through communications. And how do you increase the sense of agency or the ability for employees whether they are potentially going to be laid off or whether they're staying to feel like they have some control or influence in their workplace and in how they're doing? So those are the two ingredients to me. Any great leader who is going through a difficult time like this knows that those are the two things that you need to do. Number one is over-communicate, and number two is help people feel some agency.

Chris Riback: Chip, are you suggesting, do layoffs begin before you're sitting alone one-on-one with that other person?

Chip Conley: Yes, well, I'll say, I'll give you some of my personal experience at Joie de Vivre, my boutique hotel company, but also the advice I gave to the founders of Airbnb. And that is you do not want people to be shocked by an economic layoff or a personal career layoff. A career layoff is performance based. An economic one. And then there's also actually a third kind of layoff. There's really three layoffs. One is performance based, and that's not exactly a layoff. That's actually being terminated usually. Sometimes it's through a restructuring of a company that may have nothing to do with overall economic conditions. But I think what we're going to focus on here is when there's economic conditions out there that are affecting the broader marketplace. And so everybody knows that's around, people are talking about it, the data's coming in. So any leader who does not help prepare their teams and their employees for not just the fact that layoffs may be coming, but more the fact that we're going to have to tighten our belts.

Now, I will say that from the point where you say tightening belts to talking about layoffs needs to be a relatively short period of time. Because you can use language like tightening our belts and people will say, okay, am I going to lose my job? So again, I would say Airbnb did a pretty good job on this in the sense of saying in advance before those who knew they were going to be laid off knew that they're going to be laid off.

Brian Chesky, the guy I was mentoring, the CEO of the company, went to people and said, "Listen, we are going to have to do some layoffs. They will be coming." Some people already knew about it, but some people didn't know that they were going to be laid off. But the time period between when that conversation happened and when people got their notice was not very long. And that's a really important thing is, but I think helping the whole company see the rationale for it. And then we can get into the more most important piece of this, which is how do you do it humanely and in a way that shows both grace and culture? Because companies talk about culture all the time, but you really truly show your company culture in the difficult times.

Chris Riback: So grace and culture goes to Alex, tactics go to me in this particular case. So you said there was not a lot of time between when the scene was set, let's say and then when the actual layoffs began. Could you kind of quantify that a little more tightly? And then two, how do you feel about right now, the stats that Alex read at the top? These were all kind of preannounced. Amazon said, we the readers, the public knew in advance Amazon was going to have layoffs. The Goldman Sachs layoffs, we've been reading about those for couple of weeks now.

Chip Conley: Well, let's start with the second piece, which is that I have no idea whether Goldman Sachs told their people before it became public knowledge. I would hope that they did.

Chris Riback: It's been in the papers.

Chip Conley: What's that?

Chris Riback: It's been in the papers.

Chip Conley: Well, I know, but the question I have, Chris, is did they actually tell their...?

Chris Riback: The individuals.

Chip Conley: You hope internally before they communicated it externally. That would be a huge faux pas if they didn't.

Dr. Alexandria White: Mm-hmm.

Chip Conley: And I would also say you hope that there was a period of time between when they communicated internally and when it went externally. But that period of time is not going to be very long because we live in an era where the moment you've said something to your team, and even if you say to them, don't put this on social media, it's going to get out there. But you got to make sure that you're communicating internally first. In terms of what the period of time was between when Brian set the table and when those conversations happened was, I don't remember. It was almost three years ago now because it was May of 2020.

So I don't remember the exact period of time, but it was very short. And in some cases, many of the people, especially departments, there were whole departments that actually had to get shut down. Those people knew before Brian said a companywide message. But I will say, what's important on all of this, whether it's how you're communicating to those who are being laid off, then as well as companywide, as well as externally, you as an organization better be ready for this. Because to be able to do communication to three different parties with three different kinds of messages, those who are going to be laid off and what you're going to be offering, those who are going to be staying and letting them know what's happening, and then what the external world's hearing. If there's more than three or four days between those, that's a problem. Because you have now left the anxiety for the opportunity to rise.

So I would just say again, the more candid and the more transparent you are, the better. And this is where it's essential for a company to prepare for this and not just make a decision on a Friday that next Tuesday we're going to announce all this. And then somehow over the weekend you've figured out your plan. It will take a good four weeks minimum to be able to, I think, create a really strong plan for all three of those parties. And four weeks is short. That's four weeks burning the midnight oil to be able to do it well.

Dr. Alexandria White: You said so much right there. With grace and culture, timeframe, uncertainty, all of that. So let's talk about the good ways and the bad ways.

Chip Conley: Yes.

Dr. Alexandria White: We've heard of CEOs firing a mass amount of employees via Zoom. They were unexpectedly fired. I mean, I followed the Twitter layoff and I would just read and read how people were unexpected. Their emails were turned off. So let's talk about how business leaders, the people managers who have to make these difficult decisions, how can they show grace and maximize the inclusive culture when you are laying people off?

Chip Conley: R-E-S-P-E-C-T. Respect. It is all about respect.

Dr. Alexandria White: Yes.

Chip Conley: What people are worried about. So there's two or three thoughts here. Number one, first one is when someone is getting laid off, there are two predominant things you need to keep in mind that are on their mind maybe for the rest of their life. Because when someone gets bad news like this, especially if it's really unexpected, it can be jarring, traumatic. Number one is, did I feel respected when I got this news? I mean, did I really feel appreciated? Did the person who was giving me the news show empathy, compassion, but also an appreciation for what I had done there? That's number one. Number two is what's the package? What is the package? And how Twitter, from what I understand in terms of what I've heard sort of, Twitter actually laid people off then they actually laid off too many people and they tried to bring people back.

Dr. Alexandria White: They did.

Chip Conley: I'm just hearing right now that they haven't even solidified their severance package yet for the people who've been laid off. That is stupid. Because you need to have that in place at the time that this person's gained that news because that's part of the respect. Because again, you're increasing anxiety if there's uncertainty.

Dr. Alexandria White: Mm-hmm.

Chip Conley: So I would just say number one is let's make sure that those two things, the idea of feeling respected by way of empathy and compassion, and clarity around the severance package and a severance package that is generous. Not all companies can do the same severance package. So I don't think there's a magic severance package that works. I think there's so many variables including how much this person's making? What's their tenure been? How senior they are? How important they are? And there are also ways to sort of soften it.

Our average age of the people who come to MEA is 54. A lot of our people, they would love to have their employer come to them and say, "Are you open to going from five days a week down to three days a week and have a 40% pay cut?" There are a lot of people in their 50's would say, "Yes, I'm so open to that. I would prefer that to having you lay me off completely." So the more you can actually look at how do you customize it within the rules of what HR allows, the better. And the larger the layoff, the harder that is, because it is harder to do it in a customized kind of way. So let's start with that. Secondly, let's just say, oh wow, any company that is really savage or considerate or just stupid about how they're laying their employees off have completely forgotten that an employee who leaves is not only going to go tell other people and social media, they're going to stay in touch with all the existing employees.

Dr. Alexandria White: Yes.

Chip Conley: So that is a really important piece of this is that when someone feels respected in how they were let go, there could, as the case with Airbnb, be a shocking halo that is created in the process. I'll talk in a moment one of the things that Airbnb did that was just unheard of, and most companies can't do it, but it's a very relevant thing to talk about. But thirdly, before I get to that, I just want to say, when you're laying people off and you're not reducing the amount of work, you are in essence saying to everybody who remains, unless there's something quite unusual in your company, you're going to be doing more work, or we are going to choose to actually reduce our scope. And that's not a bad thing to do. When a company says, we're going to focus and we're going to reduce our scope because we've just done a 20% layoff of staff.

That's very impressive. Because it suggests that the leadership is being very thoughtful about the work-life integration, which I tend to call it integration as opposed to balance, the work-life integration for those who remain. So it's not just communicating in a really smart way to those who are leaving. It's really communicating about how we're going to do work moving forward. And for Amazon, 1% or 2% of the workforce is not going to be a big deal. But for Salesforce, 10% is a big number. And for Airbnb back in 2020 when the travel industry basically fell off the cliff, 25% of the workforce had to be laid off. So if you are part of that remaining workforce, you want to know, okay, what does this mean for my workload? And that's a really important thing to look at. And I think, again, in short order when these things happened, and especially in the case of Airbnb, because who knew the pandemic was coming along, who knew it was going to be as serious as it was?

And so all of this had to be figured out pretty quickly. So I'd say that's another piece. What's the other thing I was just talking about a minute ago? But I was going to come back to. Oh yes, what did Airbnb do that was just totally novel?

Dr. Alexandria White: Yes.

Chip Conley: Now again, most companies can't do this, but because Airbnb was one of the hottest tech firms in the San Francisco Bay area, and so it was one of the top three or four companies that tech workers wanted to work in. When they had to lay off, the reason they had to lay off was not because the tech industry was in trouble, it was because the travel industry was in trouble. And so they had all these great employees that they were going to have to let go of. And what they did is they created a website that actually featured all of these people and gave employers in the Bay Area or just in the tech industry, the ability to say, man, here's some of the best employees, really well-trained employees.

Dr. Alexandria White: Wow.

Chip Conley: I'm going to go out and look at some of these people. Because in essence, Airbnb became sort of like a headhunter or a search firm and wasn't making any money on it. But they're doing that because they wanted to be supportive of their employees.

Dr. Alexandria White: That's a great idea. That is a great idea.

Chip Conley: Not for everybody. I mean, Amazon won't be doing that because who knows, but it worked really well for Airbnb because it was a huge number of people. So it was worth the time and effort to 1900 employees being let go to do it, and tech workers were in hot demand at that time. So all of that was good. The other thing that I just think people forget in the layoff process is if you lay off people well, those people may come back two years from now.

Dr. Alexandria White: Yes.

Chip Conley: And to hire someone who's already been an employee that you really liked and understands the company and doesn't need orientation, that is a great opportunity. Because gosh, I mean just six months or a year ago, the tech industry was struggling with how do we find people and they were spending a fortune on recruiting.

If your recruiting can be boomerang recruiting, and I don't mean boomers, although boomers are fine. I like boomers. I'm a boomer, but I actually mean boomeranging at any age, at any generation. Bringing someone back who was there before who was well regarded, but just had to be laid off because of the finances of the situation, that's worth doing. And so again, it's a smart, savvy thing for a company to do if they think that there's going to be a rebound. Now, if you're a company that is actually on the death spiral, that won't be so important. And frankly, companies like that have to look at more severe measures than the average company.

Dr. Alexandria White: I love this example. So I'm picturing Airbnb's website where they have all of these headshots of the people that they're laying off and they're good employees. And then I'm looking at the visuals and I'm wondering women, women of color, mothers. And so we know that DEI shows up in layoffs, Chip. Sometimes people who are entry level, and more times than not entry level are people of color. They might be women.

Chip Conley: Mm-hmm.

Dr. Alexandria White: They might be from an underrepresented community. So how does DEI show up in layoffs? There was a company until it was brought to their attention, they had laid off most of the women and most of the people of color. And of course it came on the news cycle that, look, you're not being equitable in your layoffs.

Chip Conley: Yes.

Dr. Alexandria White: So what can companies do to help with those DEI efforts and how it impacts layoffs?

Chip Conley: I mean, there's two answers to that. One is what you measure you manage,

Dr. Alexandria White: Correct.

Chip Conley: You manage what you can measure. So you better be even in layoffs looking at this. And the companies that I have been involved with are very thoughtful about this one, because number one, they don't want to be perceived as having a potential class action lawsuit against them that they were doing something that was discriminatory. So I think a lot of companies are thoughtful about this, and they also need to be thoughtful about, well, gosh, if you have to get rid of a whole division and that's a division that has more employees that are women or underrepresented minorities, then okay, that's something you're going to have to figure out. How do you balance that out with some other things that you're going to be doing?

But I think secondly, beyond just the math of it all and how does it look, I think the question that any company CEO or senior leader needs to be asking is, how much have you been investing in diversity and what kind of setback are you setting up for yourself if you actually go backwards in terms of representation in your company? And I would just say it's a very important issue. So many companies have spent a good amount of money on their DEI efforts. If cavalierly in a downturn you mess that up-

Dr. Alexandria White: Yes.

Chip Conley: ...it's just like reputation. A reputation is built over a long time. It can be ruined overnight, Will Smith. And bottom line is, and there's lots of other people beyond Will Smith, I can say that too. But the moment someone actually and a company does something like that and is insensitive and has had a blind spot on it-

Dr. Alexandria White: Right.

Chip Conley: ...that's where frankly the HR department wasn't being listened to. Because any HR department with its weight is going to be tracking this. And at least even if they don't have the quantification of it, which would be surprising, they will understand some of the qualitative issues that are going on here.

Dr. Alexandria White: And those optics. And those optics. Yes.

Chris Riback: Chip, to close out this conversation. I feel like I have gotten the benefit of my own modern elder moment in getting to listen to your thoughts on this. Here's what I'm taking away, and please tell me if I'm interpreting it right. At the core, what I feel like I'm hearing is the best way to do layoffs well is to be a good company in the first place.

Chip Conley: Sure.

Chris Riback: All of the things that I hear you saying, prepare, show respect, act with grace. It's part of your culture. What have you been doing around diversity in the first place? Everything you're talking about has almost nothing to do tactically with the actual moment of, I'm sorry, Chip, but it's time for us to part ways. It's everything about who are you as a company even before that moment? Have I interpreted my modern elder moment properly?

Chip Conley: Yes, no doubt about it. It is hard if you're a company that's going to have to do some significant layoffs and you haven't already prepared your leaders and managers to do exceptional talent management, performance management. Your process of actually having to tell 12 people in one day that they're all getting laid off one at a time, it's going to be a miserable day anyways. But you're going to do it terribly, because the circumstances are like not too many people are going to do that well in the first place, but if you haven't actually been trained, it's not like you get all of a sudden on a moment's notice get all of your managers trained in respectful performance management. Now, what we're talking about here is not performance management, but there's a lot of similarity because performance management does need empathy. It does need storytelling and an ability to connect with someone and to make them feel seen as a human. Some yes. And the companies that do the layoffs well are the companies that do culture well.

Chris Riback: That's what it feels like. Chip, thank you, Alex, anything else for your friend ,and now my friend as well but he was your friend first, Chip?

Dr. Alexandria White: I just enjoyed our time together. Thank you so much, Chip, for your words of wisdom and your Chipisms, I wrote down some Chipisms.

Chip Conley: Chipisms.

Dr. Alexandria White: Yes.

Chip Conley: Well, an honor to be with you and I wish you all the best. And come on down to Baja everybody and soon to be Santa Fe for the Modern Elder Academy.

Dr. Alexandria White: I will be there.

Chris Riback: Yes, sounds like some live podcast opportunities.

Dr. Alexandria White: I will be there. I will be there in October. I'm excited.

Chip Conley: Yes.

Chris Riback: Thank you, Chip.

Chip Conley: All right. Thank you.