This article originally appeared on Business Insider.
Wayfair announced Friday that it will cut 13% of its global workforce, or about 1,650 people.
This comes as CEO Niraj Shah sent a company-wide email saying Wayfair was “back to victory” and warning employees to be careful with their money. This was just a few weeks after I sent it.
In an email announcing the layoffs to employees Friday morning, Shah said the move was necessary for the company to have a “clean organizational model,” which would help in the long run. He said he was deaf.
“I truly regret the impact this is having on you all,” Shah told staff.
Staff in North America will soon receive an email letting them know if their role has been affected, Shah said, while staff in Europe who have been laid off have already begun discussions with human resources about next steps. That's what it means.
He added that affected employees have been paid severance packages, but those details were not included in the company-wide email.
Read the full email Shah sent to Wayfair staff below.
Today I want to give you an update on Wayfair where we sit and the difficult steps we're taking this morning to make us stronger. First, I want to be clear that there are a lot of things going well at the company. We are consistently profitable. We have made meaningful progress in operating more efficiently and effectively. Our suppliers see us as winning. And most importantly, our customers value and choose us over other options. This means that we are gaining market share at a fast pace.
All very good news, but our job as leaders is to position the company now and in the long term. While we have taken important steps to win and optimize for the future, the reality is that we are where we want to be: a clean and healthy foundation that provides a sound foundation on which to grow. We have not been able to obtain an organizational model. . That's why I based my organizational design efforts on core organizational principles. As a result of this effort, today I have made the difficult decision to further reduce our workforce.
In North America, all employees will soon receive an email regarding whether your role is affected. If applicable, you'll also receive details about next steps, including the opportunity to connect live with your talent partner. European teams have already begun these discussions.
I would like to thank the 1,650 team members who are leaving today. You are all valuable and talented individuals who have made incredible contributions to Wayfair and our customers. We know you would be great for the role considering your strong skills and extensive experience, but this is sad for everyone. You have a lot to be proud of and I truly regret the impact this has had on you.
Please note that we have provided severance benefits to affected employees and will continue to support them during this transition period. It also provides access to Employee Assistance Program resources, his Wayfair Alumni networking support, and other benefits and resources.
The natural question is to ask “Why?” The reality is that we over-hired during the good times and strayed from our core principles, and we've come a long way back, but I don't think we're quite there yet. The best way to ensure that everyone in your company can grow and make the most contribution to your customers is by empowering them to make the right decisions about what your organization should look like going forward. Today we're focused on our employees, but I'd like to explain how we got here and the thinking we used to make these decisions.
From 2002 to 2011, we didn't have much money. At times this appeared to be restrictive as its main direct competitors in the US and UK spent large sums of money raised from top investors. But being lean and focused has forced us to prioritize relentlessly. By 2014, the company was publicly traded in the US and a new technology boom was just beginning.
By 2016, we were growing rapidly and the lure of spending more to build infrastructure for growth became attractive. We (like most technology companies) took advantage of easy access to money. One of the things we're proud of during this time is that we've built an industry-leading logistics infrastructure. This was expensive, but resulted in a durable moat. From 2017 to 2019, we significantly expanded our hiring and pursued a number of what we thought were good opportunities. As a result, by the end of 2019 we suffered from a lack of focus. Too many good ideas and too few ideas implemented. We decided to fix this issue and downsized our team in February 2020 with the aim of getting back to our roots.
Then the coronavirus hit us hard. COVID-19 caused our business to grow dramatically and our newly-leaning team suddenly felt at a disadvantage. Almost overnight, our annual revenue increased from his $9 billion to his $18 billion, which reignited our desire to grow the team.
By mid-2022, it was clear that we were entering a recession. It was also clear that companies had gone too far in their recruitment efforts during the coronavirus pandemic. As everyone here knows, since his 2022, he has undergone two major corporate restructurings to right-size this company. Each time, we believed we were using our best judgment, identifying the cost goals we needed to meet, and sizing to the appropriate point. These changes have been emotionally difficult and challenging for business. But I found that each time I cut back, I was able to accomplish more of my goals faster.
We believe that as a company we must remain focused on what small, dedicated teams can achieve. In many ways, having too many great people is worse than having too few. If you have too few, you can get a lot done quickly, but you might not get everything you need done. However, too many of them create inefficiencies, coordination costs, and investment in activities with low returns. That's what we've been through, and that's what has to end.
Return to the organization's core principles
That's why we're focused on taking a different approach. We start with a few basic principles of good organizational design: how to build high-performing companies that are not driven by cost targets, but have the ability to get more done and be flexible over time. I decided I needed to start. Take a bottom-up approach. What is the right number of people a lean organization should allocate to each of the high-value things it wants to do? At what level? We need senior leaders, but importantly, very talented leaders. However, the company was built by betting on young people with little specialized knowledge. We need to come back to this. Similarly, you should only do things that are of high value. Doing more than this creates resistance and slows you down. The goal this time was to err on the side of risking too little rather than risking too much. So we approached it with a strong bias to put the past five years firmly in the past.
To do this, we used some basic principles.
Question/justify the amount of work per activity area — Decide what kind of work will be done and eliminate the amount of work that is considered secondary or tertiary. After all, you can always revisit it as your business evolves.
Be efficient with level and span — what level/seniority is appropriate for which role, and what span should each manager have in terms of breadth of activity, number of reports, etc.
Eliminate excessive leveling up for “stakeholder management” — if seniors in one area have too much time, seniors in the next area need to meet with them, which is cyclical
Optimize the ratio of engineering partners' functional teams to engineers.The role of partners (business, product, design, research, analysis) does not create better technology outcomes, but rather the opposite.
By starting with these principles, rather than cost goals, you'll get back to being focused, fit, and lean. And we will do this while remaining committed to our growth drivers, leaning into a few key things that really matter to each of us. Today, the investment community will focus on cost savings numbers, but the important thing for us to note is that companies must get more bang for their buck than their competitors to continue winning in the long run. This means that it is not possible. These steps will help us keep winning. And winning is ultimately what creates the greatest opportunity for everyone at Wayfair and everyone who believes in Wayfair.
I can only thank our team. We work hard to learn as quickly as possible and make the right decisions at each milestone, even the difficult ones.
Thanks to your dedication, we are gaining momentum moving forward. The most difficult part is now over. And I think the best years are ahead of us. We will meet as a team next week to further discuss these changes and the path forward.
Thank you for investing in Wayfair. I would also like to thank all of my colleagues, past, present, and future, who have joined me on this journey.