Failure to Communicate
Over the past week, I read many perspectives on Coinbase’s recent decision to reduce its workforce by 18%. Most seem to call out the company’s incremental announcements and decisions culminating in rescinded offers, and eventual layoffs. What I see in this situation is a failure to plan for the worst outcome early.
I want to start by saying that I feel badly for everyone affected, and I am happy to help them in whatever way that I can.
Despite some of the recriminations I read, however, I want to highlight that the company has a duty to be fiscally prudent and responsible if it intends to continue as a going concern. Keeping in mind that the company had been in hyper growth mode and hired aggressively, ostensibly backed by anticipated revenues, the collapse of $LUNA and $UST as well as the subsequent declines in the crypto market fundamentally changed market conditions. Operating in a new environment, and armed with new information, the company needed to re-evaluate its positioning, which included its existing commitments and its staffing.
Objectively, I don’t believe that anyone should begrudge them their decisions even if the human toll is troubling. I contend that they could have handled their messaging better and indicated that layoffs were a possibility in an extreme scenario. I don’t know what their internal discussions were like, nor do I think that they intended the communications debacle they endured. As such, I can only take them at their word.
What I do think, however, is that the company suffered from a failure of imagination. When the market environment changed as quickly as it did, they could have engaged in a red teaming exercise to anticipate a worst-case scenario outcome. Had they done so, they could have engaged in better messaging and likely caused less disruption to the market. For example, had they anticipated a worsening market and contemplated layoffs, during the announcement of the hiring freeze and the rescinded offers, they could have also hinted that they were prepared to take further steps if market conditions warranted it. Then, when the layoffs were announced, they could have pointed to their prior communications as having hinted at their being a possibility.
The failure to communicate clearly and manage expectations early, cost the company and damaged its reputation. Going forward, future prospective employees may think twice about committing to an offer of employment at Coinbase, which could in turn make it harder for the company to secure talent. Time will tell how it shakes out, and I hope that all companies in the industry learn from these missteps and act accordingly.
Disclaimers: The above does not constitute a recommendation or solicitation to purchase or sell any securities or cryptocurrencies referenced herein. As of the time of this writing, the author may have positions in some of the abovementioned securities or cryptocurrencies.
