Home Wayfair CEO Shah Outlines Reasons Behind Another Round of Layoffs
January 19, 2024

Wayfair CEO Shah Outlines Reasons Behind Another Round of Layoffs

As it continues a series of actions initiated in 2022, Wayfair stated it would reduce its global workforce by 13%.

After an organization-wide analysis of workforce size and structure, the company decided to layoff 1,650 employees, Wayfair stated. The layoffs will most heavily impact the corporate workforce, which will shrink by 19%.

Wayfair expects the move to deliver annualized cost savings of more than $280 million.

The incremental cost savings advances the company along the path to adjusted EBITDA growth on a dollar and margin basis, the company said. The workforce reduction will cost Wayfair $70 million to $80 million, the company indicated, primarily because of employee severance and benefit costs, most of which the company expects to incur in the first quarter. 

In announcing the layoffs, Niraj Shah, Wayfair and CEO, co-founder, and co-chairman, said the following:

“Earlier today I sent a note to all Wayfair employees detailing today’s action and the rationale behind it, which is available for everyone to read on our company site. The changes announced today reflect a return to our core principles on resource allocation, such as getting fit on spans and layers as well as focusing on our highest priorities. As a result, we’re reducing team sizes across the organization, as well as reducing seniority in certain roles that we plan to rebuild with modified leveling over the course of this year. While today’s actions will bolster our adjusted EBITDA roadmap, I am increasingly focused on generating adjusted EBITDA in excess of equity-based compensation as well as capital expenditures, and intend to drive meaningful improvements here quickly. We believe that what matters is maximizing our free cash flow while simultaneously tightly controlling and ultimately reducing total share count, and are treating this as our north star.”

Although persistent furnishings category softness “makes revenue growth challenging, we remain encouraged by the share gains we continue to see,” Shah added. “Based on today’s announcement, in a hypothetical flat revenue environment — inclusive of the rebuilt roles — we would now expect to deliver over $600 million of adjusted EBITDA in 2024.”

The note to Wayfair employees from Shah reads, in part:

By mid 2022 it was clear we were in a bust period. It was also clear that we had gone overboard with corporate hiring during Covid. As everyone here knows, we’ve had two significant corporate restructurings since 2022 to try to right-size this. Each time we used our best judgment, identified the cost target we needed to hit, and believed we were resizing to the right point. These changes were difficult emotionally and have felt challenging for the business. What we found, however, was that after each reduction we have gotten more of our goals done faster.

I believe we need to stay focused as a company on what committed small teams can accomplish. In many ways, having too many great people is worse than having too few. With too few, you get a lot done quickly, but you may not get everything done that you want. But having too many causes inefficiency, coordination costs, and investments in lower return activities. That is what we have been experiencing and what we need to end.

That is why we are committed to taking a different approach. We decided that we needed to start with a few basic principles of good organizational design, of how to build a high performance company, one with the ability to get a lot done, and to flex over time – rather than a cost target – and take a bottoms-up approach. What is the right number of people a lean organization should allocate to each of the high value things we want to do? At what level? We need senior leaders, but importantly we built the company by betting on junior people who are very bright but have less expertise. We need to get back to this. Likewise we should only do high value things because doing more past that creates drag that slows us down. This time the goal was to err on carrying a risk of too few over the risk of too many. And so we approached it with a strong bias to firmly put the last five years behind us.

To do this we used a few basic principles:

  • Question/rightsize the quantum of work effort per activity area, decide what work we want to do and eliminate any work effort that is then deemed secondary or tertiary, after all we can always reexamine as the business evolves
  • Get efficient on levels & spans, what level/seniority is appropriate for what role, what span should each manager have in terms of breadth of activity and number of reports, etc.
  • Eliminate excess upleveling for ‘stakeholder management,’ senior people in one area with too much time then cause the next area to need senior people to meet with them, and this is circular
  • Rightsize the ratio of engineering partner function teams to engineers — since any excess of partner roles – business, product, design, research, analytics – will not create better technology outcomes and rather will do the opposite

By starting with these principles, as opposed to a cost target, we will get back to focused, fit and lean. And we will do this while remaining committed to our growth drivers, leaning into the handful of key things that truly matter for each. While the investment community will focus on the cost savings numbers today, the key thing for us to focus on is that a company cannot win over time unless it gets more done per dollar spent than its competitors. These steps position us to keep winning. And winning is what ultimately creates the most opportunity for everyone at Wayfair, and everyone who believes in Wayfair.


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