Our thoughts on Shopee’s latest layoffs

Shopee announced more job cuts on Monday, 19 September. This is after a round of rescinded offers earlier in September and a round of layoffs in June. 

Although this is very sad for everyone involved, we had mentioned in our June commentary that this was expected:

“Tech companies in Southeast Asia had been focused on growth – and it is natural to have lots of inefficiencies when growth was the priority. It is also because tech companies often have to trial and error, in a compressed timeline – many of the internal initiatives are bound to fail (they just did not know which ones at the onset). In fact, focusing on addressing inefficiencies in a high growth phase almost certainly would not go down with investors.”

However, in today’s investment climate – management of large consumer tech companies, which are yet to be profitable, would be foolish not to switch gears to adapt to the changing capital market environment; Switching gears fast when you are large is NOT easy – it requires leadership, people, organisation to work in sync, and a culture that stays true to its essence;

In Shopee’s case (i.e. tech companies which are supposed to be high growth), layoffs send bad signals to the media and to current/prospective employees if not handled well – the rescinded offer to the person who had just landed with his wife and dog was a case in point. 

Maybe Shopee can learn something from their Chinese tech major counterparts.  Chinese tech companies have been using ‘winter is coming’ and ‘everyone is doing it’ to execute layoffs almost every year (although winter is really coming now); in fact, Jack Ma, who is quiet now, has a way to make these layoffs meaningful for the ecosystem.

An important question here is how quickly Shopee, and SEA Group in general, learns and adapts to handling such situations which they were not used to handling. We do not yet know the verdict of this – but a few people at Shopee said the people retrenched are generally happy with the N+2 package offered.

Their PR has finally responded to media questions about the layoffs, whereas in the past they had been quiet when situations arose. The Group CEO has sent an internal memo on not taking cash compensation and reducing costs – but they can do more to communicate with external parties, including potential prospects (they will still need to hire), sellers (many are concerned about a potential cash crisis), and the public in general.  

Of course, the bigger question is whether the company can navigate itself successfully through the prolonged crisis in the macro market. Their cash balance should be sufficient for the next 3-4 years – and even more with reduced burn from Q4 2022 onwards. The key challenge is the adjustment of people and organization – and that takes leadership.   

For people affected (or observing) by the current situation, this is also a good time for reflection. Especially young talent – we have been arguing that Shopee, in its current form, is not the best place for promising young graduates, not because it is a good or bad company, but because of the size of the organisation and the task one might undertake as a junior joiner. 

Young people should, instead, get more exposure about the key trends in the macro environment and prepare themselves really for the future growth opportunities.

One of our community members, a pioneer of the Chinese tech giants, shared with us recently “It’s good for young people to develop flexibility very early on in their career. We see many mid-level executives in Alibaba and Tencent who are stuck there (because they have lost their ability to be agile). If they lose their jobs, there is nowhere they can go.”