January 2024 ended with a wave of layoffs among ‘big tech’ companies, including Google and Microsoft, as publicly traded entities look to sure-up profitability through fat-trimming and retrenchment. And fintechs, including alternative payment providers Block and PayPal, didn’t sit out the trend. Both announced this week their intention to eliminate headcount to the tune of 10% and 9% respectively by the end of the year. But in their messaging, there was a slight distinction between the rationales, albeit a very nuanced one, worthy of note to investors and other payments and fintech founders. In one case, a message of straightforward cost cutting. In the other, a more detailed plan of action that recognized the potential to increase operational efficiency through the implementation of autonomous technologies and processes. Perhaps to some, a distinction without a difference, but what fun is that? You be the judge.
In a memo to Block staff obtained by Business Insider back in November, CEO, Jack Dorsey announced his intention to cut staff in 2024, and this past Tuesday, he made good on that declaration, reporting to news outlets that those layoffs have begun. According to the same memo, the CEO’s rationale was “the growth of [Block, the company] has far outpaced the growth of …revenue.” Fair enough, as noted above, Block is in very good company with a host of other blue chip technology firms.
But contrast this with PayPal CEO, Alex Chriss’ comments (also on Tuesday) in explaining his rationale for PayPal’s layoffs, “across our organization, we need to drive more focus and efficiency, deploy automation, and consolidate our technology to reduce complexity and duplication…and will continue to invest in areas of the business we believe will create and accelerate growth.” (emphasis added)
There’s no doubt that both CEOs are doing what they believe to be is in the best interest of their respective shareholders. But as a consumer of news, an investor, and a banker, I interpreted the statements differently.
In Block’s case, Dorsey seems to be reacting to subpar performance, as a consequence of poor management and strategic decision making. If you’re a regular reader of this newsletter, you know I’m no champion of Dorsey in his capacity as CEO. Dorsey has made a big bet on crypto, Bitcoin in particular, both holding it as an asset of the company, and depending on the trading of it to support almost 1/3 of Block’s top-line revenue. Add the acquisition of Tidal Music (was that really core to its business?) and an overpay for BNPL provider Afterpay, and at least to me, there’s a pretty solid explanation for Block’s situation.
In PayPal’s case, Chriss’ statement strikes me as proactive, understanding that as steward of the company, he/PayPal should be exploring and implementing automation, both for the consumer-facing experience, and operationally. I interpreted his rationale as an acknowledgement that PayPal’s performance needs to be better, and he knows where to look for improvement.
In simple terms, as both payment companies enter a retrenchment phase, one company seems to be doing so to redress existing problems, the other, because it adheres to the principle of never being complacent, and by extension, always seeking to improve the quality of the product, and the efficiency and execution of the operations.
Chriss’ retrenchment comments are more inspiring, and instills confidence. He’s forward-looking in his vision for the company, and seems to have a strategy.
Dorsey’s?
Well again, you be the judge.
