Smith Brain Trust / November 10, 2022

Twitter Upheaval

Smith Expert Says Damage to Reputation, Employee Morale Significant but Reversible

Twitter Upheaval

Last Friday, about 3,700 Twitter employees learned they lost their jobs after access was suspended to company-wide systems, like email and Slack. This, after Elon Musk’s Twitter acquisition had them working under rumored mass layoffs and receiving a memo from him explaining that their jobs were redundant and at risk.

“From a business standpoint, I understand the need to cut costs in light of falling firm performance,” says Smith’s Gilad Chen. “But Musk has violated pretty much every rule in the book as to how he has gone about communicating and implementing the massive layoffs.”

Critics call the move rushed and chaotic based on the company requesting some fired employees to return, in addition to a subsequent lawsuit alleging the layoffs violate the Worker Adjustment and Retraining Notification (WARN) Act for failing the required minimum 60 days’ notice. Without officially responding to the lawsuit, Musk tweeted that he’s offered three months of severance – “50% more than legally required.”

That Tweet aside, “Musk could have done all of this in a much more thoughtful and careful manner,” says Chen, Robert H. Smith Chair in Organization Behavior and Associate Dean for Research at the University of Maryland’s Robert H. Smith School of Business.

“For example, Musk could have communicated the new strategic priorities to the firm moving forward, and then engage in more thoughtful downsizing based on those clearly communicated strategic directions,” Chen says. “He could have also assured current stakeholders (employees, users, investors, advertisers) of the likely success of the new strategic direction. Instead, he has shown utter disregard to Twitter's employees and stakeholders.”

Fallout Risk: ‘Quiet-Quitting’ Workers, More Fleeing Users, Advertisers

For remaining workers, Musk eliminated Twitter’s “days of rest” – monthly off-days for rest and recharging – as part of a perhaps untimely push to a “24/7” work culture. “My sense is that the morale in Twitter now is running super low, as a result of Musk's actions.” Chen adds, “current talent that remains may decide to leave – or at the very least become less engaged and less innovative – in other words, engage in what we now call ‘quiet quitting,’ leading to further productivity losses.” It's not only about worker morale. “We also see the reputation of Twitter more broadly taking a huge hit – that means fewer customers, loss of key advertisers, which is already happening, and less ability to attract new talent to the firm over time. None of this bodes well to Twitter – at least not in the short term.” However, Chen adds, “none of this is irreversible, if Musk finds a way to make the firm profitable and exciting to work for again.”

But another hurdle could be how Twitter manages transitioning from remote work.

Back to the Office

In 2020 at the start of the pandemic, Twitter became one of the first large tech firms to announce a ‘permanent work-from-home’ policy. However, Musk plans to cancel remote work. And, “evidence is rather mixed as to whether and how firms should utilize remote and hybrid work post-COVID,” says Chen, who (with Rudolph Lamone Chair of Strategy and Entrepreneurship Rajshree Agarwal and Smith’s Director of Executive Education Jonathan Southgate) recently developed and delivered a ‘Hybrid Work Arrangements’ leadership workshop in New Orleans hosted by CardWorks.

“On the one hand, current and prospective employees indicate growing interest in hybrid work, and more and more firms are moving towards that direction,” Chen says. “On the other hand, there are firms that will no doubt do well with less, or even no remote work. And – importantly – what hybrid means to different firms and even units within firms can take on very different shapes and forms.”

Chen concludes: “Although clearly Musk's aggressive and chaotic entry to Twitter is currently leading to rapid and widespread loss in morale and firm reputation, it is frankly too soon to tell how the moves Musk is making will pan out for Twitter.”

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