Today we’re diving into a hot topic that’s raising eyebrows across the SaaS industry: the recent layoffs at Freshworks.
Despite the revenue growth at 22%, Freshworks, the Nasdaq-listed SaaS provider has announced plans to lay off 660 employees as part of a global restructuring plan.
Zoho's Sridhar Vembu calls Freshworks LayOffs a “Corporate Greed!"
Freshworks' actions notwithstanding have sparked both criticism and debate. Particularly, its competitor Zoho's founder Sridhar Vembu didn't mince words on social media, calling it “corporate greed.”
Sridhar pointed out that if Freshworks can afford a substantial stock buyback program, $400 million to be precise, they could very well afford to keep their workforce intact.
So today, we’ll dissect Freshworks' decision, analyze the accusations by Sridhar, and discuss the ethics at play here.
1. The Layoff Announcement: Success at Whose Cost?
Freshworks, a SaaS powerhouse now based in the U.S., announced it would be laying off 13% of its workforce or 660 employees. The management termed these layoffs necessary, to enhance operational efficiency, and align its resources with strategic priorities.
As part of its restructuring plan, Freshworks expects to incur charges of approx., $11-$13 million in Q4-2024, mainly attributed to severance packages and employee benefits. The layoffs are understandable, when a business is struggling and/or making a loss.
However, when Freshworks recently reported a solid 22% revenue growth, it raises an obvious question: if the company is growing, why lay off employees?
To many, this move doesn’t look like a necessity; it looks like prioritizing profit over people. Vembu didn’t hesitate to call it out, suggesting Freshworks’ layoffs may be driven by a desire to please shareholders, and thus should not expect loyalty from its employees ever.
This isn’t just criticism - it was a callout to the hypocrisy of Freshworks’ values.
2. Vembu’s Critique: Corporate Greed or Necessary Re-alignment?
So, why does Vembu feel so strongly about this?
His key point is that Freshworks could afford a $400 million stock buyback, essentially funneling money back to shareholders, instead of reinvesting in other lines of business,
where the laid off employees could have been shifted to, instead of firing them.
For Vembu, this points to misplaced priorities, and a shortsighted view on loyalty. Vembu highlights that only those companies that foster loyalty should, in return, expect loyalty from employees. If layoffs become a cost-cutting “routine,” it only results in employee cynicism.
Besides, Vembu positions Zoho as a contrasting example, noting its private status allows it to focus more on employee stability and growth. His message is clear, Freshworks’ actions are a symptom of a corporate greed obsessed with quarterly returns over long-term employee loyalty.
3. Diverging Philosophies on Growth
Of course, not everyone agrees with Vembu’s stance. Vijay Rayapati, CEO of Atomicwork, responded with a defense of Freshworks, arguing that public companies often have to balance stakeholder demands in a way private firms don’t.
He points out that there’s no “one right model” and argues that diverse approaches, from employee-centered models to shareholder-focused ones, can coexist in a competitive landscape. Essentially, Vijay suggests that Freshworks is simply playing by the rules of the public market.
Although, many critics argue that by opting to satisfy shareholders expectations, Freshworks may have compromised its ethical responsibility to employees, who helped the company scale before going public.
And, when job cuts are juxtaposed against financial victories, it can create a PR disaster, casting doubt on Freshworks' long-term commitment to its team and questioning if layoffs are a relative response to shareholder pressures.
4. Corporate Values and Growth
The Freshworks debate raises critical questions about corporate values, particularly for tech startups. If a company cites economic uncertainty or growth strategy as a reason for layoffs, then stock buybacks and strong revenue growth, certainly raise serious questions about the company's values and culture.
For companies, going public often shifts priorities from employee welfare to investor or shareholders expectations. However, focusing on short-term profit at the cost of long-term loyalty often risks employee morale and loyalty. Today’s workforce (specially millennials) is very vocal about wanting ethical, stable workplaces, and companies that ignore this demand not only face internal resentment but also PR disaster.
5. Critical Takeaways for Startup Leaders and Founders
So, what can we learn from Freshworks' choices, and how can other startup leaders avoid similar controversies?
Here are 3 major takeaways for founders on navigating growth and accountability:
1. Avoid Mixed Messages: Align company actions with values. If a company claims layoffs are necessary, actions like stock buybacks can seem contradictory and risk damaging trust. Without transparent communication, companies risk their credibility.
2. Choose a Growth Path that Reflects Core Values: Freshworks went public to fuel growth, and that’s one approach. But Zoho’s private model, focused on steady growth and employee loyalty, resonates with many as a better balance. There’s no one-size-fits-all here, but values should guide decisions, not just financial forecasts.
3. Know that Corporate Actions Speak Louder than Words: In a talent-driven industry, reputation matters. Freshworks now risks being viewed as a company willing to sacrifice employees for stockholder gains. For companies reliant on skilled talent, managing reputation and trust is paramount.
Summary
Freshworks' layoffs may reflect wider industry trends, but the question remains: what will the long-term consequences be for companies that choose shareholder wealth over workforce stability?
Freshworks and other public startups face a new generation of workers who demand corporate responsibility and transparency. For companies in this high-stakes, high-growth industry, the lesson is clear – sustainable growth is about more than just the numbers. It’s about building loyalty, trust, and a reputation for genuinely valuing people over profit.
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