Jack Dorsey's mea culpa on Block layoffs: 'We overhired'

In a candid reflection on recent developments at Block, co-founder and CEO Jack Dorsey has taken accountability for the company's substantial workforce reductions. "We over-hired during COVID," he stated in a post on X, responding to backlash regarding the layoffs that have drastically shrunk the company's workforce from over 10,000 to nearly 6,000 employees. This restructuring marks one of the most significant layoffs in the tech sector in recent times. Dorsey elaborated that the overexpansion was partly due to a structural oversight, where he created two separate company frameworks for Square and Cash App instead of a unified structure. He mentioned that this duplication led to inflated headcounts during Block's aggressive growth phase amid the pandemic. However, he cautioned that critics were oversimplifying the complexity of the situation, as Block also ventured into intricate operational areas like lending and buy-now, pay-later services. The company is now aiming for a gross profit of over $2 million per employee, a figure that represents a fourfold increase in efficiency compared to pre-pandemic levels. Dorsey noted that the average gross profit per person had remained stagnant at approximately $500,000 from 2019 to 2024, indicating a need for improvement. As of the latest market data, Block's share price hovers around $54, a figure that has seen little change since 2018. The stock previously soared to over $275 in early 2021 following a pre-COVID spike, but has faced a decline, trading below $100 since early 2022. In his memo regarding the layoffs, Dorsey expressed his intention to implement a significant reduction in one go, rather than executing multiple rounds, which he believed could harm company morale. He reassured stakeholders of the company's strength, citing growth in gross profit and improved profitability. He attributed the layoffs to a fundamental shift in operational methodologies, where smaller, more agile teams, along with advanced intelligence tools, redefine the way businesses are structured and run. This trend is not isolated; several other tech giants, including Amazon, eBay, Meta, and Workday, have also announced job cuts in recent months, often linking these reductions to efficiency gains facilitated by AI and streamlined organizational processes. Last September, Fiverr's CEO, Micha Kaufman, revealed a 30% workforce cut, emphasizing the necessity to transform Fiverr into a more agile, AI-focused enterprise. "If you don't ensure that you sharpen your knives, you're going to be left behind. It's that simple," Kaufman stated.