- Real estate agent Redfin is laying off about 470 employees, or 8% of its workforce.
- Demand in May was 17% below expectations and the CEO said there wasn’t enough work for his agents.
- Read the email the CEO sent to employees announcing the layoffs.
Real estate agent Redfin is laying off about 470 employees as the housing market plummets.
In an SEC filing, it blamed “market conditions” for the layoffs. The cuts represent 8% of the workforce, or 6% including RentPath and Bay Equity employees.
Redfin is not alone. Compass said Tuesday it would cut its workforce by about 10%, or 450 employees, as part of a cost-cutting plan, along with cutting US hiring and not filling positions when employees leave.
Just last month, Compass reported a record $1.4 billion in profit for the first quarter, up 25% from the same period last year after transactions rose 18%.
A spokesman for Compass told CNBC the cuts were due to “clear signals of a slowdown in economic growth.”
Redfin has explained more clearly why it is making layoffs. In an email to employees, Redfin CEO Glenn Kelman said that demand in May was 17% below expectations and that “we don’t have enough work for our agents and support staff.”
“Our corporate culture has made an important shift toward performance and profit,” said Kelman. “If we keep our frontline agents at a high standard, we need to apply the same standard to all of us who stand behind the agent. Nor is it soulful to accept mediocrity.”
Kelman said laid-off colleagues would be offered 10 weeks of base pay, with an extra week of pay for every 12 months of service beyond a year, capped at 15 weeks of pay. Redfin would also pay departing employees the cost of extending their health coverage by three months, he said.
“This should give you until the end of the summer to find work,” Kelman told employees in the email.
Below is the full email to employees posted on Redfin’s website:
I’m sorry to say that we are asking about 8% of our employees to leave Redfin today, or about 6% if you include RentPath and Bay Equity employees. In the next few hours, managers will be calling people who are leaving. When we’re done with the calls, I’ll send a message. We will be hosting a short all hands meeting at 11:00 am PDT to answer any questions you may submit through this form. Redfin will also publicly announce the layoff and post this news on our blog.
Demand falls by 17%
To all the departing people who have placed their trust in Redfin, I am sorry that we are unable to honor our commitment to you. With May demand being 17% below expectations, we don’t have enough work for our agents and support staff, and reduced sales leave us less money for projects at HQ.
Two to four months severance pay
We offer fired colleagues 10 weeks of base pay, with an additional week of pay for every 12 months of service beyond a year, capped at 15 weeks of pay. For agent and support roles, severance includes the estimated value of productivity bonuses or sales bonuses. We also pay departing employees the cost of extending our health insurance coverage by three months. This should give you until the end of the summer to find work.
I said we wouldn’t fire anyone unless we had to. We must.
A layoff is always a terrible shock, especially when I’ve said we’d do everything we could to avoid one and that we’ve raised hundreds of millions of dollars so we don’t have to lay off employees after just a few months of uncertainty. But mortgage rates rose faster than at any time in history. We could face fewer home sales for years, not months, and Redfin still plans to thrive. If a drop from $97 a share to $8 doesn’t get a company through the heck, I don’t know what will.
It’s time to make money
We’re losing a lot of good people today, but for the rest to stay, we need to add value to Redfin. And to increase our value, we need to make money. We owe it to all who have invested their time or treasure in this company to become profitable and then very profitable.
A performance-oriented culture
Today’s layoff is a result of revenue shortfalls at Redfin, not layoffs. But months prior to this layoff, our corporate culture made an important shift toward performance and profit. There’s a reason Redfin is the only broker who hires our agents: to hold us to a higher standard. Jason Aleem agreed to become the head of our brokerage firm in February on the condition that he would run it as an elite sales organization. We can only introduce an agent to a dozen clients each month if we feel that agent is the best fit for our client. And if we hold our frontline agents to a high standard, we must apply the same standard to all of us who stand behind the agent. It’s not soulful to hit on people at the first sign of weakness; but neither is it soulful to accept mediocrity. Having a soul is how we find our way between these two poles.
The other major difference between Redfin and other brokers is our level of investment in software and support, which includes coordinators and support agents, as well as field managers, renovators, quote specialists, and title specialists. There is also a reason for this: to create a competitive advantage for our customers and ourselves. Our software and support are the best in the business. But if our agents, lenders, and customers didn’t pay for an upgrade to our software or support themselves, but would rather work with a company with fewer overheads and better economics, we can’t pay for that upgrade. This is a discipline that we need to adopt from every leader, not just leaders. Fewer projects. smaller teams. Shorter documents. Less analysis. keep it simple
where we cut
Because for every project we start, we have to think about another one we finish. We’ve already developed tools to allow teams to collaborate on a transaction, so we need fewer engineers to complement those tools. We spend less on analytics and user research. When we turned away tens of thousands of customers in 2020 and 2021, we had to hire a thousand people each month to catch up, which required an insane amount of recruiting, training and licensing. It is inevitable that these groups will be the hardest hit today.
What else do we fund?
We’re still investing in what our agents, lenders and clients value most: online presence to drive demand; Site visits to see the houses first; low prices for clients who need every penny of their property for the next stage of their lives; RedfinNow and Renovations for selling homes quickly at high prices; and other innovative services that only Redfin representatives can offer customers. We will also look for opportunities to invest more in the agents, which can be an engine for the company’s growth: Any agent can meet their first clients through Redfin.com, but our best agents nurture through these clients over time – and referral sales.
Still a place for big bets
We will continue to make big bets, but only if there is a big payoff: in the traffic to our site, in the success of our customers, in the range of services we can offer those customers. We are betting millions on a better brokerage service in 2022 because we believe client success rates will increase, making our most lucrative business more efficient. We believe in rentals because if we become a full real estate destination, we can outperform our competitors in traffic and add billions to our value. We’re investing in online tools to drive RedfinNow listings, which should result in faster service and more profit. We’re moving our software to the cloud, increasing reliability and reducing maintenance costs even as more innovations are introduced by more teams. If you want to make a big bet, you know your customer better than anyone; Be honest with yourself about whether the outcome would matter to that client; and cut our losses when the result doesn’t come.
What do we do now
Redfin will grow more slowly in a housing crisis, but we’ll still grow and our stock gains will accelerate. The world will write us off like it did before. Most painful will be the effort some of you will have to make to see yourself as a good employer. Part of being good is accepting when the company hasn’t achieved that, without giving up our determination to do better. We have now broken our commitment to our people twice in three years. We cannot shy away from doing what is best for the whole company, not just part of it, today and every day. But I will spend the rest of my life wondering how I could have avoided those layoffs. The most important thing now is to treat the people who are leaving with humanity and respect. As always, you can call or email me to vent, mourn, ask questions, or get help to find your next step. A list of frequently asked questions about cancellation can be found on our intranet.