Buffer Sacks 10 Employees: Reckless or Entrepreneurial?


Being retrenched, as we call it in South Africa, or made redundant, as they say in Australia, or laid off in the UK and US, is never easy, both on the employer and the retrenched employee. Employers face disputes, low morale, low productivity and even sabotage by disgruntled employees, and I would know because I have been on the employee receiving end only a year ago. However, many employers, in this case the CEO of Buffer, Joel Gascoigne, reports this has been a very difficult part of his job.

Buffer, the company famous for its “smarter way to share updates on Social Media” had the difficult task of laying off 10 employees due to poor judgement and taking the wrong actions in many different areas. In short, they grew their team too big, too fast. They thought they could balance the pace of hiring with their revenue growth. They were wrong. Expansion is fun, but excitement can create a fog that hides the pitfalls of rapid growth.

Joel Gascoigne  did admit that there was a certain amount of ego and pride involved and the key mistakes they made, mainly involved hiring, costs and not being attentive enough about the financial implications of every decision they made. In the end they could not recover revenue as fast as they did in the past, as they were building a company and not a product anymore.

They had to resort to more desperate and immediate measures, such as cancelling a $400,000 team retreat to a luxurious location for staff and their spouses/partners, discontinuing company perks and taking pay cuts. Unfortunately the realization also hit home that human resources could not be excluded from the equation which led to 10 employees being laid off using the “last in, first out” method to avoid any bias in selecting employees.

There is a lot to say about Buffer’s situation today, in hindsight, but let’s investigate how  a dedicated purchase order system, like Procurementexpress.com could have given them the financial lens they so desperately needed to avoid layoffs:

  • Tip 1

No one could be held accountable in areas such as HR and finances, since Buffer started out as a small company and everyone had to multi task. They needed to manage finances, time, people, space, knowledge, energy and material resources more efficiently. So the first point would be to restructure contracts and job roles of new and existing employees with company growth.

It would also be advantageous for small businesses to have budgets and approval routing in place, so that company expenses can be managed easily and transparently.

This is where Procurementexpress.com comes in. Using a dedicated purchase order system creates the need to plan budgets carefully. Approval routing is now set in place so that each approver has to accept responsibility for spending within their allocated budgets. Here’s the real bonus though, when a purchase request is sent for approval, approvers can view budget spend in real time, so informed decisions can be made.

  • Tip 2

They clearly had an appetite for taking risks. Being an entrepreneur means you have to take risks, however they have to be calculated. Buffer never established what you’d call a “healthy bank balance”, nor if they were profitable or could burn a bit of cash. Once they started to work back towards profitability, they understood the depth of their situation.

Procurementexpress.com could have helped them have constant visibility over how much they were spending. It could have helped them to pick up on and prevent overspending. With Procurementexpress.com they would have allocated funds to budgets, relative to their bank balance. By having access to this information, they would have been able to tell whether or not to hire more employees. 

Having purchasing processes in place is valuable for any company. Without purchasing management of some sort, it is virtually impossible to know how much you are spending. A dedicated purchase order management system can give companies full purchasing transparency.

So here’s to you Buffer! Mistakes were made and lessons were learnt. Procurementexpress.com uses Buffer on a daily basis and we would like to give back, subscribe for a free trial to see if Procurementexpress.com can assist. 

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