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Freshworks calls employees back to office as pressure mounts to grow efficiently

The SaaS company is implementing several measures to cut costs, including letting go of non-performers and employees in redundant roles, as it aims to turn operationally profitable by the end of 2023.

Freshworks calls employees back to office as pressure mounts to grow efficiently

Wednesday March 29, 2023 , 5 min Read

Key Takeaways

Freshworks is doing away with redundant roles and non-performers, hiring only for critical jobs.

President Dennis Woodside has outlined three areas towards optimising business operations: improving use of resources, driving a performance culture, returning to the office.

Freshworks has been under pressure to improve its profitability and share price, which is down 70% since its stock market debut in September 2021.

Freshworks President Dennis Woodside has asked employees in hybrid positions to work from the office at least three days a week, starting April 3, even as the company shrinks its workforce and restricts hiring amid pressure to improve its efficiency.

In an email to employees on March 24, ahead of a company-wide meeting on Monday where discussions on layoffs took centre stage, Woodside said “investors were increasingly looking for us to grow efficiently, and not at all costs.”

“With the focus on a high-performance culture, (Girish Mathrubootham, Founder and CEO) and I strongly believe in more face-to-face interactions,” Woodside said in the email, which YourStory has seen.

Outlining other key changes towards optimising business operations, Woodside said that while the company will hire for “most critical roles” and reward high-performers, it had identified some work no longer needed to support its goals.

Following a round of layoffs last year, the software-as-a-service company reportedly let go of more than 110 employees recently, including 90 for performance-related issues.

This was conveyed formally to employees at the company’s ‘all-hands’—an organisation-wide meeting—by Mathrubootham on March 27, according to a Freshworks employee who did not want to be identified.

“Girish said we as a company are no longer a toddler, and are a growing company and must accept the changes that come by way of this growth,” said this person.

Freshworks refused to comment on the business changes Woodside had alluded to in the email sent to employees.

“Freshworks has not conducted org-wide layoffs and continues to hire for open positions. We continue to review organisational efficiencies to avoid duplicated efforts and maintain a strong performance culture,” a company spokesperson said in response to reports on its recent layoffs. "As a result, a small number of individuals are impacted and are leaving the company."

Woodside, who previously was a CEO at Motorola Mobility and COO at Dropbox, was appointed as president at Freshworks about seven months ago to handle global business operations and strategy. He reports to Mathrubootham.

In his email, Woodside said Freshworks will invest in expanding its offices in Chennai and Hyderabad, which “are currently nearing capacity”, to accommodate all employees by July.

The recent changes are in line with Freshworks’ goal of becoming operationally profitable by the end of 2023, although it expects revenue in the ongoing first quarter to be nearly unchanged owing to the current slowdown in tech spending.

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Freshworks' next big milestone: operational profitability by year's end

Freshworks—the first SaaS company with origins in India to be listed on Nasdaq—has been under pressure to improve its profitability and share price—oscillating between early and late teens in the last 10-12 months, and down 70% from the stock’s debut in September 2021. The company's share ended at $13.78 apiece on Tuesday.

“(Investors) expect profitable growth from all public tech companies, which requires an equal focus on growth and costs and performance,” Woodside said in his email.

Addressing the recent rounds of layoffs, Woodside wrote that the management was letting go of a “small number of people” whose performance they found to be lacking.

This will allow the company to have employees who are the right fit in terms of performance and culture, creating more opportunities for those performing well, he said.

“We will continue to hire only for the most critical roles this year. We’ve also identified some work that is no longer needed to support our goals and so we made the tough decision to part with a small number of colleagues last week,” wrote Woodside.

He added that the company had invested over $80 million “in merit, promotion, and equity increases during this CAR cycle” to reward high performers. CAR stands for Career Achievement Reviews, the annual performance review process done by the SaaS company.

“Among the top questions asked by employees in the all-hands meeting were around layoffs and performance ratings, and most of them were not addressed,” said the employee quoted above.

“In previous all-hands meetings, employees questioned the management as to why the C-suite was not taking any pay cuts, and why they were indulging in extravagant meet-ups while they were laying off people,” this person added.

The first round of layoffs happened late last year when Freshworks let go of 90 employees globally, including 60 from India. YourStory was the first to report on this development.

Tech companies, including those operating in the SaaS space, are facing headwinds amid slowing economic growth in major global markets and the banking crisis, forcing them to find ways to pare costs, focus on being efficient, and chart paths to profitability—a departure from the earlier stance of growing at all costs irrespective of cash burn.

Woodside in his email highlighted that Freshworks was taking steps to reduce costs by doing away with licences for third-party software products, consolidating apps, and being “more thoughtful of workplace budgets”.

Disclaimer: As a former employee of Freshworks, the writer holds a few shares (converted as part of employee stock options) of the company. The reporting has been done in an independent manner.

Edited by Suman Singh