Zoho CEO Sridhar Vembu Criticizes Freshworks for Layoffs, Questions Leadership’s Vision Amid Cash Reserves

In a recent online post, Zoho CEO Sridhar Vembu sharply criticized Freshworks for its recent decision to lay off a significant portion of its workforce. The CEO took to X (formerly Twitter) to label Freshworks’ move as an act of “naked greed,” directly questioning the leadership’s “vision” and ethical grounding for the decision. This critique comes amidst Freshworks’ announcement earlier this week to lay off approximately 12%-13% of its employees—a decision that will impact around 660 individuals across the US, India, and other locations. The restructuring, as stated by Freshworks, is part of an effort to streamline operations and align with strategic priorities. However, Vembu’s statements cast a stark light on the decision and have sparked a broader conversation about corporate responsibility and loyalty in the tech industry.

Freshworks Layoffs and Zoho CEO’s Reaction

Freshworks, a prominent customer engagement platform, recently shared its restructuring plan that will involve the dismissal of over 600 employees. Despite the company’s robust financial standing—Freshworks reportedly holds approximately $1 billion in cash reserves, or about 1.5 times its annual revenue—its leadership decided to move forward with job cuts. These layoffs come even as the company is still experiencing steady growth of around 20% and maintains profitability.

Vembu expressed disappointment and disapproval over Freshworks’ actions, questioning the rationale behind laying off employees when the company holds substantial financial resources. He emphasized that Freshworks’ choice to pursue layoffs despite its high cash reserves exemplifies a lack of loyalty and commitment to its workforce. Vembu’s main point is that a company performing financially well should avoid mass layoffs, especially when it could potentially utilize its funds more constructively.

“A company that has $1 billion cash, which is about 1.5 times its annual revenue, and is actually still growing at a decent 20% rate and making a cash profit, laying off 12-13% of its workforce should not expect any loyalty from its employees ever,” he tweeted. He emphasized that these decisions create a ripple effect of disloyalty, distrust, and cynicism within the workforce—qualities that can destabilize company culture.

Also Read: Australia’s Groundbreaking Social Media Ban for Children Under 16: A New Era in Digital Regulation

The $400 Million Buyback: A Point of Contention

Vembu further criticized Freshworks’ decision to engage in a $400 million stock buyback program while simultaneously reducing its workforce. Freshworks’ board recently approved a stock buyback initiative aimed at purchasing outstanding Class A common stock, which, to Vembu, illustrates a stark contrast between the company’s financial maneuvering and its treatment of employees. He voiced that, from an ethical standpoint, Freshworks should have prioritized reallocating these funds to explore new business avenues or support employee growth rather than opting for buybacks at the expense of jobs.

“Here is a critical question to its leadership: don’t you have the vision and imagination to invest $400 million in another line of business where you can deploy those people you hired but you don’t want anymore?” he questioned. Vembu’s critique challenges Freshworks’ leadership, suggesting that they are lacking in empathy and innovation if they cannot envision a way to use such resources to provide value to both employees and the business as a whole.

Vembu’s Broader Critique of Corporate Layoffs

Beyond Freshworks, Vembu broadened his critique to corporate America, particularly its practice of conducting large-scale layoffs to benefit short-term financial gains. He warned that this approach, common among US companies, is now being adopted by some Indian firms, leading to increased cynicism and detachment among employees. According to Vembu, this imported mentality disregards the value of employee loyalty, stability, and company morale.

In his view, this trend—where companies prioritize shareholder interests or stock buybacks over the welfare of employees—has eroded trust between employees and employers in the US, and similar patterns in India risk doing the same in the country’s burgeoning tech industry. Vembu’s remarks underline a belief that leadership in tech companies should aim for sustainable growth and use resources responsibly, in ways that benefit both employees and the organization.

Freshworks CEO Dennis Woodside’s Statement

Following the layoffs announcement, Freshworks CEO Dennis Woodside addressed the restructuring plan and explained the company’s rationale behind the decision. In his statement, Woodside emphasized that while such decisions are never easy, they were made to better align Freshworks’ workforce with its strategic goals and to enhance operating efficiency.

According to the CEO, “There’s simply no good time to make a decision like this that affects people’s lives, and it’s my responsibility to be transparent about how and why this decision was made.” He also expressed gratitude for the impacted employees’ contributions to the company and acknowledged the difficulty of the situation.

The company estimates that the restructuring plan will incur costs of approximately $11 million to $13 million, mostly for separation-related payments, employee benefits, and other associated expenses. Woodside shared that the company expects the plan to be substantially completed by the end of the fiscal year on December 31, 2024.

While Woodside’s statement aims to convey a message of transparency and necessity, Vembu’s counterpoints highlight the potential consequences of such decisions on employee morale and trust, suggesting that layoffs could have been avoid with different priorities.

The Layoffs Debate: Growth, Loyalty, and Responsibility

Vembu’s remarks have amplified the debate around layoffs, especially within companies experiencing growth and maintaining high cash reserves. His stance suggests that layoffs, especially in financially strong companies, can negatively impact employees’ loyalty and overall company culture, ultimately harming the organization’s long-term prospects.

His comments have resonated with some, who view the decision to lay off employees amidst growth and profitability as a failure of leadership to balance corporate responsibility with employee welfare. Critics of Freshworks’ approach argue that the company might have been able to identify alternative ways to achieve efficiency, such as reallocating employees to different roles or departments or developing new projects where they could add value.

Proponents of restructuring and cost-cutting, however, maintain that in a rapidly changing tech industry, companies must stay agile and prioritize their strategic objectives, even if it means making tough calls like job cuts. They argue that layoffs can be necessary to sustain long-term profitability and maintain competitiveness, especially in an uncertain economic climate.

Also Read: Australia Today reacts after Toronto’s ban for broadcasting Jaishankar’s press meet

The Broader Industry Impact

The exchange between Vembu and Woodside encapsulates a critical issue that many companies face today: balancing growth, employee welfare, and shareholder interests. The debate reflects a broader shift in the tech industry’s ethos, as companies reckon with how their choices impact their employees, communities, and long-term legacy.

As India’s tech landscape evolves, industry leaders, investors, and employees are likely to scrutinize the values driving corporate decisions. The question of what defines responsible leadership, especially in terms of employee welfare and growth, remains central to the ongoing discussion. If companies continue to prioritize short-term financial gains over employee security and loyalty, they may risk fostering a culture of cynicism that, as Vembu points out, could erode the foundational trust between employees and employers.

For now, Freshworks’ layoffs and the ensuing backlash underscore the complexities that tech companies must navigate as they grow and evolve. The debate signals an urgent need for leaders to reflect on the broader implications of their decisions—not only on their bottom line but on their workforce and their reputation within the industry.