How Shopify bungled its latest layoffs and made employees feel like NPCs

Shopify laid off 20% of its global workforce today — its second sizeable employee culling after a reduction of 10% announced last July. This latest downsizing also includes the wholesale divestment of an entire line of business: Shopify's in-house logistics arm, which sought to own more of the warehousing and fulfillment chain for its merchants.

Shopify CEO Tobi Lütke's internal message to the entire company was shared as an external-facing blog post on the corporate newsroom (which — disclosure — I helped establish when I worked for the company way back in 2018–19). The letter is a particularly egregious example of layoff communications done poorly, but it stands as an accurate representation of Lütke's basic inability to empathize with the situation of many employees under his company's charge.

Lütke frames the 20% reduction as an effort to "pay unshared attention to [Shopify's] mission," which itself already starts things off on strange footing, since it presents those impacted as effectively working on distractions and unworthy of the time and focus they were "sharing" with the company's core focus. The letter expands on this — to even more insensitive effect — by quickly drawing an analogy between Shopify and video game mechanics, distinguishing between the company's "main" and "side quests."

In gaming, there's often a critical path — the main storyline — that focuses on one primary goal. Open-world gaming in particular also includes a wide range of side quests, which may be strongly, loosely or not at all related to the core story and goal.

Lütke is an avid gamer who has incorporated that love into the company in many ways, including Shopify Rebellion, an e-sports team created in 2021. Executive assistants at Shopify are also known as "expansion packs" — a reference to add-on game content that is typically added post-release to provide more gameplay experience for the gamer.

Video game comparisons at Shopify can be useful, in that they simplify and make relatable obtuse corporate concepts that might otherwise be inaccessible. That's useful at a company that still prides itself on hiring from a range of backgrounds, including from beyond traditional educational or professional tech industry experience.

The downside, however, is evident in cases like today's letter. Lütke paints deciding who was included in today's layoffs as looking at side quests and figuring out which weren't contributing to the main "game" story of the company. This included people focused on side bets like logistics that Shopify has been pursuing for years, as well as on managers whose main job included "heavy layers of process, approvals, meetings and…side quests," per Lütke's characterization.

The letter also cites a major shift in direction prompted by technological development as the cause for a big shift in company focus and priorities: Namely, the "dawn of the AI era" and the fact that "Shopify has the privilege of being amongst the companies with the best chances of using AI to help our customers." What it doesn't note, however, is that the existing direction, and all the various side quests that Shopify has invested in heavily over the years, including logistics, are bets made either directly by or with the full-throated endorsement of its CEO and founder — Lütke himself.

I'm still in touch with many, many Shopifolk (yes, it's a cringey moniker, but also a strangely affectionate one) and there's a pervasive sentiment that Lütke's framing of this workforce reduction is incredibly insensitive. The subtext, drawn from taking the video game to its logical conclusion, is that those affected by today's layoffs are little more than NPCs (non-player characters), those digital beings who populate game worlds and make it more engaging and believable for the only real person of consequence — the gamers themselves.

Shopify did get one thing right by offering a generous package that includes 16 weeks of severance, plus medical benefits and additional supplemental compensation, including assisting to finance a replacement laptop. But in a moment where other CEOs have at least taken the time to express regret and reflect on past choices, this one instead chose to draw an elaborate comparison to an escapist leisure pursuit and waxed philosophical about corporate institutional cruft. At least some underappreciated NPCs now get a chance to become players in their own right.

Note: I worked for Shopify from 2018 to 2019 but hold no shares or financial interest in the company.