When word first got out that the Africa-focused software engineering talent company, Andela, had cut some 135 employees loose, it easily brought back memories of last September when the company let go of around 420 developers.
But this time, though, things seem different, sort of. Yesterday’s layoff announcement saw Andela cut its entire staff base by 10 percent across all of its offices in the U.S.A and Africa, with the exception of Rwanda and Ghana. It was symbolic in that it was the third time that the company has had to let more than a few employees go in the last 9 months.
However, for once, developers are not the ones getting the chop. In other words, Andela took the axe to every other department under its roof but spared its engineering team which had been the singular target in the previous layoffs.
“135 employees located in Africa and the United States, except Rwanda and Ghana will experience reductions. Andela engineers were not impacted, but every other department is,” Andela told WeeTracker in an emailed response to queries.
“All departments and levels were impacted in a similar manner, with the exception of our engineers who were not impacted. Our technology department had the least impact.”
WeeTracker also got hold of an email that Andela’s CEO, Jeremy Johnson, shared with the entire organisation after the company’s internal “All Hands” meeting.
In the email, he had reiterated that the developers on its roster would remain untouched by what he described as a “really hard decision necessary for protecting the future of Andela,” especially in the midst of the economic uncertainties spelled by the global pandemic.
“This morning, we announced that we are laying off 135 Andela employees, or 10 percent of our company. To be clear, no engineers are impacted by this reduction, but every other department is,” reads a portion of the email.
Bearing in mind how the previous two waves of layoff played out, one would be pardoned for jumping to the conclusion that Andela has, once again, told some of its developers to walk after reading yesterday’s. But apparently, things are different this time.
Why Andela spared developers this time
Andela has raised nearly USD 200 Mn in venture capital since launching in 2014. The company’s business model involves training African software engineers at virtually no cost to the trainee, absorbing and employing the trained engineers as full-time staff, and outsourcing them to “partners” which are usually companies overseas that can fork out good sums for engineering talent.
Thousands of Africans have been availed of the rare opportunity to do exploits in the world of professional software development through Andela. The company, on its part, recoups its investment by securing job placement for its developers and earning from the fees paid by the firms where they are placed.
However, Andela had to sever ties with more than 400 junior developers in September 2019, declaring that the market was now saturated such that it had more junior developers on its books than it could place. At the time, Andela’s CEO, Johnson, said they had misread the market demand.
After closing its junior developer (D0) program, Andela began to only seek senior talent, even going ahead to launch a senior talent-focused branch in Egypt in November 2019. But in February 2020, WeeTracker broke the story that Andela was, yet again, struggling to secure placements for some of its mid-level/intermediate engineers who had been on the bench for months.
Subsequently, we exclusively gathered that the company had kickstarted a voluntary exit scheme in which developers who can’t get placement can “choose to walk away with certain benefits,” or be declared redundant anyway. Apparently, the storm hadn’t passed.
But any more talk of such internal struggles would’ve surely been quietened now that its developers were untouched in the most recent layoff.
WeeTracker gathered from Andela that engineers were all retained and the technology department was the least-impacted due to the “strategic investments it is making for the future in technology.” The company also cites the fact that it had trimmed its engineering department previously and cut its engineering hires in recent months as other reasons.
However, Andela maintains that all engineers joining will have confirmed start dates on partner engagements. As it is, the company is confident that it can handle the current number of engineering talent on its roster.
What really triggered the layoff?
“Reductions in staff headcount are directly tied to the shift we’ve seen in demand related to COVID-19,” the company told us.
“If we are not growing as anticipated in 2020, reductions in non-engineering staff were required to ensure we could thrive as an organization on the other side of the pandemic and continue to connect talent with opportunity for engineers which is our core mission.”
Simply put, the startup had made the decision to rip the band-aid off early because growth projections for 2020 had been thwarted by the global economic downturn triggered by COVID-19. And the next best thing to do was to control spending, so as to stay on track for growth.
As Johnson said in his email, “When budgeting at the end of last year, we planned for significant growth. Like any venture-backed startup, our ability to attract future investment is determined by the ratio of how quickly we grow in comparison to how much we spend to achieve that growth. If you aren’t growing, you can’t count on raising more money, so you have to adjust expenses so you don’t spend more than you bring in.“
He added, ”We’re still going to see churn spike this year as well as a decline in new customers due to the economic uncertainty. Now that we know that growth is going to be much slower than anticipated, we need to cut costs to ensure that we make it to the other side.”
The CEO said they had first tried to explore alternative routes — those that didn’t involve letting people go — to keep Andela on the right side of things. But upon further examination, those alternative routes seemed like half-measures at best, which didn’t really solve the main problem but mostly caused undue strain.
First, Andela tried to cut things that were “non-headcount-related,” including pausing future hiring, rescinding offers, and meaningfully reducing consulting and software spend. Second, the startup considered salary reductions. As a matter of fact, all directors and staff who are remaining with the company have agreed to take a salary cut ranging from 10 percent to 30 percent depending on seniority.
But even the salary cuts seemed insufficient given how much growth is likely going to slow and the fact that no one can predict how long this period will last. Hence, a headcount cut became not only unavoidable but also necessary.
“Similar to so many other technology companies around the world, we are not immune to the challenges of COVID-19, and the current global economic market requires us to conserve resources,” WeeTracker gathered from Andela.
“To navigate the current environment, we have taken some pretty significant measures, including implementing a 3-month staff hiring freeze, re-evaluating all consulting and software spend. Even with our best efforts, it was clear that we were going to have to reduce our headcount globally.”
As things stand, Andela has pledged to provide varying degrees of support to the affected employees in Nigeria, Kenya, Uganda, Egypt, and the United States of America (USA).
The startup also says it will provide four months of health coverage in each country and comprehensive severance packages in line with statutory requirements for each country and informed by local best practices.