Citing a coming “economic standstill” caused by the COVID-19 pandemic, Compass CEO Robert Reffkin announced Monday that his company had laid off 15 percent of its staff and taken other cost-cutting measures.
Reffkin outlined the cuts in a company-wide letter distributed Monday, which Inman has since obtained. In the letter, Reffkin says that because of the coronavirus outbreak “we are in the middle of one of the most challenging and uncertain moments in our lifetimes.” He also says that the impacts from the pandemic have been “shockingly swift” and that “we aren’t just facing an economic recession, we are facing an economic standstill.”
In response, Compass “laid off approximately 15 percent of our employees” earlier Monday, Reffkin explains in the letter.
A Compass spokesperson told Inman that the layoffs applied to 15 percent of the company’s 2,500-person office staff, meaning about 375 people would have lost their jobs.
Reffkin says in the letter that the decision to let people go was “heartbreaking” but that the company needed to “hope for the best” and “prepare for the worst.” Employees who were dismissed will get a severance package, COBRA health insurance and training tools. They will also be able to keep their company laptops.
“I remain optimistic about our future,” Reffkin ultimately goes on to say. “Compass has a strong cash position, $0 of debt and a proven business model. I have complete confidence in our ability to weather this storm and bounce back stronger. We are going to get through this. But not without some difficult days ahead.”
Other cost cutting measures include Reffkin’s decision to reduce his salary to zero, the decision of other executives to cut their pay by 25 percent, efforts to reduce office and corporate expenses, and the scaling back of the Concierge program.
Reffkin frames these measures as a means to weather the storm. But the letter does paint a fairly dire picture. Among other things, Reffkin says that unemployment may have shot up from a healthy level to 10 percent in the span of a month, and that “this will almost certainly result in a recession.”
“The best we can hope for is a V-shaped recovery as opposed to an extended recession,” he adds.
News of the layoffs was first reported Monday by The Real Deal.
The layoffs come amid a time of intense scrutiny for Compass — observers have been speculating about the timing of an initial public offering (IPO) for some time — and about two months after a staff shuffle resulted in several dozen layoffs. At the time of those layoffs, however, Compass still had hundreds of open job openings.
Last Thursday, Reffkin also called on U.S. lawmakers to provide for real estate agents as part of their coronavirus stimulus packages.
Though the coronavirus has dominated the real estate industry of late, an executive at another company — and who spoke on the condition of anonymity — said he believes Compass was likely already planning the cuts before the outbreak. It would be unlikely, the executive argued, that such a big move could be planned and executed in the relatively short amount of time since the coronavirus took off in the U.S.
The executive also argued that Compass needs to tamp down costs as it moves toward an IPO, and that the outbreak offered an opportunity to make cuts in an environment that would minimize negative publicity.
“They were already planning on doing this,” the executive said. “None of this is specific to coronavirus per se. They had to do this.”
However, a Compass spokesperson told Inman in an email Monday night that speculation the layoffs were in the works before the pandemic “is absolutely untrue.”
Read the full text of Reffkin’s letter here:
I’d like to give everyone an update on the impact of the Coronavirus on our business and some of the decisions we have made in response. I believe leadership is the ability to ground yourself in reality, provide a vision of where you want to go and outline a clear path to getting there — so I’ll share my thoughts in that format.
Grounding Ourselves In The Current Reality
We are in the middle of one of the most challenging and uncertain moments in our lifetimes. The Coronavirus has already shut down entire cities and countries and disrupted the livelihoods of billions of people around the world. We have all only just begun to feel the impacts this will have on our lives and my heart especially goes out to those who are ill themselves or caring for an unwell loved one.
The economic fallout from the spread of this virus has been shockingly swift and far-reaching. In the last recession, the stock market fell 30% over months. This year, it dropped 30% in just 22 days, making it the fastest 30% drop in the history of the stock market, faster than the decline of the Great Depression. Trillions of dollars of wealth, representing people’s life savings and retirement funds, has evaporated. Our own early data is already showing a more-than-60% decrease in showings and with “shelter in place” policies likely coming to the majority of markets, we should expect a much larger decrease. We are modelling a 6-month decline in revenue of 50%. In China, for example, transactions were reduced by 80-90% at the height of the outbreak, however, that was with much more restrictive social distancing measures.
We aren’t just facing an economic recession, we are facing an economic standstill. Many parts of our economy will be completely shut down for months. As a result, our country will likely have gone from a healthy level of employment to more than 10% unemployment in a month, faster than any point in our lifetime. This will almost certainly result in a recession. The best we can hope for is a V-shaped recovery as opposed to an extended recession.
But “hope” isn’t a plan, so today I would like to share with you what our plan is.
Over the past week, we have taken steps to reduce costs wherever we can in our business: scaling back Compass Concierge by 80%, shifting all services to virtual delivery, pausing corporate marketing spend, significantly reducing corporate expenses and office costs and halting all non-essential projects. I reduced my own salary to $0 and the executive team has decided to reduce their salary by 25%.
But amidst this global pandemic, we need to make proactive decisions with the level of caution and foresight that this unpredictable period requires. As we continue to hope for the best, we need to prepare for the worst. So we are joining thousands of other companies across the country in making the heartbreaking decision to let some members of our team go.
Earlier today, we laid off approximately 15% of our employees — passionate, talented professionals who did everything that was asked of them, went above and beyond for our customers and are leaving the company through no fault of their own. We have been lucky to work alongside these folks and will miss them as both colleagues and friends. To support their difficult transition, we’re providing enhanced severance and COBRA health insurance, letting everyone keep their laptops and providing premium tools, training and personal networking to help them land their next opportunity even in this market. And we hope to rehire as many of them as we can as soon as things return to normal.
Our Vision Of Where We Are Going
With all that is changing around us, the one thing that isn’t changing is our vision: creating the single platform for real estate to empower agents to realize their dreams and best serve their buyers and sellers. Helping everyone find their place in the world — no matter how our world changes.
I don’t have a crystal ball, but I believe that in 100 days the real estate market will bounce back and our customers, company and country will be climbing its way out of a recession.
How We Are Going To Get There
While the timing of the economic recovery is uncertain, we are certain that by making these hard decisions today, our company’s future is secure. I remain optimistic about our future.Compass has a strong cash position, $0 of debt and a proven business model. I have complete confidence in our ability to weather this storm and bounce back stronger. We are going to get through this. But not without some difficult days ahead. Today was not an easy day for Compass. But we are well positioned to not just survive but thrive as the economy rebounds.
Every investment we’ve made over the past 7 years has set us up to operate in an environment like this: our tech platform and tools, our solutions-driven approach and our culture of doing whatever it takes to empower our customers. Over the past two weeks, we’ve hosted virtual sales meetings using our video conference system for thousands of agents and national agent calls with leading economists and bankers. We’ve quickly launched new video-based training to help agents to empower them to grow, even if their business has slowed. We have real-time, chat-based support inside our platform; IT support 16 hours a day, 7 days a week; online tools to schedule meetings with our Agent Experience Managers; remote desktop access and online payments and onboarding and more.
While most brokerages won’t build anything new over the coming months for agents and their clients, Compass has the best technology team in real estate and we are going to continue improving our platform every single day.
During this crisis and beyond, we are going to provide our customers more value than we ever have before and more value than any other brokerage ever could.
I say all of this with the full knowledge that what happens with Compass pales in comparison to what’s happening with our planet as a whole. Our world is being tested right now. Our country is being tested right now. WE are each being tested right now. And we’re being reminded of the importance of the only thing that ever truly matters: our health and the health of those we love.
But we will prevail. The world has survived recessions, depressions, natural disasters, world wars, and yes, global pandemics, before. I feel hopeful that China’s apparent success at reducing the spread of the Coronavirus and restarting their enormous economy may provide a blueprint for our future, as well. And I feel hopeful because of the ways I see people throughout our company and throughout our society stepping up during this challenging time. Thank you.
Please continue to do whatever you need to take care of yourselves, your families and loved ones, your communities and each other during this time. If you are in need of support yourself, please reach out to your people & culture partner, your manager, or me directly.
Updated: This post was updated after publication with additional information from Reffkin’s letter, industry commentary and other context.