Last year, after laying off 1,000 employees, Shopify introduced a “flexible compensation” policy for employees and deleted meetings, among other changes.
But the Ottawa company, according to those at the helm, was still mired with bloat and distraction—bogged down by too many “side quests,” to borrow the analogy of CEO Tobi Lutke.
Canadian fintech Shopify announced a major restructuring on Wednesday that will see the company shed approximately 1,800 jobs, or about 20% of its workforce.
Shares in the public firm rose dramatically in response to the news.
The announcement was made this week in a public memo to employees by Lutke.
In the memo, Lutke explained that the company was changing the shape of Shopify in order to pay unshared attention to its main quest: making commerce simpler, easier, more democratized, more participatory, and more common.
He noted that the company had been subtracting everything that was in the way of making the best possible product for the past year, but that there were still side quests that were distracting from the main one.
“I recognize the crushing impact this decision has on some of you, and did not make this decision lightly,” the Shopify cofounder wrote.
One of those side quests was building logistics infrastructure, which Lutke said was a worthwhile pursuit for Shopify but was not directly related to its main quest.
As a result, the company has sold its Shopify Logistics division to Flexport, a global logistics company.
“It’s often said that larger companies are more sluggish but this is not because of their size, it’s because of all the side quests and distractions they accumulate along the way,” Lutke said.
The memo also addressed the company’s management structure, noting that there had been an unhealthy balance of crafter to manager numbers.
The company plans to rebalance this ratio to focus more on outcomes and impact, according to the CEO.
“The balance of crafter to manager numbers is a tricky one to strike,” Lutke confesses. “With the right numbers we’ll fully focus on outcomes and impact.”
The restructuring will result in job losses across all areas of the company, including engineering, marketing, and support.
Lutke said that the company has designed a package to make the transition as smooth as possible.
Employees who are leaving Shopify will receive a minimum of 16 weeks severance pay, plus an additional week for each year of tenure. They will also have access to medical benefits and the company’s employee assistance program during this period, and affected employees have continued access to the advanced Shopify plan, should they choose to pursue an entrepreneurial path in the future.
In the memo, Lutke expressed his belief that Shopify’s ambition was now “greater than ever” and that the company was now more fit for purpose.
“My belief is that any enduring company makes a habit of doing the right thing, even if easy outs present themselves,” he asserted.
Despite the significant job losses, the executive remains confident in Shopify’s future.
“Shopify is stacked with exceptionally talented, merchant-obsessed people,” Lutke wrote. “Everyone at Shopify is pursuing a singular, focused main quest—our ambition is greater than ever.”
Shopify was founded in Ottawa in 2006.
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