Jack Dorsey has long expressed admiration for Elon Musk, and now it appears he may be following in his footsteps. On Thursday, Dorsey revealed a significant reduction in the workforce at Block, the financial services company he established, which includes Square, Cash App, and Tidal. The company will let go of over 4,000 employees, decreasing its global workforce from more than 10,000 to just under 6,000. This decision was met with approval from investors, pushing Block's stock up by over 24% in after-hours trading.
This move mirrors a similar strategy employed by Musk when he acquired Twitter in November 2022, cutting about half of its staff. Dorsey, who was a substantial shareholder in Twitter, witnessed this dramatic restructuring firsthand. His unique relationship with Musk has seen fluctuating support and criticism, especially concerning Musk's Twitter acquisition and Dorsey's subsequent launch of Bluesky, a decentralized alternative to Twitter.
Dorsey insists that the layoffs are a strategic decision rather than a financial necessity, although those affected might see it differently. He stated that frequent layoffs damage morale and trust among employees, customers, and investors. "I'd rather reach this point proactively and under our terms than be forced into it later," he remarked on X. He believes that other companies will soon follow suit within a year.
The official rationale for the cuts is to enhance efficiency with the help of AI, according to Block's CFO Amrita Ahuja. The aim is to operate with smaller, highly skilled teams that leverage AI to automate tasks.
In terms of severance, U.S.-based employees affected by the layoffs are promised 20 weeks of salary plus an additional week for each year of service, equity vested through the end of May, six months of healthcare, corporate devices, and $5,000 to assist during the transition. Employees outside the U.S. will receive comparable support based on their local regulations.
Block is not alone in this trend. Companies such as Salesforce and Amazon have also enacted large-scale layoffs, attributing them to efficiencies gained through AI. However, a recent Forrester Research report suggests that many of these layoffs might be financially motivated rather than driven by actual technological advancements.