[nullcipher]

Why do companies wait till the dying moments before informing employees? I have seen many articles now which read like 'we went to back to the drawing board to realize that we have to close down in 2 days. Our bank was empty'. Is this just dramatization? I cannot believe people can run business without something so basic. Like paratroopers jumping out of an aeroplane and then saying 'we checked before hitting the ground, only to realize we had no parachutes'.

[jaredhansen]

>Why do companies wait till the dying moments before informing employees?

Because if you tell employees how close to the edge you are they often run out the door, moving your odds of failure from 50% or 70% or whatever up to ~99%.

Personally, I'm a stickler for integrity and scrupulous honesty so I have never hid facts from employees even when it was dark (and for a couple of years, it was often really, really dark). But I can see why people do it: when you're in the middle of trying to close a save-the-company funding round, with 2 minutes left on the clock, losing half your team doesn't exactly help. And that did in fact happen to us several years ago: I lost almost the entire engineering team early in our company's life because they freaked out and bailed when they realized how little cash was left -- and this, in turn, torpedoed a number of funding efforts that were underway, almost sinking the business.

Again: don't take this as an endorsement of hiding the truth. But many, many good companies have been days from bankruptcy multiple times, and if everyone had known it at the time, people would have bailed out and the company would have failed. So that's why management often wants to conceal bad news from the rank and file.

[Disruptive_Dave]

> But many, many good companies have been days from bankruptcy multiple times

This. For many (most?) early stage startups, every single day you're on death's door. You learn to live with it.

[simonswords82]

When a founder doesn't know that they don't have money to pay their employees it's unforgivable.

When a founder concludes they might have to fight to save their company and might not be able to pay employees in X months time that's an entirely different proposition. You can be upfront with your employees and hope that they stick around. Or you can keep quiet and do everything necessary to save the company and hope the employees never need to know.

It's a gamble either way but I suspect the majority of founders opt for keeping quiet in the hope they can snatch success from the jaws of defeat.

[WillPostForFood]

> When a founder doesn't know that they don't have money to pay their employees it's unforgivable.

This is a constant state for a startup, from day 1. You always have a runway of some length at which point you know you can't pay your employees. The question is when you start to warn about the runway running out. It's much more grey than you suggest. 2 days warning is unconscionable, IMO. But do you need to start warning employees at 120 days? 90 days? 60 days?

[gwbas1c]

It's not just to keep the employees. Telling an investor "I only have 1 week's worth of paychecks" is a recipe to loose control of a startup.

[kev-reframed]

Our employees were always informed how much runway there was left, which is how they found jobs so quickly afterwards. They had correctly been looking after their own interests and sounding people out for jobs, just in case. Our developers got new jobs immediately, one within an hour the other within a day.

The most difficult part of this process was the two weekends in which I couldn't share the information with them. Both times occurred on a friday afternoon after they had gone home for the weekend so I had to keep it with me until monday then immediately tell them monday morning.

The staff were always well informed, that doesn't necessarily come across in the article

[dragonwriter]

> Why do companies wait till the dying moments before informing employees?

Because the "dying moment" is, almost by definition, the point at which you determine you have no viable route to get new funding or restructure to keep the business a going concern. Any earlier notification to employees means that employees started fleeing ship for safer shores -- especially the most employable with the best outside options -- undermining your efforts to find a way to save the company as you lose key staff.

[pessimizer]

Why would they tell employees? They're not going to be held personally responsible for not paying them; it's the fault of a mailbox in Delaware.

[khuey]

Officers and directors can have personal liability for unpaid wages.

[jdmichal]

Unpaid wages is a different situation. A company running out of money and "suddenly" laying everyone off and winding down does not necessarily mean that there are unpaid wages. In this case, the article makes it seem that there was never a point where employees were working without the ability to continue paying them.