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Letter to Employees

CEO Jennifer Tejada sent the following email to PagerDuty employees on January 24, 2023

Dutonians, 

Part of our mission at PagerDuty is to help businesses “anticipate the unexpected in an unpredictable world.” Over the last year, the macro environment shifted rapidly, with growth contracting in Q1 and Q2 yet expanding in Q3. Inflation and geopolitical concerns caused the US Federal Reserve to hike interest rates, while the jobs market overall remained strong and the unemployment rate remained low. Macro signals remain mixed and uncertain as we head into a new fiscal year. 

Our $38 billion TAM of over 75 million potential users remains large, our Operations Cloud platform mission critical for our customers, and our competitive advantages deep, but we are not immune to macro volatility, nor can we predict when the economy will improve.

While demand for our products and services remains stable and our strategy to help our customers transform their operations remains relevant and intact, it is taking longer to convert than prior years. Macro uncertainty and volatility has led our customers – businesses across segments and regions – to scrutinize and slow investments in order to preserve business outcomes and protect shareholder returns, while improving their operational resilience.  

For the last two years we have undertaken proactive initiatives to scale efficiently, accelerating this program last summer by standardizing our go-to-market motion globally, reducing layers, improving spans of control, reducing discretionary spend and standing up teams in cost-effective, high-talent locations. 

The reality of today’s volatile economy requires additional transformation. Despite executing well over the last eight quarters, sustaining high growth and dramatically improving operating margins, there is more to do to secure PagerDuty’s future. To weather today’s economic uncertainty and succeed over the long term, we must generate more cash flow and increase our operating margins in the near term. Doing so enables us to sustainably fund the priorities and commitments our customers count on us for: resilience and security at scale, and an easy-to-use, low-cost-to-own, high-ROI Operations Cloud. 

Today’s actions 

After considering a range of approaches for strengthening the company as we move forward, we are further refining our operating model as we work to increase our capacity while improving our cost structure, focusing our efforts, and improving our return on investments. 

Additional refinements we are implementing today include: 

• Eliminating roughly 7% of roles globally, the vast majority of which are in North America, primarily in our go-to-market and G&A organizations;
• Reducing discretionary spend;
• Negotiating more favorable commercial agreements with key vendors;
• Rationalizing our real estate footprint to reflect the realities of our distributed-by-design hybrid work model.

Like most technology companies, our most significant investment is our workforce. These decisions were carefully considered and are necessary to set PagerDuty up for long term success, especially in the context of ongoing uncertainty. That said, these changes are also very difficult. They will be painful for those Dutonians impacted, their loved ones and their teammates, because every PagerDuty employee is an important, valuable part of our community.

As these changes impact the heart of our organization, our people, we worked to ensure fair and equitable, principled decisions by focusing on a value-centered and business-based set of principles. Decisions were predicated on business rationale that included, for example, protecting investments in top product development priorities like our new Incident Workflows, self service and product-led growth (PLG), and continued AIOps and Automation enhancements, improving spans of control and streamlining management layers, expanding teams and roles in Santiago and Lisbon, and addressing our enterprise opportunity with a hybrid strategic and high-velocity GTM motion that continues to improve our productivity.  

I regard Dutonians as more than employees; they are accomplished, deeply talented individuals who #BringThemselves and drive the innovation and culture behind our products and services to deliver experiences that delight our customers. I appreciate each and every Dutonian’s contribution to PagerDuty. It is my expectation that we show all of our colleagues the grace, respect, and dignity they have earned. As someone who has worked in this industry for decades, I have experienced this before and it is never easy, and I also know from experience that while we may not work together in the short term, our relationships and this community live beyond our tenure at PagerDuty. 

Honoring and supporting our people

We are committed to supporting impacted Dutonians through this transition. In doing so, we ensured our colleagues receive severance with an average of 11 weeks pay, with additional severance based on tenure (or we followed local laws as required). Impacted employees, who are currently enrolled in our plans, are being offered extended healthcare coverage for themselves and dependents for a minimum of three to four months (depending on carrier requirements by location), and all employees will be provided career transition support from Randstad RiseSmart. All notifications for impacted employees are expected to be completed today and tomorrow. 

We are confident that these changes sufficiently improve our operational resilience such that we do not anticipate further actions outside of the regular course of business.

Looking forward to the future 

I’m excited to appoint Jeremy Kmet SVP, North America Sales, to Senior Vice President of Global Field Operations, effective February 1, 2023 reporting to me. Jeremy assumes expanded responsibility for our global Sales, Partner and Sales Strategy & Operations organization. Jill Brennan, Natalie Fair, Josh Thacker, Julia Fare, Tim Chinchen and their teams will report to Jeremy beginning February 1. For customer and business continuity, and efficiency, we are not backfilling the SVP, Americas role at this time. 

We are well positioned to succeed with Jeremy leading our go-to-market (GTM) organization, going from strength to strength. As our most tenured and highest performing GTM leader, he is credited with designing and scaling the land-and-expand motion – especially in the upper mid-market and enterprise segments – underpinning PagerDuty’s efficient growth and setting our performance pace, especially in the past two years as we accelerated our growth and profitability. 

With this promotion, Jeremy’s role expands from the Americas, approximately 75% of annual recurring revenue, to our global sales theaters, channels and operations teams. Jeremy has deep domain experience, customer relationships and product expertise. He brings a breadth of expertise – from selling to the world’s largest enterprises to building a high-velocity mid-market motion here at PagerDuty. Given his track record and demonstrated deep commitment to our customers, our people, and our values, our board of directors and our leadership team have great confidence in Jeremy to lead the Global Field Operations organization.  

Dave Justice, Chief Revenue Officer, is leaving PagerDuty to pursue other opportunities after the completion of FY23. Dave has been a valued partner to me and the executive team over the last three years. We thank him for his leadership in championing our customers, and for his many contributions to PagerDuty. Please join me in wishing Dave all the best in his future endeavors. 

This leadership transition creates an opportunity for us to evolve our customer experience in ways that encourage a faster Operations Cloud adoption and value realization, through both product-led and sales-led growth. The strength of the partnership between our customer support, success and services team and sales teams creates a foundation for us to build on, more tightly integrating the voice of the customer into product design and experience, blazing the product-led “Path to Platform” for our Operations Cloud by connecting these teams with our product teams. 

With that goal in mind, we are realigning the Customer Success Group (CSG) organization with the Product Development team. Manjula Talreja, our Chief Customer Officer, will report to Sean Scott our Chief Product Development Officer. Manjula will stay closely aligned across the company as a part of both the GTM Leadership and Executive Leadership Teams, and continue to extend the teams’ impact on our business by more tightly integrating the voice of the customer into product design and experience.

I am excited to connect Customer Success to our product strategy, and likewise drive a deeper connection between product management and our customers’ platform engagement and post-sale experience. The organizational design of Sales, CSG and the rest of the company beyond the changes noted above remains in place. We are confident we have the right team and a strong platform to achieve our bold mission. 

Taking additional steps to improve our own operational resilience will shore up our ability to achieve our long-term goals – achieving $1B in revenue, sustaining profitable growth and working towards the rule of 40 – by expanding our leadership in digital operations through adoption of the Operations Cloud which benefits our customers, our shareholders and all our stakeholders. 

We are reinforcing our strengths, ensuring capacity to increase innovation and growth, and delivering on our commitment to operate as a profitable, durable growth company, with a platform and team our customers trust and can depend on for years to come. We expect to finish the year strong – in fact, we have reaffirmed our guidance for FY23 today – and those results, combined with the refinements outlined above, put PagerDuty in a position of strength to successfully execute on our platform strategy regardless of what the market and the macroenvironment bring. 

None of this would be possible without you, our leadership, and our board — thank you for your grit and resilience, your commitment to our customers and your support of our values and people. I am reminded in moments like this, of something Martin Luther King said, that “the ultimate measure of a [leader] is not where [they] stand in the moments of comfort and convenience, but where [they] stand in times of challenge and controversy.”  PagerDuty is a leader that stands behind its customers, its values, and our vision — for an equitable world where we transform critical work so all teams can delight their customers and build trust. 

What’s next 

Please join us later today for a Town Hall at 1:30 pm PST / 4:30 pm EST where we’ll discuss these changes further and have an opportunity for Q&A. Once all notifications are completed (targeting end of day Wednesday PST), you will receive an email from your ELT member outlining any specific changes within your functional area.  

Jenn 

Forward-Looking Statements 
This post contains forward-looking statements including but not limited to statements regarding our future financial performance, financial outlook, expected benefits of our global scaling initiatives, and market positioning. These forward-looking statements are not guarantees of future performance and involve significant risks, uncertainties and other factors that may cause our actual results, performance, or achievements to be materially different from results, performance, or achievements expressed or implied by the forward-looking statements contained in this post. A discussion of factors that may affect future results is contained in our SEC filings, including the company’s most recent reports on Forms 10-K and 10-Q, which may be obtained by visiting our Investor Relations website at www.investor.pagerduty.com or the SEC’s website at www.sec.gov. PagerDuty does not undertake, and expressly disclaims any duty, to update any statement made in this post, whether as a result of new information, new developments or otherwise, except to the extent that disclosure may be required by law.