Dropbox CEO Drew Houston sent a letter to employees, informing them that roughly 20%, or 528 employees, are being laid off.

Houston said the company is in “transitional period,” as Dropbox works to grow out additional projects, while maintaining its existing services and infrastructure.

As we’ve shared over the last year, we’re in a transitional period as a company. Our FSS business has matured, and we’ve been working to build our next phase of growth with products like Dash. However, navigating this transition while maintaining our current structure and investment levels is no longer sustainable.

Houston also acknowledged that Dropbox’s organizational structure has become too complex, with excess management layers slowing down innovation.

We continue to see softening demand and macro headwinds in our core business. But external factors are only part of the story. We’ve heard from many of you that our organizational structure has become overly complex, with excess layers of management slowing us down.

And while I’m proud of the progress we’ve made in the last couple years, in some parts of the business, we’re still not delivering at the level our customers deserve or performing in line with industry peers. So we’re making more significant cuts in areas where we’re over-invested or underperforming while designing a flatter, more efficient team structure overall.

The CEO goes on to express his confidence in the company’s direction, saying the industry is rapidly moving into the very space that Dropbox has been investing heavily in.

The changes we’re making today, while difficult, come at a pivotal moment when the market is accelerating precisely where we’ve placed our biggest bets. It’s been tremendously rewarding over the last few weeks to see customers and prospects light up when using Dash for Business for the first time, much like people did when we first launched Dropbox.

And this time we’re starting from a position of strength. Millions of customers trust us as the home for their most important files, making the leap to organizing all their cloud content a natural evolution.

But we’re not operating on our own schedule. This market is moving fast and investors are pouring hundreds of millions of dollars into this space. This both validates the opportunity we’ve been pursuing and underscores the need for even more urgency, even more aggressive investment, and decisive action.

Employees being laid off will be eligible for sixteen weeks of pay, in addition to an additional week for each full year with the company. The impacted employees will also receive their Q4 equity vest, as well remaining paid leaves that are current or approved, including medical and family leaves. Those on the Corporate Bonus plan will receive a pro-rated payment equal to their expected 2024 bonus.

Employees will also be able to keep company devices for their personal use, and be able to use COBRA for health insurance in the US for up to six months, or receive a one-month healthcare extension in Canada.

The company will also provide job placement and career coaching assistance at no cost.

Ultimately, Houston took responsibility for the decision, apologizing to those impacted.

As CEO, I take full responsibility for this decision and the circumstances that led to it, and I’m truly sorry to those impacted by this change.