The accounting software giant has amped up performance management of staff, offering underperformers the option for immediate severance, amid AI’s disruption of the SaaS market.
Xero employees deemed to be underperforming are now being given a choice: Accept a severance package or get put on a 30-day performance improvement plan, after which you may get shown the door anyway.
The new policy was introduced to Xero’s 5,000-plus staff in June by chief executive Sukhinder Singh Cassidy via a company-wide Slack message, reviewed by Forbes Australia, in which she framed the changes as needed for the company to meet the AI moment.
“As per the performance process, the Opt Out Program will be offered to 100 per cent of the Below Expectation cohort, as an alternative to the 30-day Performance Improvement Plan (PIP),” Singh Cassidy wrote.
The “Opt Out Program” is Xero’s name for a voluntary separation package and, Singh Cassidy added, it will also be offered to employees rated “Moderate” two annual reviews in a row. Xero staff fall into one of five buckets: Exceptional, Strong, Good, Moderate and Below Expectation.
It is an escalation of performance management within the company amid its attempts to reorient around AI and expand in the US. Xero is among the tech companies hardest hit by the “SaaSpocalypse”, a broad selloff in software stocks borne out of investor fear that agentic AI tools whipped up by Anthropic and OpenAI’s platforms will remove the need for utilitarian software like Xero produces. Its stock has fallen over 60 per cent from its peak last June.
“As AI changes how work gets done, we have the chance to redefine how small business finance works,” Singh Cassidy wrote. “To capture that opportunity, we need to keep raising the bar on the customer impact we deliver, and how we execute internally.”
The company is however offering carrots in addition to the stick. Singh Cassidy promised employees deemed “Exceptional” and “Strong” will receive “stronger ASR [annual salary review] outcomes” and additional equity grants as a bonus.
“We’ve spent the last 2-plus years talking about the need to build a high performance culture alongside our purpose and passion, and putting in place the frameworks and reward systems to do so,” Singh Cassidy wrote, “and when I say we, I mean all of us.”‘
Xero confirmed the policy to Forbes Australia, with a spokesperson saying: “Like any company that cares about doing great work, we have ongoing performance and development conversations with our people… We recognise strong performance, we support people who need it, and we treat everyone with care and respect.”
At the same time as the more intensive performance management was being introduced, Xero chairman David Thodey began meeting with investors to discuss bolstering Singh Cassidy’s compensation package following Xero’s stock plunging over the past year.
Xero’s board in December 2024 granted the California-based CEO target remuneration worth US$15.2 million ($21.8 million) and separately awarded her 575,000 Xero stock options, worth US$26.5 million at the time, to vest over three years. Those options carried a strike price of $171, meaning the current stock price of $74.34 would have to more than double for the options to be worth anything.
Thodey is reportedly asking Xero investors to reformat the package so it restores some of the value, giving Singh Cassidy an incentive to push the company through recovery. Xero says its remuneration framework benchmarks its executives against peers in the markets they’re based – which in Singh Cassidy’s case is Silicon Valley.
“Each year we engage shareholders ahead of our AGM for feedback on a range of topics, including performance, market context and remuneration practices,” a Xero spokesperson said. “Remuneration reviews for all Xero employees are standard practice at this time of year, and for the CEO, the Board takes market soundings through that same investor engagement.”
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