The professor recommends across the board pay cuts as an alternative to layoffs.
> One thing that Lincoln Electric, which is a famous manufacturer of arc welding equipment, did well is instead of laying off 10% of their workforce, they had everybody take a 10% wage cut except for senior management, which took a larger cut. So instead of giving 100% of the pain to 10% of the people, they give 100% of the people 10% of the pain.
Curious if there is research here on how this impacts the company? Seems like it would also increase stress and encourage top performers to seek new opportunities.
He also recommends hiring during a recession:
> He actually hired during the 2000 recession and saw it as an opportunity to gain ground on the competition and gain market share when everybody was cutting jobs and stopped innovating.
I suppose this works when it works, and then fails completely when it doesn’t. In essence, this increases the risk profile on the company which seems problematic too. Would be curious if there are studies that show the outcomes of these strategies.
Perhaps there are no “good” strategies- just those that favor employees or those that favor investors.
I think the problem with this strategy is that it causes the wrong people to leave. If you're a top performer, you're going to feel like a 10% pay cut is very unfair, and you're going to be able to get another job elsewhere fairly easily, even in this environment. If you're not performing particularly well, it probably doesn't feel as unreasonable, and even if you don't like it, it's tough to leave.
When done correctly, layoffs give 100% of the pain to 10% (or whatever) of the people, but you get to select the worst-performing people. Spreading the pain equally is much more liable to cost you your best-performing people.
I do think the one important thing to note is that the reference you quoted is to a manufacturer, where you've probably got more consistent performance across a given type of employee as compared to software developers.
Having seen both, I'm much more likely to leave /after/ a layoff than after a 10% paycut.
In abstract, if there were a way to rank employees by ROI and contribution perfectly fairly, I might not worry about layoffs personally. However:
1) In my career, I've never seen layoffs which were at all good at selecting the bottom 10%. Who gets dropped is pretty random.
2) I care about other people I work with. A 10% layoff means a few of my friends were hurt.
When I had a 10% paycut because the business needed it, it felt a little unfair, but I didn't leave. That same business raised my salary back up a year or two later. I'm still there, actually, and many people spend entire careers here.
I spend most of my hours working, and above some point, I care about having a humane employer, meaningful work, and a decent work environment much more than I do about salary.
Job stability also allows me to focus on my work over signalling. That works well if I value and enjoy my work (which I do).
If you’re a top performer you bail as soon as there are layoffs anyways. I certainly do. It’s rarely a sign that anything good is in your future, they’re often performed poorly, and the work environment post-layoffs is incredibly bleak and disheartening.
If you have options there’s no good reason to stay.
This ignores the morale. I've been in both situations and the pay cut definitely felt like "we're in this rough economic situation together". Compare this with a layoff where I made my peace while waiting for "you still have a job email" and started interviewing shortly after. Of course pay cuts always ignore shareholders as they are really getting the benefit of paying less for same number of people.
As a top performer, you are more likely to leave after layoffs, especially if layoffs feel indiscriminate. From LinkedIn, some people were let go as their projects failed, not necessarily because of their own performance.
One thing I've seen "performance" is largely subjective. It is not just X cls or Y design docs (and you can see how these artifacts are easily gameable). A large part is visibility, likeability and awareness of org politics. A lot of them are maximizing personal gain over company gains. As a reasonably well-performing manager and former IC (as well as getting my share of not so great ratings) this was the game I hated but accepted to play - after many years of denial. And don't worry, companies know this. Check out Macleod's hierarchy or Man in the high castle!
So if you are worried that "top" talent will leave don't. Their departure is not damaging the company as much as the boat remaining unrocked!
If you're a top performer, you're going to feel like a 10% pay cut is very unfair
This is also different too, in that, there was almost deflation at thst time.
Now, there has been great inflation!
So a 10% cut hurt less then, where as now, all workers should be pushing for a 10%, almost yearly pay increase.
Even if inflation is less than 10%, you have a year of extra experience.
Right now, I'd say most workers are 25% behind on 3 years of raises.
So in a sense, everyone already has had a 10% pay cut this year.
edit:
You know, just a thought, all of these companies were caught colluding to suppress wages in the past.
Whether tracking, or any form of behaviour punished by the courts, it never stops.
So if you are looking at inflation, at high increases coming at 25% over three years due to that inflation, why not all lay off people together, even if profits don't require it?
Why not put fear into people during contract renegotiation, during hiring? Why not, over return to office orders?
I think the problem with this strategy is that it causes the wrong people to leave.
That's a possibility, but there's also a good chance that very good performers who value stability will stay, particularly with senior management taking larger cuts. Will you keep that 1-in-1000-and-knows-it person? Perhaps not. Do you want to? Perhaps not (see the whole "fire the indispensable person" philosophy).
If you still get rid of bad performers but keep good to excellent ones because of good management, even if you lose the occasional rockstar your overall team quality will still rise.
It will also hurt you more if you’re on a lower salary. 10% on a 300k FAANG salary is a lot different to 10% on an 80k administrative job - you’re going to feel the pinch a lot more on 80k than you are on over a quarter of a million.
>> If you're a top performer, you're going to feel like a 10% pay cut is very unfair, and you're going to be able to get another job elsewhere fairly easily, even in this environment.
Nobody outside of your immediate team, manager and may be at best a few people apart from them know you are the top performer. It's not like sports or movie industry that people know who you are. Where you go next, you have to work from the beginning to prove you are a top performer. And that take 2+ years too. Overall rage quitting for these reasons is a bad move.
>>When done correctly, layoffs give 100% of the pain to 10% (or whatever) of the people, but you get to select the worst-performing people.
In nearly all companies the rating system is fixed. And largely depends on political lobbying at the management levels. There is literally no way to know who are the real top performers.
In fact in many companies, money comes from top projects/products, not top performers. This is why often the companies let go people on the lines of which businesses they want to be running or shutting down, not which people they want to keep and let go.
If you’re a tech worker at any of the top paying public tech companies you’ve already taken more than a 10% paycut as you’ve seen the value of your RSUs decline
I agreed. The example given, a very specialized manufacturer, does not represent the tech industry. Probably these employees recognized it would be difficult to be hired elsewhere and this is why they were so willing to put up with a 10% pay cut.
> but you get to select the worst-performing people.
Anecdotally I'm not necessarily seeing this. Amazon's cuts were concentrated in groups. Some parts of Amazon, like AWS were essentially untouched, except for recruiters. In a comment a few days ago I pointed out that the headlines could have said "Amazon pulls back on Alexa efforts", "Amazon reduces its bet on retail" rather than just the number of people...though that would have hurt the stock price, while cutting people often raises it :-(. And AWS appears to still be hiring at some rate (source: couple of friends who mentioned interviewing candidates in the past couple of weeks). I am sure, of course, that if Amazon did cut half of the Alexa team, where they had a choice they chose the lower performing one.
The same is true of Microsoft's cuts, AFAICT. Slaughter in the hololens team, for example.
Google's cuts seemed to include some people I have worked with in the past and who are IMHO good. Notably they are long termers, though, so perhaps google was considering people who were more expensive. My gf mentioned to me that someone she knew was laid off, and they had just been promoted.
There’s a lot of evidence that indicates that layoffs will cost you your top performers too. They see layoffs, have options and take them before they get laid off.
Large scale lay offs are generally done blind to avoid accusations of bias: they don’t lay off low performers, they use some other fixed criteria (like laying off teams, people under X tenure, etc…).
Performance based layoffs have to be well documented and take lots of time, so they just happen continuously but in small numbers. At least, that is how it seems to me.
In case of google and other faangs this was easily achieved by just not giving annual bonuses that are 10-20% and are explicitly not guaranteed. For top performers you can still give bonuses just not as large
This is, for lack of a better term, "capitalist brain rot". It may even be "American brain rot". I don't mean this in a disparaging way to you, individually, by the way.
Myth #1: Most people believe they're "above average". In your post you talk about cutting the "bottom 10%". You feel comfortable with that because you likely believe you're not one of th ebottom 10%. It's yet another example of how true the Steinbeck quote [1] is about Americans being "temporarily embarrassed millionaires".
Myth #2: These layoffs are targeting "low performers". This is a myth for two reasons. First, it implies the myth of meritocracy. There are so many ways that meritocracy is a lie. The second way is that the company won't be targeting the bottom 10%. They will basically pick names from a spreadsheet, save anyone leaders vouch for, possibly skew layoffs towards projects getting killed at the same time and look at the demographics of the layoff group to make sure it can't be perceived as discriminating against a particular class such that the company might open itself up to litigation for discrimination.
These layoffs really are the worst kind of virtue signaling.
You make top earners sound like entitled children who cannot reason around the big picture impact to their community.
Top earners at software companies should be heavily de-valued. Being so specialized as to be useless if that specialization ceased to be validated by economy policy of shoveling cheap money at tech companies to titillate the public is not so special. It’s intentional attempt at agency control.
Hiring during a recession is a proven strategy. Google is what it is today because it doubled down on hiring during the 2008 recession when the rest of the industry was in the midst of layoffs and because of it was able to monopolize on top tech talent for the next decade.
>>The professor recommends across the board pay cuts as an alternative to layoffs.
Terrible idea imo, there is almost no company that can't cut 5% of their staff without negatively impacting the company as a whole if done more or less right, you cut the people who are lower performers - or average performers who, thru no fault of their own, are not currently assigned to something that matters anymore to the company.
Cutting the pay of the best/better performers, and/or the pay of people that are actively contributing to high value projects, so the less qualified or less needed people can stay employed seems like a huge disincentive to keeping your top performers.
If my manager came to me with that proposal I would give my notice on the spot.
Well seeing that everyone working at a public tech company has seen far more than a 5% pay cut because of declining stock prices and their unvested RSUs, that’s clearly a Counterexample
> Seems like it would also increase stress and encourage top performers to seek new opportunities.
There's a third route: cut hours.
Everybody gets every other Friday off, and with that 10% reduction in hours, they get a 10% reduction in pay.
It doesn't solve everything, but reduces the feeling of unfairness because your per-hour rate stays the same. (Provided you cancel less-important projects, etc. so that people actually have less work, not just nominally.)
I think this approach is more common in cyclical industries like manufacturing. If you're probably going to need those people again, you want to keep them around. But if the goal is to reduce the company size, you could try combining it with attrition.
Profit per employee is still high. Revenue per employee hired might be lower after the hiring spree, but the total revenue is still higher. Pay that back w/o culling the herd.
The other option is forming a coop like Igalia or moving to a democratically run organization. I say this not not to stoke a needless discussion, but corporations are fascist cabals. Employees are tools that are on the out-group and nothing more.
Strategies that favor employees are more humane, more ethical, and more likely to pay off in the long run.
All the investors have in this is money—and the investors who have enough money in it to actually influence decisions have so absurdly much anyway that the amount they would stand to lose based on this strategy or that one is very unlikely to materially affect their lifestyle.
The employees have their whole livelihoods invested in the company, so any decision that is made without regard for their interests and needs is necessarily a heartless and inhumane one.
We should be making decisions based on how they affect humans, not based on how they affect money.
> The professor recommends across the board pay cuts as an alternative to layoffs.
This is the fourth bout of "layoffitis" I've lived through in the tech industry, and I think this professor is really nailing it.
> Seems like it would also increase stress and encourage top performers to seek new opportunities.
You don't have to cut pay for key performers. You can offer retention incentives to key people. You can cut bad leaders and promote people (and give them a raise). Every time I've had to preside over layoffs (three times, all working for a big corporation), I got to ID my key people and offer them raises to stay on after the layoffs. The high performers that were laid off? They weren't the people that were the right ones to get the company through the hard times and the recovery. Often they were people that were great at their core job, but did not take on anything extra - and when everyone will have to take on extra, hearing "not in my job description" is, well, a big problem for the remaining team.
> hired during the 2000 recession
Ok, I'll let you in on a secret. When you see companies do layoffs, they are cutting costs, and big salaries are easy targets for cuts. The secret is that layoffs aren't permanent headcount cuts. Almost every time, the highest cost, non-essential people are cut, and then shortly after, people are promoted and the hiring starts anew, at a lower starting wage than before (I suspect in this economy, there's enough wage pressure that this will not work). I remember when I was in my 20s and 30s hearing older employees getting laid off who had 30 years of cost-of-living raises and made 2.5x what I did for the same job lament how it was ageism. Now that I'm 50, I see this as a sad truth: if you don't make yourself worth 2.5x someone 20 years younger, you aren't going to get paid 2.5x more forever.
> I suppose this works when it works, and then fails completely when it doesn’t.
You have to have an empathetic, "yes" to the question, "will customers continue to buy from US (over the competition) during a recession." If there's no way to grow, no way to win market share, then you really do have to batten down the hatches.
> this increases the risk profile on the company
This is especially true if you have to raise money to hire during a recession.
But the thing is... in tech usually it doesn't work that way. A 15yr tenured L6 is most likely making less than a newly hired L6. Why would you fire the one with experience? I've seen so many of these coming form MS and Google's layoffs.
> except for senior management, which took a larger cut.
There's your trouble -- even if a company would go the "pay cut" route now, there is no chance in a million where the leadership at the top would ever agree to losing a single dime. If anything, it would be performative, with other payment options making up the difference.
Apple chief executive Tim Cook has voluntarily taken a 40 percent pay cut for 2023, an unusual move that comes “in response to shareholder feedback,” according to the company's annual proxy statement. The decision puts Cook's target compensation at $49 million, down from $84 million in 2022.
I think the first stage of cutting should be management taking a cut. That's what I've always done (3 times in the last 20+ years). Then all employees. Then layoffs.
Fair enough. Bad company performance is usually management's fault to adapt to market dynamic, lack of vision on the CEO's part. Yes, one could blame it on external factors such as a recession as well, but even Apple's CEO took a voluntary pay cut.
> Curious if there is research here on how this impacts the company?
I remember reading something like this in Simon Sinek’s “Leaders Eat Last”[1]. Might’ve been anecdotal examples instead of research, though. I don’t necessarily recommend you read the whole book, but it may be a starting point for references.
My answer to the next quote is partially informed by memories of the book.
> Seems like it would also increase stress and encourage top performers to seek new opportunities.
In the case you cited, everyone got a proportional cut but senior management’s was higher. That signals to workers the company is prioritising them over short-term profits, increasing trust and making workers more invested in getting through the slump with the company as opposed to running away. If they’re successful and wages go back up, a powerful precedent of trust will have been set. Which might not even be necessary, as a company which goes this route probably has given other signals over the years.
Maybe that doesn’t matter to top performers who only care about money, but fortunately I don’t think those are as prevalent as HN may make us think.
I was at a firm that did a similar strategy once (during the 2008 hellscape) and it worked (20% across the board except for one non-salaried (hourly) team that was so junior cutting by 20 was just sadism).
It kept things afloat, and it definitely favored the workers (myself included at the time) than anyone else.
> they had everybody take a 10% wage cut except for senior management, which took a larger cut.
The problem (to me) is...
senior management is almost universally involved in making these types of decisions, basically in a vacuum with no outside input (aka, no democracy/voting)
how often do a collective group of senior managers decide to give themselves paycuts? almost never?...
everybody thinks they work hard, overcame a ton of adversity, and deserve "theirs"
reminds me of the goodfellas scene where billy batts is drunk at the bar talking to jimmy
CONWAY: It's changed, now. You've been away for six years, everything is different.
BATTS: I did my time, Jimmy. I did my fuckin' time, I come home, and I want what I wanna get. I got fuckin' mouths to feed. You understand?
CONWAY: (acquiescing) You're gonna get it. You're gonna get it.
In a high inflation environment, not giving raises is essentially a pay cut but doesn’t have the same negative psychological effect.
And RSU’s are a huge portion of comp in tech companies, it’s easy to cut RSU’s. Setting aside the very top performers, the middle 80% are not going to have an easy time finding a job in this environment. And may be less likely to leave when so many other companies are cutting but they happen to be at one of the few that didn’t cut but simply scaled back bonuses.
Bluntly, taking business advice from an academic who has never worked in the private sector is suicide.
If you attempt to socialize losses and cut pay, your best employees leave for other opportunities while your worst performers stick around.
That’s a recipe for disaster in a competitive market.
When done surgically, laying off non-productive employees can improve the morale of the top performing employees, because it shows that management is aware and appreciates them.
You know that's bs, right? They took the cheap money, hired a bunch of people to do 'cool' stuff like VR and feed junk adtech directly to your brain, speech assistants to buy stuff that you don't need and self driving which failed to deliver on inflated promisses and when those things failed they're axing those projects along with the people who worked on them.
Even Stanford with its multi-deca Billions in endowment cuts technical staff. They may not call them layoffs but they do cut budgets and headcount. I don’t believe they reduce pay in lieu of headcount. They’re hypocrites! As others pony out, you risk having your best leave, unless they harbor true communist spirit and take one for the team.
ok I really can't speak for the first part, but the more I think about it, the more preferable than the layoffs to me it seems...
* not sure why is this communist spirit, the difference in levels and salaries still remains, but presumably you're not as mad because the cut is by design not targeted at you
* discerning who is a performer and who is not cannot be done instantly, especially if the managers themselves are getting cut (and kept out of these conversations), so even the layoffs end up being random and blind, like the cut. Just read all those linkedin posts from people with 10+ years and recent promos getting booted currently
* if you are really concerned about top performers, double down on bonuses, say next time you're going to get 2x the usual bonus, which will give the company some time to measure performance at a normal pace
> Perhaps there are no “good” strategies- just those that favor employees or those that favor investors.
I don't think this is the case. Cutting costs is hard in tech companies because the biggest cost is usually people. If cuts are intelligent and needed, it's good for the remaining employees, customers and investors. If cuts are for the sake of "everyone is doing it" then, it's extra.
This misses the main driver. Valuations are no longer based on growth. The entire market has shifted to profitability over growth.
Companies with a stronger balance sheet coming out of the recession will be better positioned for the long term.
Seems that companies that gained their valuations through growth weren't sustainable in the long run.
And at a macro level, economic policy has largely deferred recessions since the 2008 housing bubble pop. That's not sustainable either. At some point a correction is going to happen.
The "social contagion" is companies betting that a correction is coming. Some made that bet early, and some are just now hopping on the train.
It's about survival for many companies. I bet we'll see fire sales, and acquisitions ramping up for the financially stronger companies.
The market shifting to profitability over growth was the motive, absolutely. But Elon's decimation of Twitter was the means and opportunity. And I think that copycatting those means of executing layoffs - 7am email notifications for 20-year employees, minimal consultation with lower-level management about who should be retained - will have significant ramifications on the morale of the remaining workforce. Perhaps some of it was unavoidable to avoid media leaks. But a lot of how all this was executed reflects a massive lack of empathy.
I can't wait for Elon's Twitter to fully crater so brainless Wall Street people will stop trying to emulate his approach to cost reduction. It's obvious to everyone paying attention that Elon destroyed that company in the first 30 days and it's only a matter of time until bankruptcy. It blows my mind that anybody could see his approach as an example to emulate.
The layoffs without consultation with the lower levels will indeed leave a bitter taste. It gives the impression that hard work isn't awarded if the top management level has no visibility over your work. This will result in departments spending much more time selling their work, rather than actually doing the work. In the end, this is counterproductive for a company.
Speculation, but maybe companies as a whole aren't great at repurposing employees from working on growth projects to working on profit generating projects.
Which executive wants to add more headcount expenses to their P&L responsibilities, without a compensating increase in revenue? There's a lot of internal politics that are likely insurmountable for most companies. Especially big companies that are inflexible and are hard to course correct.
As much sympathy as I have for the human side of layoffs that are called out here, I feel the researcher is not being intellectually honest. This paragraph is the worst offender:
> Layoffs often do not cut costs, as there are many instances of laid-off employees being hired back as contractors, with companies paying the contracting firm. Layoffs often do not increase stock prices, in part because layoffs can signal that a company is having difficulty. Layoffs do not increase productivity. Layoffs do not solve what is often the underlying problem, which is often an ineffective strategy, a loss of market share, or too little revenue. Layoffs are basically a bad decision.
First of all, if your strongest argument that layoffs do not cut costs is that sometimes companies hire them back as contractors, then I don't think you have a leg to stand on, because that's not really a layoff! In this case, "layoffs" is just a smokescreen to reclassify workers.
Pointing out that layoffs don't solve ineffective strategy, loss of marketshare or too little revenue is a facile argument at best. Yes, trivially, getting rid of people does not solve your business strategy problems. But at the same time, there may be no solution. The world may simply be moving on from what your company has to offer. Bringing in the MBAs to try and force the issue can have a lot of ugly outcomes that go well beyond layoffs.
At the end of the day, businesses ebb and flow, and they can only support a certain size of headcount based on the economic environment in which they operate. It would be nice if leadership had the clairvoyance to always avoid overhiring and give ironclad promises on perpetual employment, but such is not the world we live in. Coming with an absolutist position that layoffs are universally bad, backed by a bunch of flimsy strawman arguments, is not very helpful for people that actually have to make these decisions. Seems more like pandering to a generation that has never known a bear market.
I love this point: "The tech industry layoffs are basically an instance of social contagion, in which companies imitate what others are doing."
I really wish for a less supine tech press. I've not seen any of these titans of industry being held accountable for the apparent major mistakes of overhiring. And I'm not even talking actual consequences here; these people will surely get bonuses for this. I'd just like to see some hard questions being asked and answered.
Do we have any evidence that the over-hiring was a mistake? Could companies not have seen the free money and decided to beef up their staff for short term gains in their roadmap, with the knowledge and intention that they will likely be cutting later while getting to keep all that intellectual output? I don't see why we put this past them.
Another question I'd ask is: why can't the find something useful to do with these people in the meantime? Downturns are definitionally temporary. Can managers really find no way to prepare for the coming good times? Or is there no way to use those staff to gain ground while everybody else is retreating?
Workers are getting blamed by many for (claimed) low productivity. But why isn't that seen as a managerial failure? Isn't it better to have the same number of people and use them much better than a smaller number of people that are just as poorly used?
Interesting way to look at it. It certainly makes sense that companies hire to capture intellectual output when money is cheap and then tighten spending when access to easy money goes away even if they are making money hand-over-fist in their business.
Anecdotally, I've heard multiple stories of companies hiring staff, but not having any useful work to fill their time. Cases like product managers being hired but not assigned to any actual products, or engineers hired to infrastructure teams before the company has decided what infrastructure it wants. Although, these anecdotes are mostly from startups trying to scale and grow, not from FAANG-tier companies.
The research has shown that these layoffs are performative, meant to boost profits and/or share price right before bonus season and any "savings", which largely aren't real because of layoff costs, lost value from those employees and the acquisition costs of new employees in the next hiring wave, just go to dividends and/or share buybacks anyway.
If CEOs really were taking "full responsibility", Zuckerberg (as one example) would be facing some pretty hard questions about spending tens of billions on the metaverse (which no one wants and has no path to recoup that "investment"), which is many multiples of any supposed savings from Meta's layoffs.
> I love this point: "The tech industry layoffs are basically an instance of social contagion, in which companies imitate what others are doing."
Is there any evidence at all of this though? There appears to be a lot of copycat articles and comments on social calling the layoffs copycat behavior, which is a bit ironic.
Meanwhile, everyone of these companies laying people off is worth considerably less than a year ago and what was supposed to be a quick ending to the conflict in Ukraine has turned into a precursor for a larger sale war that may last for years, no doubt having a significant impact on economic growth.
It's social contagion all the way down. A lot of people have noted that small tech companies tend to imitate Google. But I think that Google is now looking at the state of the industry and trying to get ahead of trends too (reactive rather than a market maker). So it causes this amplification loop where big tech copies small tech, who are copying big tech.
I would love to see the capitalists held accountable for the way they treat their workers, but I believe their decisions are primarily dictated by profits, regardless of what they say.
Hard questions can surely be asked, but once you weed through all of the empty narrative, you pretty much end up with the reason: extracting profits.
Even there, I think there can be usefully hard questions. Because I suspect what the CEOs are focused on is not the long-term profits that come from building healthy companies, but the short-term profits that come from juicing the numbers in ways that look good to the market on a day-to-day basis.
It is hard to find anyone who honestly suggests it is otherwise.
It was never about the workers. Layoffs are because companies think the workers cost more than they make. Everything else is just bickering over why they think this.
Not all of it is "copycat". During the pandemic consumer spending moved online. People purchased hardware to work from home, ordered more from Amazon and other online stores as opposed to physical stores, used online services such as Zoom and Microsoft Teams more. Tech companies responded to the increased demand by increasing the pace of hiring. Were they wrong to do so? Possibly, because they should have expected that not all of the increased demand would stick around once the pandemic is over. As it happened, the demand ebbed when the pandemic was over, so they are stuck with excess manpower, which now has to be reduced. This doesn't explain all layoffs, however. Some of it is just opportunistic - now is a good time to do layoffs without looking weak.
Staff turnover in most companies is more than 15%. The same staff reduction could have been achieved by implementing a hiring freeze, moving people to strategic projects and putting underperforming staff on a performance management plan. However, as layoffs are now normal, it can be done without looking weak.
> During the pandemic consumer spending moved online.
I keep hearing this repeated as canon but is this quantified somehow? Did we really see a spike long enough for hiring sprees? And did it last until ... when? A few months ago?
It seems intuitive but I'd really love to see numbers.
The Shopify layoff memo (https://news.shopify.com/changes-to-shopifys-team) has a pretty interesting graph of exactly this effect. Basically a huge leap in e-commerce adoption with a subsequent dip right back to where the pre-pandemic trend line was heading. It’s not hard numbers I suppose, but it was at least the reason shopify gave when explaining their layoffs.
> In 2021, as people began returning to their pre-pandemic shopping habits, Amazon’s revenue growth decelerated to 22 percent with nearly $470 billion in revenue. And in the first nine months of 2022 (Amazon reports results for the final quarter of 2022 the first week in February), year-over-year revenue growth decelerated all the way to 10 percent. To make matters worse, Amazon’s core retail business lost more than $8 billion during that time frame, compared to an $8 billion profit during the same period the previous year. Jassy decided Amazon’s layoffs and cuts had to follow.
Yes, there was pull-forward growth in e-commerce. Using this from Benedict Evans in 2021 because it has numbers and a good graph:[1]
> The traditional way to think about ecommerce penetration is to look at share of total retail sales, and then deduct things like car repair, gasoline and restaurants - to get to ‘addressable retail’. On that basis, US ecommerce was at 16% penetration at the end of 2019 and increased to 20% or so in 2020, adding 12-18 months of growth in a year.
I recently spent a couple years interviewing hundreds of global F100 executives and all of them said exactly the same stuff about both B2B and B2C demand moving online during the pandemic.
> instead of laying off 10% of their workforce, they had everybody take a 10% wage cut except for senior management, which took a larger cut. So instead of giving 100% of the pain to 10% of the people, they give 100% of the people 10% of the pain.
This doesn't seem like a good strategy for tech. Cutting everyone's salary will dislodge your top performers who can get a better position even in poor market conditions.
> Cutting everyone's salary will dislodge your top performers who can get a better position even in poor market conditions.
Will it? Are your top performers only there because of the pay? And how do you even determine who your top performers are? I see this sort of logic frequently and I don't even know how to measure it, much less believe it.
> Are your top performers only there because of the pay
In an ideal work environment, probably less so than other employees. But I think anyone who has their salary reduced is going to reevaluate their position, and those with more valuable skills are more likely to leave. The question is, what is more likely to cause a serious reevaluation, salary reductions or layoffs?
I think for most tech companies, a single round of layoffs is preferable, as the people who you want to remain are more likely to feel they aren't and won't be affected and not reevaluate their position. The reductions approach could work for smaller or startup companies with a flatter structure, where employees are more invested in the company's goals and successes, either through culture or shares.
I don’t think the math checks out: Salary isn’t the only expense, so you might be looking at a 15% wage cut to keep 10% of the workforce. With stock performance, I’ve already taken a 10% wage cut. Cut another 15% in cash and I’m gonna be super unhappy about my comp.
Some solutions to this include furlough rather that straight cuts. Those do reduce some infrastructure costs. I can’t reduce service staff and contract work at all if everyone is working 40 hours a week still. We use the same toilet paper, water, electricity, other consumables and depreciating equipment. A saw blade cuts X feet of metal. But I can trim if everyone is working 37 hours.
>"Cut another 15% in cash and I’m gonna be super unhappy about my comp."
In case of Google they already "overpaid" by more than that percentage wise. Sundar can just say take your unhappiness and shove it up the place. What you gonna do? Quit when every other FAANG is laying off in hope to find something better? I do not think Sundar would give a flying fuck about this kind of unhappiness.
Betting you’re not one of those with a target on your forehead, eh? Cutting salaries and keeping staff is better for the company going forward. Those driven by comp aren’t those that’ll stay long term. Raises come from switches.
Will it? Most of the top performers I know are not very motivated by money, and instead value doing interesting work with people they like.
Granted, there are a set of people who are very good at job-hopping while executing a performance of being a top performer. But maybe a company will do just fine those people hop away. Maybe it would do better.
I think it is an S-curve: if you are below the curve, or just on it, then pay amount matters a lot.
But above the curve, everything else matters a lot, especially having a good boss / project leader and a project that makes sense / is actually used by people.
I am not motivated by money. That's why I am not looking for another, better paying job. But I will if you take from me what I already earn.
Advice to reduce the wages of all individuals is disconnected from reality and likely originates from someone who is insulated from the practical implications of such a decision, such as those in an academic setting.
Out of the millions of things I find “interesting”, helping a huge corporation make money is very low on the list. The company pays me to exchange labor for money.
If my skip-level took a bigger paycut than me to ensure that my team keeps their jobs, then I will take the pay cut also. If my skip-level lays off a non-bottom-performing co-worker and then claims "full responsibility" I'm getting the fuck out of there.
> Behavior spreads through a network as companies almost mindlessly copy what others are doing. When a few firms fire staff, others will probably follow suit.
I generally agree. Copycat layoffs are the result of “we have to do something” thinking, with little thought put into whether or not what’s being done is actually beneficial. Politicians are subject to these types of actions, as well.
If you do the same thing everyone else did and it doesn’t work, you don’t get blamed. You, like everyone else, was a victim of “circumstances”. But if you do something different and it doesn’t work, it’s your ass.
That said, these circumstances could provide cover for companies who need to shed poor performers or performers who’s cost-benefit is no longer positive to the company. But that requires more planning and forethought than I think any of the major players are applying.
It makes me physically ill to hear billionaire CEOs "take full responsibility" for the layoffs in an impersonal email while taking no pay cut themselves.
Look at Meta as one of the worst offenders. Meta's layoffs will save what? $5 billion a year? Assuming those employees were actually producing some value, the true savings will be less (since you also have to factor in severance costs).
Now consider that Meta has spent $36 billion [1] building the Metaverse with basically nothing to show for it.
Now Meta has fully internalized the idea that it cannot exist without a monopoly of some kind. FB (and even IG) are dwindling. The Metaverse is the answer to that. That's literally all it is. But there's no business strategy here, no value proposition to consumers (on the contrary, this is something consumers clearly do not want) and no product-market fit. Yet the intention here is to spend over $100B on this unproven effort. For what return on investment?
My point is that Meta could've achieved multiples of the "savings" from layoffs by simply scaling back or, better yet, scrapping entirely the Metaverse. Focus on the core business and acquisitions.
So many of these layoffs are purely virte signaling for "investor confidence" and nothing more. A less charitable interpretation is that it's aimed and making the remaining staff work harder and for less money, fearing future layoffs.
Meta in particular is rudderless and layoffs are a bandaid on that.
> It makes me physically ill to hear billionaire CEOs "take full responsibility" for the layoffs in an impersonal email while taking no pay cut themselves.
To be fair, Microsoft's executives partied with Sting[1] right before announcing their layoffs. They probably would have rather had Lady Gaga perform for them, but had to take some responsibility so they settled for Sting. It's hard times for everyone.
Readit News
> One thing that Lincoln Electric, which is a famous manufacturer of arc welding equipment, did well is instead of laying off 10% of their workforce, they had everybody take a 10% wage cut except for senior management, which took a larger cut. So instead of giving 100% of the pain to 10% of the people, they give 100% of the people 10% of the pain.
Curious if there is research here on how this impacts the company? Seems like it would also increase stress and encourage top performers to seek new opportunities.
He also recommends hiring during a recession:
> He actually hired during the 2000 recession and saw it as an opportunity to gain ground on the competition and gain market share when everybody was cutting jobs and stopped innovating.
I suppose this works when it works, and then fails completely when it doesn’t. In essence, this increases the risk profile on the company which seems problematic too. Would be curious if there are studies that show the outcomes of these strategies.
Perhaps there are no “good” strategies- just those that favor employees or those that favor investors.
When done correctly, layoffs give 100% of the pain to 10% (or whatever) of the people, but you get to select the worst-performing people. Spreading the pain equally is much more liable to cost you your best-performing people.
I do think the one important thing to note is that the reference you quoted is to a manufacturer, where you've probably got more consistent performance across a given type of employee as compared to software developers.
In abstract, if there were a way to rank employees by ROI and contribution perfectly fairly, I might not worry about layoffs personally. However:
1) In my career, I've never seen layoffs which were at all good at selecting the bottom 10%. Who gets dropped is pretty random.
2) I care about other people I work with. A 10% layoff means a few of my friends were hurt.
When I had a 10% paycut because the business needed it, it felt a little unfair, but I didn't leave. That same business raised my salary back up a year or two later. I'm still there, actually, and many people spend entire careers here.
I spend most of my hours working, and above some point, I care about having a humane employer, meaningful work, and a decent work environment much more than I do about salary.
Job stability also allows me to focus on my work over signalling. That works well if I value and enjoy my work (which I do).
If you have options there’s no good reason to stay.
So if you are worried that "top" talent will leave don't. Their departure is not damaging the company as much as the boat remaining unrocked!
This is also different too, in that, there was almost deflation at thst time.
Now, there has been great inflation!
So a 10% cut hurt less then, where as now, all workers should be pushing for a 10%, almost yearly pay increase.
Even if inflation is less than 10%, you have a year of extra experience.
Right now, I'd say most workers are 25% behind on 3 years of raises.
So in a sense, everyone already has had a 10% pay cut this year.
edit:
You know, just a thought, all of these companies were caught colluding to suppress wages in the past.
Whether tracking, or any form of behaviour punished by the courts, it never stops.
So if you are looking at inflation, at high increases coming at 25% over three years due to that inflation, why not all lay off people together, even if profits don't require it?
Why not put fear into people during contract renegotiation, during hiring? Why not, over return to office orders?
That's a possibility, but there's also a good chance that very good performers who value stability will stay, particularly with senior management taking larger cuts. Will you keep that 1-in-1000-and-knows-it person? Perhaps not. Do you want to? Perhaps not (see the whole "fire the indispensable person" philosophy).
If you still get rid of bad performers but keep good to excellent ones because of good management, even if you lose the occasional rockstar your overall team quality will still rise.
Nobody outside of your immediate team, manager and may be at best a few people apart from them know you are the top performer. It's not like sports or movie industry that people know who you are. Where you go next, you have to work from the beginning to prove you are a top performer. And that take 2+ years too. Overall rage quitting for these reasons is a bad move.
>>When done correctly, layoffs give 100% of the pain to 10% (or whatever) of the people, but you get to select the worst-performing people.
In nearly all companies the rating system is fixed. And largely depends on political lobbying at the management levels. There is literally no way to know who are the real top performers.
In fact in many companies, money comes from top projects/products, not top performers. This is why often the companies let go people on the lines of which businesses they want to be running or shutting down, not which people they want to keep and let go.
Have you been in a layoff? Not having a job anymore is not the only form of punishment.
I maintain it’s not even the most painful. Being a survivor can suck mightily.
Anecdotally I'm not necessarily seeing this. Amazon's cuts were concentrated in groups. Some parts of Amazon, like AWS were essentially untouched, except for recruiters. In a comment a few days ago I pointed out that the headlines could have said "Amazon pulls back on Alexa efforts", "Amazon reduces its bet on retail" rather than just the number of people...though that would have hurt the stock price, while cutting people often raises it :-(. And AWS appears to still be hiring at some rate (source: couple of friends who mentioned interviewing candidates in the past couple of weeks). I am sure, of course, that if Amazon did cut half of the Alexa team, where they had a choice they chose the lower performing one.
The same is true of Microsoft's cuts, AFAICT. Slaughter in the hololens team, for example.
Google's cuts seemed to include some people I have worked with in the past and who are IMHO good. Notably they are long termers, though, so perhaps google was considering people who were more expensive. My gf mentioned to me that someone she knew was laid off, and they had just been promoted.
Performance based layoffs have to be well documented and take lots of time, so they just happen continuously but in small numbers. At least, that is how it seems to me.
Myth #1: Most people believe they're "above average". In your post you talk about cutting the "bottom 10%". You feel comfortable with that because you likely believe you're not one of th ebottom 10%. It's yet another example of how true the Steinbeck quote [1] is about Americans being "temporarily embarrassed millionaires".
Myth #2: These layoffs are targeting "low performers". This is a myth for two reasons. First, it implies the myth of meritocracy. There are so many ways that meritocracy is a lie. The second way is that the company won't be targeting the bottom 10%. They will basically pick names from a spreadsheet, save anyone leaders vouch for, possibly skew layoffs towards projects getting killed at the same time and look at the demographics of the layoff group to make sure it can't be perceived as discriminating against a particular class such that the company might open itself up to litigation for discrimination.
These layoffs really are the worst kind of virtue signaling.
[1]: https://www.goodreads.com/quotes/328134-john-steinbeck-once-...
Top earners at software companies should be heavily de-valued. Being so specialized as to be useless if that specialization ceased to be validated by economy policy of shoveling cheap money at tech companies to titillate the public is not so special. It’s intentional attempt at agency control.
Terrible idea imo, there is almost no company that can't cut 5% of their staff without negatively impacting the company as a whole if done more or less right, you cut the people who are lower performers - or average performers who, thru no fault of their own, are not currently assigned to something that matters anymore to the company.
Cutting the pay of the best/better performers, and/or the pay of people that are actively contributing to high value projects, so the less qualified or less needed people can stay employed seems like a huge disincentive to keeping your top performers.
If my manager came to me with that proposal I would give my notice on the spot.
There's a third route: cut hours.
Everybody gets every other Friday off, and with that 10% reduction in hours, they get a 10% reduction in pay.
It doesn't solve everything, but reduces the feeling of unfairness because your per-hour rate stays the same. (Provided you cancel less-important projects, etc. so that people actually have less work, not just nominally.)
I think this approach is more common in cyclical industries like manufacturing. If you're probably going to need those people again, you want to keep them around. But if the goal is to reduce the company size, you could try combining it with attrition.
Profit per employee is still high. Revenue per employee hired might be lower after the hiring spree, but the total revenue is still higher. Pay that back w/o culling the herd.
The other option is forming a coop like Igalia or moving to a democratically run organization. I say this not not to stoke a needless discussion, but corporations are fascist cabals. Employees are tools that are on the out-group and nothing more.
All the investors have in this is money—and the investors who have enough money in it to actually influence decisions have so absurdly much anyway that the amount they would stand to lose based on this strategy or that one is very unlikely to materially affect their lifestyle.
The employees have their whole livelihoods invested in the company, so any decision that is made without regard for their interests and needs is necessarily a heartless and inhumane one.
We should be making decisions based on how they affect humans, not based on how they affect money.
That in addition to a hiring freeze might get the company close to the mark in a year's time.
An annual pay freeze then can be re-evaluated again next year.
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This is the fourth bout of "layoffitis" I've lived through in the tech industry, and I think this professor is really nailing it.
> Seems like it would also increase stress and encourage top performers to seek new opportunities.
You don't have to cut pay for key performers. You can offer retention incentives to key people. You can cut bad leaders and promote people (and give them a raise). Every time I've had to preside over layoffs (three times, all working for a big corporation), I got to ID my key people and offer them raises to stay on after the layoffs. The high performers that were laid off? They weren't the people that were the right ones to get the company through the hard times and the recovery. Often they were people that were great at their core job, but did not take on anything extra - and when everyone will have to take on extra, hearing "not in my job description" is, well, a big problem for the remaining team.
> hired during the 2000 recession
Ok, I'll let you in on a secret. When you see companies do layoffs, they are cutting costs, and big salaries are easy targets for cuts. The secret is that layoffs aren't permanent headcount cuts. Almost every time, the highest cost, non-essential people are cut, and then shortly after, people are promoted and the hiring starts anew, at a lower starting wage than before (I suspect in this economy, there's enough wage pressure that this will not work). I remember when I was in my 20s and 30s hearing older employees getting laid off who had 30 years of cost-of-living raises and made 2.5x what I did for the same job lament how it was ageism. Now that I'm 50, I see this as a sad truth: if you don't make yourself worth 2.5x someone 20 years younger, you aren't going to get paid 2.5x more forever.
> I suppose this works when it works, and then fails completely when it doesn’t.
You have to have an empathetic, "yes" to the question, "will customers continue to buy from US (over the competition) during a recession." If there's no way to grow, no way to win market share, then you really do have to batten down the hatches.
> this increases the risk profile on the company
This is especially true if you have to raise money to hire during a recession.
There's your trouble -- even if a company would go the "pay cut" route now, there is no chance in a million where the leadership at the top would ever agree to losing a single dime. If anything, it would be performative, with other payment options making up the difference.
Apple chief executive Tim Cook has voluntarily taken a 40 percent pay cut for 2023, an unusual move that comes “in response to shareholder feedback,” according to the company's annual proxy statement. The decision puts Cook's target compensation at $49 million, down from $84 million in 2022.
Top performer here. I would welcome a corporation that treated my coworkers properly.
Don't project your antisocial attitudes onto the rest of us.
I remember reading something like this in Simon Sinek’s “Leaders Eat Last”[1]. Might’ve been anecdotal examples instead of research, though. I don’t necessarily recommend you read the whole book, but it may be a starting point for references.
My answer to the next quote is partially informed by memories of the book.
> Seems like it would also increase stress and encourage top performers to seek new opportunities.
In the case you cited, everyone got a proportional cut but senior management’s was higher. That signals to workers the company is prioritising them over short-term profits, increasing trust and making workers more invested in getting through the slump with the company as opposed to running away. If they’re successful and wages go back up, a powerful precedent of trust will have been set. Which might not even be necessary, as a company which goes this route probably has given other signals over the years.
Maybe that doesn’t matter to top performers who only care about money, but fortunately I don’t think those are as prevalent as HN may make us think.
[1]: https://www.goodreads.com/book/show/16144853-leaders-eat-las...
It kept things afloat, and it definitely favored the workers (myself included at the time) than anyone else.
It's easy to get ambitious and hire a bunch of people for growth targets that aren't viable without ZIRP.
It's less so when you hire people to build orders you've largely already sold...
Why should you keep hiring if you already over hired?
The problem (to me) is...
senior management is almost universally involved in making these types of decisions, basically in a vacuum with no outside input (aka, no democracy/voting)
how often do a collective group of senior managers decide to give themselves paycuts? almost never?...
everybody thinks they work hard, overcame a ton of adversity, and deserve "theirs"
reminds me of the goodfellas scene where billy batts is drunk at the bar talking to jimmy
CONWAY: It's changed, now. You've been away for six years, everything is different.
BATTS: I did my time, Jimmy. I did my fuckin' time, I come home, and I want what I wanna get. I got fuckin' mouths to feed. You understand?
CONWAY: (acquiescing) You're gonna get it. You're gonna get it.
And RSU’s are a huge portion of comp in tech companies, it’s easy to cut RSU’s. Setting aside the very top performers, the middle 80% are not going to have an easy time finding a job in this environment. And may be less likely to leave when so many other companies are cutting but they happen to be at one of the few that didn’t cut but simply scaled back bonuses.
If you attempt to socialize losses and cut pay, your best employees leave for other opportunities while your worst performers stick around.
That’s a recipe for disaster in a competitive market.
When done surgically, laying off non-productive employees can improve the morale of the top performing employees, because it shows that management is aware and appreciates them.
* not sure why is this communist spirit, the difference in levels and salaries still remains, but presumably you're not as mad because the cut is by design not targeted at you
* discerning who is a performer and who is not cannot be done instantly, especially if the managers themselves are getting cut (and kept out of these conversations), so even the layoffs end up being random and blind, like the cut. Just read all those linkedin posts from people with 10+ years and recent promos getting booted currently
* if you are really concerned about top performers, double down on bonuses, say next time you're going to get 2x the usual bonus, which will give the company some time to measure performance at a normal pace
"60% of the time, it works every time"
I don't think this is the case. Cutting costs is hard in tech companies because the biggest cost is usually people. If cuts are intelligent and needed, it's good for the remaining employees, customers and investors. If cuts are for the sake of "everyone is doing it" then, it's extra.
not sure why you think this is categorically true.
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Companies with a stronger balance sheet coming out of the recession will be better positioned for the long term.
Seems that companies that gained their valuations through growth weren't sustainable in the long run.
And at a macro level, economic policy has largely deferred recessions since the 2008 housing bubble pop. That's not sustainable either. At some point a correction is going to happen.
The "social contagion" is companies betting that a correction is coming. Some made that bet early, and some are just now hopping on the train.
It's about survival for many companies. I bet we'll see fire sales, and acquisitions ramping up for the financially stronger companies.
Personally if my employer was acquired by him or his companies I'd shart shopping for a new job immediately.
Google? Microsoft? Amazon?
Those companies are in no danger of dying.
Could have written this in 2001 or 2008 and it wasn't true then, and it probably isn't true now.
Which executive wants to add more headcount expenses to their P&L responsibilities, without a compensating increase in revenue? There's a lot of internal politics that are likely insurmountable for most companies. Especially big companies that are inflexible and are hard to course correct.
> Layoffs often do not cut costs, as there are many instances of laid-off employees being hired back as contractors, with companies paying the contracting firm. Layoffs often do not increase stock prices, in part because layoffs can signal that a company is having difficulty. Layoffs do not increase productivity. Layoffs do not solve what is often the underlying problem, which is often an ineffective strategy, a loss of market share, or too little revenue. Layoffs are basically a bad decision.
First of all, if your strongest argument that layoffs do not cut costs is that sometimes companies hire them back as contractors, then I don't think you have a leg to stand on, because that's not really a layoff! In this case, "layoffs" is just a smokescreen to reclassify workers.
Pointing out that layoffs don't solve ineffective strategy, loss of marketshare or too little revenue is a facile argument at best. Yes, trivially, getting rid of people does not solve your business strategy problems. But at the same time, there may be no solution. The world may simply be moving on from what your company has to offer. Bringing in the MBAs to try and force the issue can have a lot of ugly outcomes that go well beyond layoffs.
At the end of the day, businesses ebb and flow, and they can only support a certain size of headcount based on the economic environment in which they operate. It would be nice if leadership had the clairvoyance to always avoid overhiring and give ironclad promises on perpetual employment, but such is not the world we live in. Coming with an absolutist position that layoffs are universally bad, backed by a bunch of flimsy strawman arguments, is not very helpful for people that actually have to make these decisions. Seems more like pandering to a generation that has never known a bear market.
I really wish for a less supine tech press. I've not seen any of these titans of industry being held accountable for the apparent major mistakes of overhiring. And I'm not even talking actual consequences here; these people will surely get bonuses for this. I'd just like to see some hard questions being asked and answered.
Workers are getting blamed by many for (claimed) low productivity. But why isn't that seen as a managerial failure? Isn't it better to have the same number of people and use them much better than a smaller number of people that are just as poorly used?
Intellectual output or technical debt?
The research has shown that these layoffs are performative, meant to boost profits and/or share price right before bonus season and any "savings", which largely aren't real because of layoff costs, lost value from those employees and the acquisition costs of new employees in the next hiring wave, just go to dividends and/or share buybacks anyway.
If CEOs really were taking "full responsibility", Zuckerberg (as one example) would be facing some pretty hard questions about spending tens of billions on the metaverse (which no one wants and has no path to recoup that "investment"), which is many multiples of any supposed savings from Meta's layoffs.
Meanwhile, everyone of these companies laying people off is worth considerably less than a year ago and what was supposed to be a quick ending to the conflict in Ukraine has turned into a precursor for a larger sale war that may last for years, no doubt having a significant impact on economic growth.
Hard questions can surely be asked, but once you weed through all of the empty narrative, you pretty much end up with the reason: extracting profits.
It was never about the workers. Layoffs are because companies think the workers cost more than they make. Everything else is just bickering over why they think this.
I keep hearing this repeated as canon but is this quantified somehow? Did we really see a spike long enough for hiring sprees? And did it last until ... when? A few months ago?
It seems intuitive but I'd really love to see numbers.
https://www.vox.com/platform/amp/recode/2023/1/19/23562702/a...
> The traditional way to think about ecommerce penetration is to look at share of total retail sales, and then deduct things like car repair, gasoline and restaurants - to get to ‘addressable retail’. On that basis, US ecommerce was at 16% penetration at the end of 2019 and increased to 20% or so in 2020, adding 12-18 months of growth in a year.
[1]: https://www.ben-evans.com/benedictevans/2021/5/29/boxes-truc...
This doesn't seem like a good strategy for tech. Cutting everyone's salary will dislodge your top performers who can get a better position even in poor market conditions.
Will it? Are your top performers only there because of the pay? And how do you even determine who your top performers are? I see this sort of logic frequently and I don't even know how to measure it, much less believe it.
In an ideal work environment, probably less so than other employees. But I think anyone who has their salary reduced is going to reevaluate their position, and those with more valuable skills are more likely to leave. The question is, what is more likely to cause a serious reevaluation, salary reductions or layoffs?
I think for most tech companies, a single round of layoffs is preferable, as the people who you want to remain are more likely to feel they aren't and won't be affected and not reevaluate their position. The reductions approach could work for smaller or startup companies with a flatter structure, where employees are more invested in the company's goals and successes, either through culture or shares.
This is such a weird attitude to me. If it goes up you expect the gains, if it goes down the company is letting you down.
Stock is supposed to involve some risk. It's not cash, and you will only be disappointed if you build your lifestyle around it being a certain price.
Some solutions to this include furlough rather that straight cuts. Those do reduce some infrastructure costs. I can’t reduce service staff and contract work at all if everyone is working 40 hours a week still. We use the same toilet paper, water, electricity, other consumables and depreciating equipment. A saw blade cuts X feet of metal. But I can trim if everyone is working 37 hours.
In case of Google they already "overpaid" by more than that percentage wise. Sundar can just say take your unhappiness and shove it up the place. What you gonna do? Quit when every other FAANG is laying off in hope to find something better? I do not think Sundar would give a flying fuck about this kind of unhappiness.
So top performers will get moving quickly.
Granted, there are a set of people who are very good at job-hopping while executing a performance of being a top performer. But maybe a company will do just fine those people hop away. Maybe it would do better.
The handwringing and psuedo-calculus of cuts does further damage to any interesting work.
Can't do interesting work when instead you have to fill in for a job previously covered by a junior engineer.
It'd take a hell of a company culture to fight these trends.
But above the curve, everything else matters a lot, especially having a good boss / project leader and a project that makes sense / is actually used by people.
Advice to reduce the wages of all individuals is disconnected from reality and likely originates from someone who is insulated from the practical implications of such a decision, such as those in an academic setting.
I generally agree. Copycat layoffs are the result of “we have to do something” thinking, with little thought put into whether or not what’s being done is actually beneficial. Politicians are subject to these types of actions, as well.
If you do the same thing everyone else did and it doesn’t work, you don’t get blamed. You, like everyone else, was a victim of “circumstances”. But if you do something different and it doesn’t work, it’s your ass.
That said, these circumstances could provide cover for companies who need to shed poor performers or performers who’s cost-benefit is no longer positive to the company. But that requires more planning and forethought than I think any of the major players are applying.
Look at Meta as one of the worst offenders. Meta's layoffs will save what? $5 billion a year? Assuming those employees were actually producing some value, the true savings will be less (since you also have to factor in severance costs).
Now consider that Meta has spent $36 billion [1] building the Metaverse with basically nothing to show for it.
Now Meta has fully internalized the idea that it cannot exist without a monopoly of some kind. FB (and even IG) are dwindling. The Metaverse is the answer to that. That's literally all it is. But there's no business strategy here, no value proposition to consumers (on the contrary, this is something consumers clearly do not want) and no product-market fit. Yet the intention here is to spend over $100B on this unproven effort. For what return on investment?
My point is that Meta could've achieved multiples of the "savings" from layoffs by simply scaling back or, better yet, scrapping entirely the Metaverse. Focus on the core business and acquisitions.
So many of these layoffs are purely virte signaling for "investor confidence" and nothing more. A less charitable interpretation is that it's aimed and making the remaining staff work harder and for less money, fearing future layoffs.
Meta in particular is rudderless and layoffs are a bandaid on that.
[1]: https://www.businessinsider.com/meta-lost-30-billion-on-meta...
To be fair, Microsoft's executives partied with Sting[1] right before announcing their layoffs. They probably would have rather had Lady Gaga perform for them, but had to take some responsibility so they settled for Sting. It's hard times for everyone.
1: https://www.marketwatch.com/story/microsoft-hosted-sting-con...