Layoffs Don't Work

I cannot speak for layoffs in all industries ever, but I agree with your assessment of layoffs in big tech from personal experiences.

I have way too many “lifer” friends in big tech who are deadly scared of layoffs and job hopping. They are also the ones who rarely got promoted and havent had a significant pay bump pretty much ever.

On another hand, half my team at a big tech company got laid off back at the start of 2023. 4 months later, I caught up with them over drinks, and the results were rather interesting. They all got around 4-6mo worth of severance pay, spent 2-3 months just skiing/traveling/hiking/vacationing, then 1 month or so interviewing, and then starting their new jobs shortly after. All seemed rather happy, both with their new positions/pay (which had a significant paybump) and, essentially, paid vacation break they took right before.

It seems like the heavity majority of those stressed about layoffs in big tech are lifers and those who are chronically averse to and dread the interview process.

Maybe that perception that people chronically job hop is not true? I would welcome a data source that shows chronic job hopping is the norm.

Anecdotally speaking, I spent 6+ish years at my first "old tech" company. My org in this (very large) company was constantly simmering with resource actions (mostly small scale layoffs). There was lots of negative energy there. I left to take a programming/data analytics gig in a large, privately held financial company that had never had a layoff. This was unfortunately timed, 2 years later the financial crisis of 2008 kicked off and I (and my entire team) were all laid off. I have been with my current employer for approaching two decades and several of my peers have been on our team for that much time.

I have had a SINGLE manager in that time window. I can't even name all the managers I had in my first job due to near-constant re-orgs and layoffs.

I’ve been at my company working in tech for 19 years and I hate the pushing of job hopping as a norm. Job hoppers have no skin in the game. They don’t need support what they build, they don’t get to see where it fell short… they really can’t learn from their experiences and mistakes. What they do isn’t in the best interest of the company, it’s just enough (an MVP if you will) to add to the resume so they can leverage it for a bump in pay on their next job.

I see wave after wave of job hoppers hired to “transform” the organization and all they ever do is repeat the same old mistakes, which we could tell them if they weren’t too arrogant to listen.

Every job hopper I’ve worked with has simply been a distraction to the greater goals of the organization to serve the customer. I’ve lost all patience and respect for the people who practice it, and the companies that set themselves up in a way which encourages it.

I don’t know how we find our way back, but I think companies and employees would all be better off with some stability and more long term thinking.

Job hopping is done to maximize your salary in the least amount of time - but everyone knows that there's a ceiling. You can't just keep job hopping for the rest of your career, and magically end up making 25% more every time you hop to the next gig.

Sooner or later you'll start to reach a ceiling, and have to defend your salary more. The idea is that if you can end up hitting that ceiling in 10 years by job hopping, that's better than spending 25 years at one place to hit the same figure. The earlier you have maximized your salary, the more you can invest and hopefully retire earlier.

Now, once you hit that ceiling - it kind of sucks to be in a constant state of job hopping. You actually don't get rewarded, and it is more stress than anything. And the older you get, the more stability you'll value - after all, you probably have a mortgage, kids, and all that to account for.

It's a chicken and egg problem. If people feel they could have a meaningful career in a given place, they would stay longer. When you see your teammates getting laid off one after the other - including people with 5-10 years of seniority and history of good performance, you start to wonder whether you should have any sense of loyalty to the company.

I joined my company with the naive hope there would be some sentiment of family/community and that I'd do a big chunk of my career there. But after seeing how they treat employees, I'm looking for the way out.

Many of the stereotypes you mention are for startup founder / early employee types.

That's not everyone, it's just who's on HN.

Most employees of these companies are just regular people wanting regular jobs.

I think the other side of it is:

- Detail-oriented nerds with a rich mental framework around things like optimization, making decisions based on data, perhaps statistical approaches to uncertainty get frustrated when they see their organization making big, irreversible choices without the benefit of all available information. From the IC or line-manager level there may be a bunch of information which you can tell was not taken into consideration.

- Process-oriented people who have put a bunch of effort into planning, goal-setting and measurement based on seemingly reasonable assumptions like "this team that provides service X will continue to exist for the duration of project Y which depends on X" get frustrated when execs throw everything into disarray ... and then 3 weeks later want to know why Y is off track.

As the article describes, often lay-offs end up being bad for the company, not just the employees who get terminated. Even if you're not let go, or even if you just care about the value of your vested equity, it can be quite frustrating to see this happen. And often, because layoffs are generally planned in secret, leadership explicitly precludes the possibility of getting input from the experts in their organization.

While perhaps some layoffs ultimately turn out ok, I think generally the people who go through them can tick off a list of parts of it that were ill-considered and needlessly disruptive, in part b/c of this lack of trust and communication.

I think there are two reasons: choosing to change jobs on your own gives you ability to pick a time when it's minimally disruptive to yourself and your actual family, and then the pretend "family" vibe you cite is pushed by the employer in the first place. Companies insising on a game of make-believe where the relationship between employer and employee isn't transactional makes it hard not to be bothered by the hypocrisy. I agree that on average, the tech industry isn't as bad as other industries often are, but I don't see why that's a compelling argument not to care about the fact that it still could be better. There's nothing stopping me from wanting fewer tech layoffs and better conditions for workers in other industries as well (and in some circumstances even advocate for that even knowing that it might require changes to my own quality of life to achieve that; as a trivial example, I go out of my way to tip much larger than 20% when I use Uber because I'd rather risk getting ripped off than a driver not getting paid a fair wage for the work they do for me, even if it's at my own expense).

At the end of the day, everything is a balancing act, and the amount of change most of us can make as individuals is a drop in the bucket compared to the unfairness that people have to deal with every day. We all have to make judgement calls on where to take a stand and where to play it safe to avoid making things harder for ourselves without actually making a difference that ends up helping anyone, and if people are acting in good faith when trying to make those choices, I don't see any value in criticizing what they end up deciding. If anything, most of us in tech are probably in far more of a comfortable position to be able to speak out against employers (either or own or those in industries where workers are treated even worse), so I think there's a reasonable argument that it's more important for us to because of that. It's not a zero-sum game though; pointing out tech employer hypocrisy doesn't inherently take anything away from pointing out even worse things that other employers do.

A good friend of mine has a PhD in labor economics and is now a senior management consultant for a big firm and I've been told that in general just cutting people is bad for businesses and most businesses will be worse off by just cutting people, especially without changing any of the underlying systems that got the company to the position it's in. Next time I'll have to ask him about the studies on it but there definitely isn't a consensus that general layoffs help businesses in the medium/long term. He was saying the times they seem to work best is in the context of a broader restructuring, (which in my experience is not common for companies).

> If a company is bleeding revenue

Not what happened with some of the recent layoffs. Some big tech companies generate huge revenues, laid off 5-10% of people (sometimes with false pretext of performance), and do keep hiring at the same time or soon after. This happens not to reduce cost but to stress out remaining employees.

Unsurprisingly, both the OP and this are oversimplified statements.

The more nuanced point is to note that simply reducing the world to accounting equations omits all of the human detail. Morale is a meaningful thing, or if you prefer, knowledge, expertise, Metis; these are damaged in layoffs, especially repeated rounds. And furthermore, the recent tech layoffs were not generally about fixing unsustainable businesses, they were about juicing profit margins for already profitable ones.

On the other hand, of course the OP title is wrong and layoffs can work. There are many examples even within tech where cutting deep is the only way of surviving.

Complex systems are complex.

Math wise, yes, you're correct, but layoffs can also hurt morale, especially if not done well. And in a competitive environment, the most talented people might be next to leave after a layoff, as they see things aren't going well and have the easiest time finding alternatives. I've seen that happen myself.

And some of those people you're laying off did revenue generating activities, so, as above, yes, it may be necessary to reduce costs, but it has to be done carefully.

> If a company is bleeding revenue, it cannot sustain the overhead of employees. They have to go.

No, they don't. During the dotcom bubble my company gave us 2 choices, layoffs or 20% pay cut. We took the latter. Everyone stayed and we had our pay back to previous levels in a couple years and the company remained profitable.

You can, in fact, treat people as people and still run a company.

> Employees feelings don't matter on a Balance Sheet, Income Statement and Cash Flow Statement.

This is only true of companies of a certain (large) size, when all semblance of employees being people have been abstracted away. In companies of more reasonable sizes you must take employee moral into account or you will lose critical employees which could kill the company.

> Employees feelings don't matter on a Balance Sheet, Income Statement and Cash Flow Statement. There is not a "Employee's Feelings" column on the ledger.

Sure they do. Just in the sense that employees feelings need to be controlled and made to fear any collective action or sense of agency.

At least for public companies, accounting is FAR from the end all be all.

Most of the time, company valuations are completely divorced from valuations. And much of what public companies do these days is try to game their stock price.

Government employment is 95% the time completely divorced from reality.

That being said, private companies employee a lot of people and this is very relevant.

Many larger do companies behave as if revenue is unlimited.

Too many times, I’ve seen layoffs followed by acquisitions of 10x the cost reduction from the layoffs — often even in the same quarter. And when parent company has a track record of driving acquisitions into the ground from mismanagement, where is the profit?

> But everyone knows that's not what killed them.

Another addition I'd like to add here is more often then not wrong people get booted while the "dead weight" tends to stick around and becomes even deader due to a motivation fall from the layoff. So maybe it doesn't kill, but for sure exacerbates an already bad situation.

The key takeaway for me is that layoffs are an effect, not a cause, of company failure.

The quoted text is a good example of this. If a company is struggling strategically or economically, and doesn't do a layoff, it's just going to struggle more, and fail more quickly. Companies that aren't laying people off are likely not even considering layoffs, because their businesses are actually doing well.

So, it's pretty obvious to me that companies in that cohort would see the biggest stock price appreciation, because layoffs are an indicator of poor future performance.

There is the question of if layoffs saved the company enough to save itself or improve? And with that data you could say layoffs by themselves don't.

Today the question is why companies making good profits are making layoffs. And looking at the damage they cause is relevant in trying to predict company performance

There's a big tendency to look for culprits whether layoffs, PE, MBAs, or whatever. But a lot of companies just made wrong bets or were in the wrong place at the wrong time. Kodak was never going to survive in anything like its pre-digital form.

Also, failing companies that use layoffs to restructure can succeed. For an example see IBM in the 90s. It’s hard but possible. And since the article uses stock price as a proxy for success, IBMs stock struggled for a long time afterward. It hit an all time high in 2025.

And then there are non tech industries that just go through cycles, like oil.

This is it exactly. Layoffs are a symptom of failure, not a cause of savings.

This correlation isn’t necessarily causal. Companies that are failing are more likely to layoff could be just as true as companies that layoff are more likely to fail.

This isn’t how all layoffs work though. Some, yes they are due to over hiring and a failure of management to plan. They are likely necessary for survival of the firm and generally last course of action. Although even those come with a cost to current and departing employees which harms the business.

But the ones being discussed in the article are the consistent ones. The ones you do while you’re ahead to make your balance sheet look better. Those come with a temporary balance sheet boost and all of the negative effects of any layoffs.

I don't see much reason to think mass layoffs are typically the result of over-hiring rather than a reaction to changing circumstances that are different than when the hiring originally happened. The article opens with a perfect example, the constriction of the US air travel market following 9/11. The people most airlines fired as a result weren't "over-hired". Their hiring made sense at the time and they were fired when circumstances changed. I'd argue this is likely more often be the case than actual over-hiring, since it's easier for a company to see if they can actually utilize new employees now than it is for them to predict the future.

In cases like that, the layoffs really do seem likely to be damaging to the companies. If circumstances change for a company and they can no longer effectively use all their employees, the most obvious solution is to get rid of employees, but it then makes it far more difficult to recover when positive opportunities present themselves. I think companies trick themselves into believing that since hiring and firing employees is relatively quick, it's a good tool to adapt to changing circumstances in either direction. But that ignores the time it takes for a new employee to become fully productive and the increased difficulty/cost in hiring new employees if your company has a reputation as an unreliable employer. It also ignores the potential boost to productivity that can come from employee loyalty and job satisfaction and security.

I have tried and failed to understand what is meant by "layoff due to overhiring", in the context of Software Engineering. When an engineer is employed in a successful project, they are incredibly profitable. A handful of engineers can write and maintain products worth millions of dollars. Big companies, which are the ones we discuss when talking about "overhiring" should be capable to find or create projects where an engineer will be at least modestly profitable. And having an employee creating a small amount of profit, who might eventually be moved to something that's better, is certainly more profitable than firing him and paying severance.

Note that here I'm talking about firing good performers because you have "too many" of them. Firing bad performers because the estimated cost of training them is not justified, I can understand.

The only explanation I found satisfying is that investors heuristically care about profit per capita(ppc) as well as total profit, and employees who don't produce _enough_ profit reduce ppc and thus investment to point the opportunity cost of firing them aligns. You'll make investors happy, which will raise valuation, more than what you are losing from the lost profit. But this is not "rational" in a full information economic sense. It's essentially the company virtue signaling that they are capable to fire if they had to, even at the cost of actual dollars.

> A lot of people treat economics as though damage didn't happen unless someone acknowledges it.

This is what I call the TV effect. People are trained from an early age, by consuming media, to only construct what is "real" by what is announced. And it's not just economics, but all sorts of aspects of life.

Is it not incumbent on the company who hired the employees to ensure they are utilized sufficiently? Why imply it’s the worker’s fault for their own mismanagement?

This would be more true of management did not play BS with the numbers constantly.

I worked at a firm that for 2-3 years straight would report great Q1,Q2,Q3 numbers.. tell employees it's looking like a good year. And then Q4 report a total wipeout loss that negated the quarterly earnings and swung the company to flat or a loss. Whoops, sorry, no raises, cutting bonuses.. and need to do some layoffs.

Behavior like this reminds us that the numbers are not real real in a scientific sense, but only in a relativistic accounting sense.

Some people will really do a lot of mental gymnastics in order to consistently blame workers instead of laying the real blame on poor leadership for company failures. If your company is failing because Tammy isn’t a “rockstar” at her job, you have a terrible company.

You don't know what you're talking about. People are fired when they can't add enough value to justify being employed. Sweeping industry-wide layoffs are different. Eg the "damage was done" to the aviation industry in 2001 due to plummeting demand, due (obviously) to new fears and hassle inhibiting travel; the damage currently being done to companies in the economy is from interest rates, inflation, trade uncertainty, stock manipulation, ...

> But when it became clear there was no coherent plan, people began leaving.

I see this more any more, to the point of wondering what % of execs and decision makers are actually meaningfully good at the job? When times are good, any exec action will turn out fine. But when times are tough, who is worth their salt?

And if all these decision makers are bad at decision making, what would a better organization look like?

> Americans don't exactly dig EU/UK workers, right?

I’m actually curious to hear your take on it - what’s your experience been?

I've seen this happen. I worked at an extremely efficient company that had a great product. We got acquired, and within months, were part of the acquiring company's yearly mandatory layoffs. They fired a bunch of (apparently random) people to meet the quota. This absolutely destroyed us. Morale was just gone.

Within six months, about a quarter of our employees, mainly top performers who could easily find other jobs, left voluntarily.

The whole thing self-destructed within another year, and the product we worked on was abandoned.

Why do you lose 10% of your top performers?

I don't think its only psychological safety. If the top performers lose staff that did the mundane crap and now they have to do it they start to really pay attention to what the management is actually doing.

Every layoff I have ever survived the staff inevitably ends up talking about how so and so manager and his favorite buddies are still out golfing every friday. Why the f are they still here etc.

This resentment builds and builds.

Companies churn through people constantly. Google famously has an employee tenure of like a year[1]. Most companies that subscribe to the Jack Welch "fire your bottom 10% yearly" philosophy don't usually declare a media stock-pump "layoff" but are just letting go of purported non-performers constantly. And there are a lot of "top 10%" performers who are very happy that the so-called deadweight isn't kept around just for some foolish notion of "loyalty".

Sometimes layoffs are unfair, and sometimes the wrong people are let go. But often it's entirely necessary and the right people are let go.

[1] - Which makes the whole gruelling, multi-month hiring process positively ridiculous. It would be much better for this industry if companies hire fast and fire fast, instead of delusions that they're finding the magical employee base that will be with them forever.

software development costs are out of control the whole industry is one big grift, there’s no accountability anywhere, 20% of the devs are doing 80% of the work, the business would instantly terminate the 80% for cause if they could only discern the difference, but they can’t, because the business side is also a big grift with the exact same problem all the way up to the founders recursively

Running a business is less and less about actual business outcomes and more about juicing stock. And the stock market itself is divorced from reality as companies whose output has gone down over time sees higher valuations because the owner has cult appeal. So everything gets worse and more expensive year over year while feckless suits get sloshed over company dinners.

Shareholders are expecting layoffs now, it’s kind of sickening.

[dead]

In Europe where most countries are notoriously hard to fire people they don't do layoffs like that "just to be safe", they instead just cut-back on hiring more people during though times.

It has an impact of morale, but not nearly as bad I imagine. I wonder if that is one of the reasons why Europe companies tend to be smaller companies, while US tend to be bigger. Expansion is easier when you can fire at any time, smaller companies are more likely to succeed if they don't over-hire and keep talent around.