Layoffs Don't Work

We are a small team in big company, and management that made wrong decisions is still somewhere there but not my direct management, still getting same paycheck, car, cards and benefits but new managers (that accepted to take over and got brand new car for 100k€, cards and bonuses, bells and whistles) started to layoff workers so we know this is the end for my team, and of course they will do whatever it takes to "save the product", but not fix the the real issue... lack of good developers to fix terrible bugs in our product.

Even if mostly the “right” people are laid off, laying off a wrong person can have a cascading effect.

Good people like to stick together. Get rid of a couple and the rest will start to leave.

Unfortunately, optimizing for not getting yourself laid off is not the same as optimizing for max productivity. In many ways, they're quite opposite.

This happened to me. There was a layoff, I got overwhelmed with work that had to get picked up, lost motivation, and burned out.

Layoffs are an effect of unsustainable success.

If you can lay off people without cratering the company, it means you hired too many people in the first place.

> And with that data you could say layoffs by themselves don't.

I think that is one inference too far? Layoffs may have saved some of those companies from bankruptcy. The Bain study is looking at share price performance and offers no data that would resolve that question.

> There is the question of if layoffs saved the company enough to save itself or improve?

They at least secured management a final big bonus for dealing with that, so management and shareholders cash in a bit on the way down.

Yet, those who makes those wrong bets are generally paid very generously and they are generally not those who suffers from the consequences

IBM is up 40% from its previous 2012 high point. In the same time, S&P is up nearly 400%.

Surely there are some situations where a pay cut is insufficient because you would like to reorganize the company, for example to wind down an unprofitable initiative or division and there's not a reasonable way to maintain the same headcount?

Which dot com was that?

They have way, way more employees than they need.

>This happens not to reduce cost but to stress out remaining employees.

Or to cull the low performers.

I personally am less stressed when the competition I outperform gets fired.

It is still to reduce cost. Hiring would often be in cheaper geographies. The reason to reduce cost is not to e.g. save a business from collapsing but it is to improve the financial results with the hope of making the stock price go up.

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> 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.

That has to be matched with a strategy of intentional overhiring though, and the damage is being done there. That is the insight that should be drawn from the research - intentionally doing something silly (in this case, overhiring) is a classic form of waste and economically destructive. Layoff or no layoff, the problem is the management team has set up a situation where they believe a big chunk of their workforce is unproductive.

This does raising the question of why boards and shareholders tolerate these clowns. To me the obvious answer being that the major central banks have a history of printing money and handing it out to asset owners, so hiring competent managers for said assets is a lot of trouble for limited gains - even weak managers are enough to drink from the money hose. But who knows, maybe the analysts think that a small amount of sillyness averts a greater problem.

> But the ones being discussed in the article are the consistent ones.

I worked at GE when Jack Welch was there. First of all we never had a systematic firing of the bottom 10%. That is a myth. We ranked everyone each year and clearly identified the bottom 10% but they were not always fired. The manager did have to have a development plan for these individuals.

More importantly, GE did have consistent layoffs. I assert this was a good thing. I vividly remember asking an EVP at GE Capital when I first joined GE why we did this. It seemed inhumane. Wasn’t it better to try and fix the so-called ‘C’ players? His response fundamentally changed my view on hiring, leadership, and firing. He told me two things. 1) Hiring people is always a gamble. The best interview/onboarding processes will not produce 100% success. There will people that do not have the skills that are needed. There will also be people for whom GE is simply not a good cultural fit. 2) In good times, when a GE business unit is doing well, they always over hire. People working 50 hours a week want to work 40, process problems that have built up need to be addressed (similar to tech debt), etc. Over time this leads to bloat and inefficiency.

For these reasons, consistent layoffs make sense for the company. They also make sense for the employee. By not waiting for an economic downturn and then making dramatic cuts, the exiting employees would have an easier time finding the next job as odds are the economy would doing well. Particularly in the case where the person was not a good fit for the GE culture, they learned this and could find a better fitting role elsewhere. And GE was great on the resume back in those days (sadly not so today). If we waited for the downturn, then the exiting employees would be looking for a new job in a bad economy with everyone else who had just been laid off. Not a good situation.

Finally, an additional point I learned later by observing when and where we made headcount reductions. GE made many bets on new markets, new products, etc. We had to if we were to grow by 10% each year (GE Capital’s rigorous requirement for business and strategic plans). The successful GE leaders understood is was easier to grow revenue to achieve 10% net income growth than to cut expenses. Unfortunately, not all new business ventures worked out. In those cases, we had to make a decision to shut them down (all new ventures had off-ramps). As a result, some people were repurposed, but others had to be let go. I posit that is consistent with the tech approach of “fail early, fail often.” In industries with significant people required to try a new approach, the consequence of failing will be layoffs.

>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.

This feels like a "no true scotsman" argument. The headline of the article is literally "Why layoffs don’t work", not "why consistent layoffs don't work". The only mention of "consistent" layoffs were when referencing Jack Welch's management style, but that was more of an attempt to argue that layoffs are bad by citing the worst possible example, than trying to introduce nuance between the types of layoffs. The studies cited also did not distinguish between the type of layoffs.

The latter points are true. But it's also the case that radical reskilling for very different job roles (with possibly rather different market salaries and, honestly, different from many people's job preferences) is tough too. Probably hard to come up with reliable rules.

Similarly when goals are linked to earnings and the company reports adjusted earnings... So changing the earnings by disregarding some expenses or some sales out of the calculation. The one in charge of this adjustment can play to allow or dismiss bonus for the year.

And to top it all off executives never have to eat the shit they caused in the same way the rest of the workforce at the company ends up having to

>Why imply it’s the worker’s fault for their own mismanagement?

I'm not sure how you got the impression that OP implied it's the worker's fault. If during the 2021-2022 boom, some startup hired a bunch of junior programmers for $200k/yr, I think describing those people as "people who couldn't add enough value to justify keeping them employed" is a fair assessment of the situation. It doesn't imply that it's the junior programmer's fault, any more than it's not my "fault" if I'm asked to play a musical instrument with no prior experience, it sounding terrible, and people asking me to stop.

This all sounds like the post-mortem justifications of a sclerotic executive suite.

> You don't know what you're talking about. People are fired when they can't add enough value to justify being employed.

That depends upon the employer. Layoffs occur for a plurality of reasons and the persons selected for termination are selected by various different criteria that may include quotas or random selection.

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You nailed it. In our case, EBITDA margins were "pencil on a napkin" at best — only because the CFO is usually the sanest person in the room. At the same time, Elon's moves and Meta's "year of efficiency" were super influential.

A lot of what happens in the boardroom or C-suite is "stick with the crowd" — e.g. template-based "tech modernization." (That's often a new CTO's hedge if the real problems are too hard. Just "go Cloud" or "go AI" for five years — four vests, one to jump off.) You broadcast confidence, you own the narrative. Which means never, ever saying "I don't know."

This is especially common in PE "turnarounds" or post-IPOs after founder exits. And it's especially harmful there because current staff is often seen as a liability, not an asset.

I thought a lot about this after the layoffs, and I think it boils down to how "professional C-levels" see execution as a commodity. They tend to overemphasize leadership (sometimes self-serving, but often genuine) and resource availability. The focus is on "what?" and "how to pay for it?" — with "how?" left to be figured out on the go.

I don't think that's completely wrong. Sometimes execution is a commodity. But not when you're short on time and planning for a rapid sprint.

There's definitely a "peacetime" / "wartime" divide. There's also an overreliance on pedigree. But above all, it's the pressure of being a public company (which often means losing the founder).

As a new CEO, you have to impress the board and investors without really knowing the company. You probably get two earnings calls - six months at most - to prove yourself. That's nothing, even for a senior dev, let alone an exec. And if you're being brought in, it means the company isn't in great shape - or is at least perceived that way.

You don't have time to really figure out how things work, and even if you did, it's political suicide. The board didn't hire a "looks fine to me" person. They hired a fixer. So, it turns into narrative games and rapid actions with massive tail risks.

I don't think it's a people problem. It's a system problem. Leadership replanting is hard, but it's one of the very few tools in the board's toolbox.

UK was horrible. No real protection for workers - just layers of mandatory legal mumbo-jumbo with zero actual chances for people to keep their jobs. It was like ripping off the band-aid 1mm at a time for four months.

Spain/France were an employer’s nightmare. Anyone without another job lined up secured a "special deal"—workers have massive leverage, they know it, and they’re actively litigious. People on parental leave had close to a year of guaranteed no-shows. The reaction was, of course, "never again" rippling across American corporate circles.

The rest of Europe was okay-ish.

US was predictably the easiest. We were generous with packages, but it's easy to see how the system can be used to screw people over.

Middle East was the roughest. Visas in UAE/Qatar expire instantly, and the local tech market is almost non-existent. We extended until the end of the school year to help with visa concerns, and some people managed to arrange golden visas. But for many, it was a massive shock — losing both jobs and residency overnight.

>yearly mandatory layoffs

That sounds grotesque. Who would choose to work at a company with that sort of bullshit dangling over your head?

> had a great product

> We got acquired

Can I just ask about the reason for this? Was it owners wanting off the ride?

The Google tenure stat is misleading because it was taken at a time when the company was growing 20% per year. The actual statistic worth looking at was how long a person who is leaving had been with the company on average at the time of leaving or what percentage of the overall headcount leaves per year. While I don't feel comfortable sharing those numbers, I can confidently say they lower than the industry norm.

I think if you look at companies like Citadel, which routinely fire the bottom 10% as part of the job description, it attracts a certain set of people who actually do feel "safe" in that environment. The trouble comes when you break your norms about layoffs.

Also, Google's median tenure of <1 year was due to hiring, not employees leaving. In other words, that number included people who hadn't left yet. I think if you look at people leaving Google, average is about 3 years.

I don't know if I'm a top 10% employee, but I'll share how layoffs influenced my decision to leave a job of 5+ years. I started looking for a new role after they announced the layoff of about 200 people in my organization. When I finally got an offer, I kept going back and forth on staying and negotiating or accepting the offer. There were many other reasons why I left, but a huge factor were the layoffs. I just kept thinking, they already had layoffs, what's to stop them from laying me off next? It's also a crappy feeling thinking that you/your team can be on the chopping block at any time.

Top performers have options and value stability. They also know that they rely on their manager to accurately reflect their work up the chain.

Some percentage of top performers report to deadbeat managers, so in an environment doing mandatory layoffs, they'll know that it doesn't matter how much they knock it out of the park, their manager will screw them. So of course they'll leave.

Because disloyalty breeds disloyalty and distrust breeds distrust.

The top people have the best opportunities elsewhere, so they leave first.

Even if they don't quit outright, they are likely to quiet quit, because why put in the effort when it is rewarded with disloyalty?

I have only ever quit jobs in response to layoffs. Layoffs demonstrate to me that the company is apparently low on cash if they need to fire people to make ends meet. If they are not low on cash, it means that they will arbitrarily fire anyone in order to pump up their stock.

Though I've never personally been laid off, it's a black mark on the company that I think you can never recover from. It means I will never trust anything said at a quarterly all-hands. The projections they give us employees are spun to be more positive than they really are.

During COVID, my company told us that we were going to be able to save money by breaking the lease on our office building and stop paying for amenities like the snacks in the break room and catered lunches (since nobody could use them anyways). This, they said, should save us enough money that we don't need to lay anyone off!

10% of the company was laid off a week later. The next day, I would later discover, the company applied for a PPP loan: they had laid people off pre-emptively so that they wouldn't be penalized for it next year when they sought to have their PPP loan forgiven.

It illustrated to me that you can't trust leadership, ever. Once a company initiates a layoff, it's a permanent black mark on that company

Because people will often see people who they don't perceive as low performers getting lumped in with 'low performers' and laid off. At that point, you start looking for management that seem to know what they're doing.

because they see the company struggles and is not loyal, as top performers have plenty of options they will be more likely to take a better offer when it comes along. Top performers will not leave the same day but bleed out over a bit longer timeframe. The most popular example is woz hesitating so much to leave HP because HP was loyal to employees and woz was loyal to HP. Imagine the same situation when HP had just let go 10% of employees, he would not have thought about it twice.

Because they have a good chance of hiring a better employer and will either do that or stop being your top ten percent

Top performers are generally pretty sharp. If they recognize the company is struggling and decide they have a better future elsewhere then that’s where they’ll go.

Yeah, I make the same adjusted for inflation that I did when I got my last/only promotion 10 years ago. I have grey hair, a disability, and a family that relies on the health insurance. Switching or being laid off is a risky proposition for me. It sounds like all your examples are young, childless people (who else could take a month off to go vacationing?). Life is much harder for some of us.

Sure, maybe that's how people in their 30s living in NYC or bay area feel about layoffs. But when you're older, have a family, and live in an area with a less dynamic job market, you may see things differently.

A few months of skiing sounds nice, but not as nice as the profound pleasure of working on a team of people I've know and cared about for over a decade.

You're going to spend half your waking life at work. For me, that's too much time to not want to do so at a place where I have real relationships with my coworkers.

Big tech interviews tend to be daunting. Many long term employees lose the skill, and fear the impact of work interruption on their resume as well as their ability to get in again.

Anecdotally, the LC bar for many firms has risen to the point that passing requires at least one through of the question before. If you Time bound your practice per question to 20 minutes, this means that you can solve most LC problems at least once in around 8 weeks of 40 hour weeks. Or 6 weeks at 60 hours.

Not a pleasant way to spend two months - but not impractical. I'm unclear what employers are deriving from this exercise at this point.

This story is changing. There is now an oversaturation of us ex-BigCo people in the market. I quit Google before the layoffs, after being there for 10 years and sick of it. The first year was serious ego boost, having Google on the resume opened doors all over the place. Then my ex-coworkers started getting laid off and things began to shift.

Now I know people I used to work with who have been without work for many months and having a hard time getting interviews.

Granted, I'm not in the Bay Area, so. But the market is saturated.

Has to do with H1b visas.

Post layoff, a person on H1B has 2 months to sign a new job offer or they must leave the country.

Majority of Indian and Chinese H1bs do not have green cards, and are the main group that suffers. Some of these folks are well into their 30s, with kids and houses in the US.

I stayed in the same job for nearly a decade, it got really interesting in the second half; in a way that it never would have gotten if I had job hopped every 3 to 5 years.

That being said, once I got bored in the job, I sniffed out that the parent company wanted to lay a few people off, and hinted that I was open to it. It worked out well for me.

I was just too busy in my personal life to look for a job on the side, and honestly I didn't want to walk away halfway through a project.

Those "lifer" friends may just be later in their career, though. Your ability to significantly advance your compensation depends on how early in your career you are. You will plateau at some point, but early on it makes a lot of sense to job hop. My first job hop was for +66% comp increase. My next was for about +25%, next for +15% or so. Eventually you hit a ceiling. After 30 years in the industry, my last job change was probably about +0.05%. I expect if I have to interview again, it's a toss up whether I'd get a higher or lower offer.

I worked at Microsoft 2009-2024 and I've seen it a lot. It's rather telling when your own manager tells you that if you want fast promos and raises, the best way to do so is to switch companies every few years. And I've had more than one manager say that. I know many people who did several rounds of Microsoft -> Google -> Amazon -> Microsoft or the like.

That said, I don't think one can blame the devs for it, since it is the companies themselves that have created the environment where the above holds true. I never understood why - intuitively, it doesn't make sense for the company to underpay its devs to the point where they leave for a competitor, and then come back and get rehired at a much higher salary anyway. But it is what it is, and the workforce has caught on.

Another anecdote from my part. I graduated in roughly 2015. I've had 5 software eng jobs since then. Each one I've had at least 2 different managers in the average 2 years I spent in each. My latest role, however, I was at for 2.5 years and had 6(!) managers. I had originally intended to stay at that role longer term but it was obvious the constant managerial turnover was a negative for my career growth - so I hopped again.

I've not experienced a layoff, but I also think its extremely abnormal to be in a position for so long and only have one manager.

I contracted/consulted around London for decades, and though I was with some clients for many years in total, others were much shorter, and short entries on a CV were not seen as a red flag AFAIK.

(Well, there was one hiring manager idiot who could not conceive of anything other than linear non-concurrent contracts as being honest - that interview did not go well, but I dodged a bullet!)

Hard to say - at my current company many people seem to be there for the long haul (it is a good place to work) and I'd say many departures have been due to restructures (some people lost jobs, but I think in a few cases existing managers haven't seen eye to eye with new leadership so have left, but also taken people with them).

At my last job people came and went, but I'd say that the job hoppers would be more inclined to say for 3-4 years rather than 1-2 years.

As a further insight, I'd say that my current job is at a big company, and in my town there are probably only four or five other companies of comparable size, while my previous job was medium sized and there were probably a lot of companies of that size that you could move to.

It seems impossible to think that it's not true given how fundamental it is to (new) tech culture.

> Where the fuck is the company showing any loyalty to its workforce?

They have been and are out there. But all it takes is a change on C level and cost cutting suddenly is everything, loyalty a thing of the past. That is, you cannot count on loyalty anymore, even if the company you are working for is currently showing it (or seems to).

Yeah I don't see the big mystery here. People leave to keep up with cost of living or get away from toxic elements in their current workplace that are otherwise difficult - if not impossible - to change by staying. It's not something we want to do, it's something we have to do for one good reason or another. If we had better rights and meaningful raises to improve or even sustain our quality of life, the job hopping would surely decrease. The layoffs and the reason for job hopping are both attributed to actions on the employer's side.

> The tech industry also doesn’t reward loyalty

Anecdotally, I’ve heard of many cases of “up or out” in FAANGs, which in other terms is a negative preference for loyalty.

(This, in fact, is one of the reasons people working in those companies perpetually seem to be practicing interview questions and Leetcode every day.)

>Where the fuck is the company showing any loyalty to its workforce?

I mean by that definition, they wouldn't be hiring much, so you don't see them o. n the radar.

Big tech employees have been abandoning companies the second they can get higher TC for decades, and as soon as the companies start firing a very small fraction (in a lot of cases people who were coasting or incompetent) its a problem of morality?

You can really see what people are made of when they face adversity. Good luck.

> 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

Honest question, as a European who doesn't fully understand tipping culture: don't you think that this might be perpetuating a culture of exploitation? Wouldn't you rather spend your money on taxis that at least have some regulations if you are afraid the drivers are getting the wrong end of the deal?

The stock market is like a sports betting pool where the players are allowed to bet on themselves

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Got news for you.

It’s not the devs who are bloating development costs. It’s the layers of management making hour long meetings to discuss button placement.

It’s the hours of retros, design meetings, and skip-levels designed to remove any personal investment or sense of ownership from everything.

Since so few individuals are trusted with real decision making power, you need a lot more people to achieve some kind of consensus/buy-in so that you can ship anything.

The devs are at the extreme bottom of this totem poll.

It’s like blaming construction workers for houses being expensive.

And, ofc, that goes without mentioning the multimillion yearly bonuses for C-suite, but we can just forget about that and blame the lowest ranking corporate employees (devs)

Source: I worked at a large tech firm for many years and saw this over and over again.

So much of the software industry is just an outrageous combination of inexperience and "YOLO". Every problem can be solved by just giving AWS another $100,000 this month because we don't have time (and don't know how) to make even basically optimized software. So just burn the gas and electricity and give more money to the YAML merchants at Amazon.

The big tech companies paying the largest salaries are raking in billions in profits. How does this square with the view that software development costs are out of control?

Layoffs today seem more like execs following management fads for easy visible actions and this data would suggest that the actions are actually detrimental to company profits. Juice the numbers for a quarter but add another long term drag to the company

Good lord I’m not sure I’ve ever heard it put so succinctly. Well done.

The twist is that when you layoff the 80% who supposedly only did the 20% part, you pretty much still have to hire the same amount of people to do that 20%.

> the business would instantly terminate the 80% for cause if they could only discern the difference

There's many many companies and leadership who want their big empires of people. I'm not too sure they want to fire 80% or be more efficient.

And, of course, you can site a reference for those statistics. That aside, I don't agree with your overall sentiment.

I think it is because most companies stopped firing.

Yes, this is happening at the company I work for. Total hiring freeze, people leaving through retirement or attrition aren't necessarily replaced. Salary raises are lower than inflation. Because no growth in staff, there's limited progression opportunity - you can't take a step up by moving to a new team since the business isn't expanding. It does have an impact in that ambitious people get frustrated and end up leaving.

I don't know whether it's a reason for size ("one market" isn't just about taxes, it's also about culture and language, and that's more different in the EU than the US), but it definitely makes companies more risk-averse towards expansion and disadvantages people with non-average backgrounds. The risk your CV suggests (e.g. mental health, unemployment, non-traditional career) gets multiplied if it's close to impossible to fire you.

> It's only the employees that suffer for every mis-step.

They benefit for the overhiring mis-step.

I agree with you that most American cars are junk. I hate all these same features plus others like the weird headlight controls, parking break on the floor in non-trucks, not to mention the loose feeling brakes and steering.

Traditionally, GM sold other models overseas through brands like Holden or Opel, but these have all been sold off or shut down over the past decade or so except in China. GM now has a much heavier reliance on trucks and SUVs in the North American market. They sell some of those same product overseas still, but in much smaller quantities than before.