[Samurai]

https://fortune.com/2023/02/07/meta-...es-efficiency/

I am amused that Mark Zuckerberg thinks all high level managers can transition to good individual contributor. That is more ludicrous than expecting all individual contributors to transition into good managers. Only a small percentage can do that, and it is even smaller in case of the former.

Originally Posted by V.Narayan

In a job getting laid off is similar in a business to have a long serving contract being cancelled on you for little reason leaving you sitting with employees and assets.

Except, folks think that companies have unlimited money. In reality, most companies are merely 3-6 months away from bankruptcy if they suddenly lose their revenues, as the fixed costs are very high. That is why companies to resort to layoffs, to reduce the fixed costs.

[V.Narayan]

Originally Posted by tsk1979

CEO and executive pay in last 30 years has increased manyfold as compared to the workers.

In USA without a doubt. In India more in IT and Banking and much less so in other sectors. In USA the culture that the only stakeholder who matters is the shareholder has taken deep roots that is playing out in many other ills of that society. In India too some of the IT salaries of CFOs and CEOs are hard to justify. They are encouraged by large shareholders.

If rising pay is the cause of layoff's all the CEOs who are actually claiming responsibility for over hiring should have been laid off.

Agree 100%.

The layoffs happened because the companies did not grow at the rate which stock market expected. After a boom 2021 for tech, they tasted blood and wanted more. When 2022 did not bring back the loot, and 2023 looking worse, the CEOs have to show the board that they are doing something. Something visible. What's more visible than laying of 20,000 people in one shot.
The CEOs miscalculated demand and hired more people than what they had work for.

The fact that these CEOs don't think they should take a big pay cut is a disease of the industry. If the CEO takes a big cut the private equity and institutional players panic. It is a song outside their playbook.

[m8002?]

This is something that has been bothering me especially in this round of layoffs.

When the company is in loss, letting go of people to breakeven or get back profits is perfectly understandable. But letting go of people just to keep the high profits is not good. Especially when the senior management then takes huge bonuses since they keep/increase the profit margins and stock prices.

Startups were loss making and once the funding runs dry, they need to let go of people. But what is the excuse for the Amazons and Metas of the world?

[V.Narayan]

Originally Posted by m8002?

This is something that has been bothering me especially in this round of layoffs.

When the company is in loss, letting go of people to breakeven or get back profits is perfectly understandable. But letting go of people just to keep the high profits is not good. Especially when the senior management then takes huge bonuses since they keep/increase the profit margins and stock prices.

Good and relevant question. This behaviour is driven by institutional shareholdersi.e. private equity, wealth managers, mutual funds etc. They are focused only on share price increases and hold enough proportion of the stock to push the CEO into acting with an undisguised 'if you don't then we'll dump your stock and crash the price or we will vote down certain types of resolutions at the next general body meeting...' This is what clearly occurred in the case of Sundar Pichai & Google recently. FaceBook has its own problems that caused them to lay off. Microsoft, Amazon etc decided to follow suit in case they got dinged by their institutional shareholders.

The big bonuses to the senior management are to reward them to act mercilessly.

This is what happens when ownership is removed from the business. Small-medium business owners like me rarely lay off people because there are a dozen ways to trim costs fast without laying off trained manpower. I've done it at least three times in a major way. A small-medium business {mine had 1400 employees} values trained and loyal manpower plus most you know in greater or smaller measure as a person rather than just a number. At least in my case on all three occasions the senior management & I took a drastic pay cut and no bonus to help conserve cash to tide over bad times. In one of my units I had private equity who went into panic mode at this cutting of wages because they felt I and my senior team will no longer be committed. They could not understand that throwing money is not the only motivator. They don't understand that because they are merely XL spreadsheet gurus and not real leaders.

Hope this helps.

[Fx14]

Originally Posted by V.Narayan

They are focused only on share price increases and hold enough proportion of the stock to push the CEO into acting with an undisguised 'if you don't then we'll dump your stock and crash the price

+1.

The fact that the CEO has significant amount of stock options means that this works wonders. He wouldn't want to see his retirement kitty shrinking drastically.

[Gsynch]

Originally Posted by V.Narayan

This is what happens when ownership is removed from the business. Small-medium business owners like me rarely lay off people because there are a dozen ways to trim costs fast without laying off trained manpower..

Read an interesting article today to support this POV that there are many ways to trim cost and layoffs, especially in MNC/FAANG etc. is an expensive proposition.

Alphabet’s layoff cost is estimated to be around $2.5 billion.

Meta and Microsoft will shell out nearly $1 billion.

Mass layoffs have been dominating headlines for a while. But, do layoffs actually boost profitability?

https://finshots.in/archive/tech-com...aign=13-2-2023

[SoumenD]

Intel decides not to join the layoff bandwagon(atleast for now).

I feel this is a much better move than laying off people. Am sure anybody would prefer this over a sudden brake in paycheques that leaves families in a spot.

But not sure if the board-members/shareholders like this and does this help the stock price?

Link

[Guna]

Originally Posted by SoumenD

Intel decides not to join the layoff bandwagon(atleast for now).

Intel has already laid off hundreds of employees as per news reports. This may be about further rounds.

[SoumenD]

Originally Posted by Guna

Intel has already laid off hundreds of employees as per news reports. This may be about further rounds.

Am sure they have. My point is firms can think of looking at this option first before going with layoffs as the repercussions are pretty brutal on not just the employee but their families as well. Since the common reason for layoffs is cost-cutting, rather than cutting off 10k employees from the payroll, maybe a 10% salary cut to 100k employees would help save same cost without affecting those 10k families adversely and making the rest 90k skeptical which eventually reduces their commitment as well? This move would even give the employees a sense of trust towards the firm IMO.

Speaking form personal experience, one of my ex-firms'(a Fortune 50 firm), decided to go for restructuring back in 2020 laying off some 10-15% workforce. That made the rest folks very skeptical about their future. In my team we had like 45 people of which some 10 were affected but 25-30 more left over a period of next 6-8 months as they had lost trust in the firm. The firm did reach out to laid off folks after 6 months asking if they would be interested to rejoin but what they would have answered is anybody's guess.

Edit:

Originally Posted by balenoed_

Do you really think they wouldn’t have thought about these? There is much more than what we think.

And why would it not be feasible? Didn’t see anyone mention that. I read a lot of experts claim layoffs help keep stakeholders happy and provide instantaneous boost to stock prices. But if it’s about cost cutting, how come salary cuts aren’t considered as cost reduction?

[balenoed_]

Originally Posted by SoumenD

Am sure they have. My point is firms can think of looking at this option first before going with layoffs…

Do you really think they wouldn’t have thought about these? There is much more than what we think.

[am1m]

Originally Posted by SoumenD

The firm did reach out to laid off folks after 6 months asking if they would be interested to rejoin...

Seen this often at more than one company- not necessarily asking people to rejoin, but firing and then advertising for the same roles in 6 months. I can understand some unforeseen event like covid that messes up the best laid plans, or after a couple of years when demand picks up you realize you need to hire for those roles again, but what are these higher execs being paid all that much for if they can't forecast capacity reasonably for a period of 6 months?! These MBAs from great institutes of management didn't see they would need the same roles after just 6 months? Why layoff in the first place then, since surely the process of replacing those roles in just 6 months would surely cost the company more.

But we lesser mortals just have to agree with:

Originally Posted by balenoed_

There is much more than what we think.

Surely there is. But I also think it has a lot to do with HR and management just not being able to think 'out-of-the-box' (one of their favourite phrases!).

[arunramaswamy]

What happens after mass layoffs at these firms? Would people want to join such companies who have scant regards for employees and their families?

[NPV]

Originally Posted by arunramaswamy

What happens after mass layoffs at these firms? Would people want to join such companies who have scant regards for employees and their families?

I think most folks in the industry understand that there is no such thing called Job Safety, it's all based on performance of the company and also the individual.
Yes, there may still be some companies with few leaders/execs building their kingdoms in silos and keeping their jobs safe, but these aren't widespread/common.

Also, when a layoff happens, most companies give a decent severance package that will not put the employee in a crisis overnight.

At the other end of the scale are the times when the market is extremely good and employees are changing jobs at will with huge pay raises and benefits.

The market cycles through demand surges and ebbs every 4-5 years and this has been the case for the last couple of decades at least.

[thanixravindran]

Originally Posted by SoumenD

Am sure they have. My point is firms can think of looking at this option first before going with layoffs as the repercussions are pretty brutal on not just the employee but their families as well. Since the common reason for layoffs is cost-cutting, rather than cutting off 10k employees from the payroll, maybe a 10% salary cut to 100k employees would help save same cost without affecting those 10k families adversely and making the rest 90k skeptical which eventually reduces their commitment as well? This move would even give the employees a sense of trust towards the firm IMO.

In the old type companies like industrial conglomerates it is very common to find cost cutting actions like foregoing bonus, deferred hikes, furlough and pay cuts. Some times shutting down high cost region sites and replacing with more offshore happens even during normal times. They also do layoffs but small in number and use it to shed the skills of previous generation and hire with latest trends. But the hiring is always very minimum due to their margin structure. It never makes headlines.

In this headline grabbing situation, as per their own admission, the new age tech companies hired too much may be for risky bets and can't sustain the funding for breakthrough. So they may have eliminated en masse leaving no scope for other softer methods.

[SoumenD]

Originally Posted by arunramaswamy

What happens after mass layoffs at these firms? Would people want to join such companies who have scant regards for employees and their families?

Nothing happens. Public memory is short. Back in 2008/09 as well there were many discussions articles etc around this topic. By 2010 people had already moved on. Whoever sees a recession learns the important lesson 'there's no job guarantee in private jobs' and hence as soon as the market bounces back he/she is back hunting because YOLO('Make hay while the sun shines' )