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Having dealt with 2 PE exists, rarely is the proposal something as upfront and silly as slash everyones pay. That probably does happen for a company being restr

Having dealt with 2 PE exists, rarely is the proposal something as upfront and silly as slash everyones pay. That probably does happen for a company being restructured in the red, but the more subtle actions tend to be things like: * Comp bands for are now targeting p50 averages rather than p75 or top of market. So you can't close new hires that are going competitors. And you can't give raises to your top performers * The health benefits are less generous when renegotiated for the following year * T&E that would have been approved - granted some maybe that shouldn't - but importantly some that should have for top-sales people, are no longer approvable. So your top sales people leave. Or similarly the accelerators or other measures are changed, that might look good on paper but rub top sales people the wrong way. * Head-count isn't replaced, so teams have to take on more work * Perks like conference attendance or hardware upgrades, which arguable aren't perks but investments in your team's productivity, are cut/limited

jscode 5y ago
>> Having dealt with 2 PE exists, rarely is the proposal something as upfront and silly as slash everyones pay. Agreed, but a gradual erosion can occur over the course of several years. PEGs and the operating company's management team have massive incentives to hit their growth metrics. If decreasing 401K contributions helps management hit their EBITDA target, many would argue that they should do exactly that. However, the impact of these decisions accumulates over time and can eventually derail a company's performance.
- TheOtherHobbes 5y ago
  The reality is that this kind of stupidity is built into accounting systems. It's not even the people with the spreadsheets. They're doing what they've been taught to do. It just happens to be completely wrong-headed - if you're interested in tangible long term growth and not quarterly plunder which moves money around without seeding genuine real value. Which is why companies can "grow" in accounting terms while actually being hollowed out as going concerns with a future. Likewise with the planetary economy, which appears to be growing financially while in ecological terms it's almost literally eating its own seed corn. A better approach needs a revolution in accounting. Current accounting practices are built on so many false assumptions they cannot possibly produce lasting long term opportunity, except for a tiny minority of exceptionally and unhealthily privileged people.
  - mahkeiro 5y ago
    Just look at Intel to see a company that was managed by the accounting people. Great numbers for a few years, large dividend, etc, but now they have to spend billions and billions to put the company back on track and give it a future.
    - erosenbe0 5y ago
      Disagree. Intel has had continuous dividends for at least 30 years. Few giant American companies have been as consistently successful as Intel. I can think of only Microsoft, one or two energy conglomerates like ExxonMobil, a telecom or two like Verizon, and maybe a bank like Goldman Sachs.
      - mahkeiro 5y ago
        Sorry should have been more precise but I was also counting in the very large stock buyback that came to a end in early 2021.
      - projektfu 5y ago
        Abbott Labs, CR Bard, Deere & Co. Something about staying in your lane while increasing opportunities in that lane seems to be a good long-term formula.
        erosenbe0 5y ago
        Yep, Bard is part of BD, which is a large beast. Abbott/Abbvie always has something going for them. UnitedHealth has done well for years and years as it has grown. There might also be a stable industrial I am forgetting like a chemical company or 3M. But overall, giant companies with 30 year runs of knockout growth and/or dividends like Intel are Cinderella stories. Google will be the next one to qualify in a few years I suppose.
- snovv_crash 5y ago
  It can be more insidious than that. For example, as time goes on more and more of the engineering might be shifted from product development to contracting. In this way you see revenue growth without realising that there is a hard limit and you're throwing away the company's future.
andrei_says_ 5y ago
What were the longer term changes you saw and their outcomes for the health of the teams and companies?
bb88 5y ago
Cash is still King. The more cash on hand, the easier it is for the business to survive in an economic downturn, and the more dividends and stock buybacks can happen for the investors. Software engineers from a CFO perspective aren't any really different than plumbers or carpenters. It's just labor. Getting a cheaper rate on labor is far more beneficial to the company than say making sure it's employees are happy. If the company could cut wages 50% across the board and then give the executives 20% raises for saving 50% in labor, they would do it in a heartbeat.
- Aeolun 5y ago
  > Getting a cheaper rate on labor is far more beneficial to the company than say making sure it's employees are happy. Whoa, citation needed. I’m fairly certain yhis isn’t true unless you are optimizing for just the next month.
  - bb88 5y ago
    Companies exist for the stockholders, not the employees or the public at large.
    - _blu 5y ago
      that's a myth. it's the opposite that is true.
      - vinyl7 5y ago
        It's hard to argue against it when I see companies becoming more and more consumer hostile (cheap products that break in a year or after warranty is up, slow buggy software, incomplete game releases, ads crammed into every open space, FANG cornering their markets, dark patterns, etc.)
- nickpeterson 5y ago
  This line of thinking is wrong though, because software developers are more like writers than plumbers. You can fire the writing staff at a sitcom and hire cheaper writers but good luck, it will probably fail.

jscode 5y ago

>> Having dealt with 2 PE exists, rarely is the proposal something as upfront and silly as slash everyones pay. Agreed, but a gradual erosion can occur over the course of several years. PEGs and the operating company's management team have massive incentives to hit their growth metrics. If decreasing 401K contributions helps management hit their EBITDA target, many would argue that they should do exactly that. However, the impact of these decisions accumulates over time and can eventually derail a company's performance.

TheOtherHobbes 5y ago
The reality is that this kind of stupidity is built into accounting systems. It's not even the people with the spreadsheets. They're doing what they've been taught to do. It just happens to be completely wrong-headed - if you're interested in tangible long term growth and not quarterly plunder which moves money around without seeding genuine real value. Which is why companies can "grow" in accounting terms while actually being hollowed out as going concerns with a future. Likewise with the planetary economy, which appears to be growing financially while in ecological terms it's almost literally eating its own seed corn. A better approach needs a revolution in accounting. Current accounting practices are built on so many false assumptions they cannot possibly produce lasting long term opportunity, except for a tiny minority of exceptionally and unhealthily privileged people.
- mahkeiro 5y ago
  Just look at Intel to see a company that was managed by the accounting people. Great numbers for a few years, large dividend, etc, but now they have to spend billions and billions to put the company back on track and give it a future.
  - erosenbe0 5y ago
    Disagree. Intel has had continuous dividends for at least 30 years. Few giant American companies have been as consistently successful as Intel. I can think of only Microsoft, one or two energy conglomerates like ExxonMobil, a telecom or two like Verizon, and maybe a bank like Goldman Sachs.
    - mahkeiro 5y ago
      Sorry should have been more precise but I was also counting in the very large stock buyback that came to a end in early 2021.
    - projektfu 5y ago
      Abbott Labs, CR Bard, Deere & Co. Something about staying in your lane while increasing opportunities in that lane seems to be a good long-term formula.
      - erosenbe0 5y ago
        Yep, Bard is part of BD, which is a large beast. Abbott/Abbvie always has something going for them. UnitedHealth has done well for years and years as it has grown. There might also be a stable industrial I am forgetting like a chemical company or 3M. But overall, giant companies with 30 year runs of knockout growth and/or dividends like Intel are Cinderella stories. Google will be the next one to qualify in a few years I suppose.
snovv_crash 5y ago
It can be more insidious than that. For example, as time goes on more and more of the engineering might be shifted from product development to contracting. In this way you see revenue growth without realising that there is a hard limit and you're throwing away the company's future.

andrei_says_ 5y ago

What were the longer term changes you saw and their outcomes for the health of the teams and companies?

bb88 5y ago

Cash is still King. The more cash on hand, the easier it is for the business to survive in an economic downturn, and the more dividends and stock buybacks can happen for the investors. Software engineers from a CFO perspective aren't any really different than plumbers or carpenters. It's just labor. Getting a cheaper rate on labor is far more beneficial to the company than say making sure it's employees are happy. If the company could cut wages 50% across the board and then give the executives 20% raises for saving 50% in labor, they would do it in a heartbeat.

Aeolun 5y ago
> Getting a cheaper rate on labor is far more beneficial to the company than say making sure it's employees are happy. Whoa, citation needed. I’m fairly certain yhis isn’t true unless you are optimizing for just the next month.
- bb88 5y ago
  Companies exist for the stockholders, not the employees or the public at large.
  - _blu 5y ago
    that's a myth. it's the opposite that is true.
    - vinyl7 5y ago
      It's hard to argue against it when I see companies becoming more and more consumer hostile (cheap products that break in a year or after warranty is up, slow buggy software, incomplete game releases, ads crammed into every open space, FANG cornering their markets, dark patterns, etc.)
nickpeterson 5y ago
This line of thinking is wrong though, because software developers are more like writers than plumbers. You can fire the writing staff at a sitcom and hire cheaper writers but good luck, it will probably fail.