4 ms·

Something I wanted to discuss - the bandwagon effect. If you want to do layoffs you will be best suited doing them at the same time as all the other companies.

by DenisM 4y ago

Something I wanted to discuss - the bandwagon effect. If you want to do layoffs you will be best suited doing them at the same time as all the other companies. That’s because normally layoffs bust morale and lead not only to the ejection of the people you wanted gone, but also to the departure of the people you wanted to stay. However when everyone is doing layoffs at the same time there is nowhere for your good employees to go. Is this effect real, or am I seeing things?

alberth 4y ago
For negative announcements like this, companies like to "hide in the herd" of other such announcements happening in the industry. Another tactic is announcing negative news on a Friday afternoon, to miss the news cycle.
roflyear 4y ago
Layoffs always happen, but I imagine it is like a wave. Sometimes you have very few, other times you have a lot. "nowhere else to go" isn't really a thing right now - but "the mood is right" is probably more of what is happening. Employees are at least a little on edge (which significantly impacts performance, for what it is worth) right now. Most companies that are laying off people do not need to lay them off. Their survival is not at stake. Doordash, for example, is making something like 4billion $ of gross profit a year. That's enough to pay all of these 1200 employees $3m a year, with some left over.
- ctchocula 4y ago
  Like most growth-phase startups from SV, Doordash are not profitable at the moment and have no profit to speak of with an EPS of _negative_ $2.41. Please correct your "$700m in gross profit a quarter" to "$1.7b in revenue a quarter" or "$296m in net loss a quarter" [1]. [1] https://www.sec.gov/edgar/browse/?CIK=1 https://www.sec.gov/edgar/browse/?CIK=1
  - lotsofpulp 4y ago
    And they have never had a profitable year: https://www.macrotrends.net/stocks/charts/DASH/doordash/net-income https://www.macrotrends.net/stocks/charts/DASH/doordash/net-...
  - roflyear 4y ago
    Their Q3 earnings show over $700m gross profit: https://s22.q4cdn.com/280253921/files/doc_financials/2022/q3/DASH-Q3-2022-Shareholder-Letter_FINAL.pdf https://s22.q4cdn.com/280253921/files/doc_financials/2022/q3... Take it up with them.
    - zamadatix 4y ago
      "Gross profit" as seen on financial sheet doesn't work the way you might think it does, particularly for services companies. A positive gross profit doesn't imply a positive net income (i.e. that the company as a whole is making money instead of losing it). E.g. if you look at page 10 of that document you can see their total costs far exceed their total revenue it's just not all those costs are associated with making the revenue. https://www.investopedia.com/ask/answers/101314/what-are-differences-between-gross-profit-and-net-income.asp https://www.investopedia.com/ask/answers/101314/what-are-dif... So while the 700M statement is true in financial speak it's not true in the way you're impyling it i.e. it's not profit leftover they could be paying out instead it's just a certain financial measure in a company that overall is losing money pretty hard. Likely feeding into this reduction of corporate headcount to be honest.
      - Cupertino95014 4y ago
        As the accountants say: Profit is an opinion, but cash flow is a fact.
- dev_tty01 4y ago
  >"Their survival is not at stake." What do you base that on? As others have pointed out, DoorDash is losing money every quarter. These companies have experienced hyper growth in employee count while the economy is good. But they are still losing a lot of money every quarter. When the economy turns, that high burn rate quickly becomes a threat to their continued existence. I think most of these layoffs are essential and may still prove inadequate. DoorDash for instance is selling a non-essential service. When the economy tightens up, people stop spending on things like DoorDash.
  - roflyear 4y ago
    I admit DD is not the most egregious example when it comes to this behavior.
xeromal 4y ago
I'd say there is an effect, but there are compound issues at hand. Another issue is that it's just damn hard to raise money right now either through debt or issuing stocks. Someone very close to me just got laid off at Volta because they were in an expansionist mindset but you need easy money to pull that off. Easy money is gone. Companies that balanced their budget without the need for debt to continue to operate are OK.
- DenisM 4y ago
  I’m trying to tease apart the bandwagon effect from the fundamentals you’re describing. The reason why the distinction is important is that the bandwagon effect will come and go, while the fundamentals can stay negative for any amount of time.
- phpisthebest 4y ago
  I am very lucky to work for a company that has zero debt. If I was looking to change jobs right now that would be one of the primary questions I would ask, the debt position of the company. Many companies are going to get hit hard when their corporate loans come due over the next 1-3 years.
  - xeromal 4y ago
    Same with mine. We're small and lean but we are slow to grow or needlessly spend money. A bit less reward but way less risk.
balaji1 4y ago
Well there is cover fire

by DenisM 4y ago

alberth 4y ago

For negative announcements like this, companies like to "hide in the herd" of other such announcements happening in the industry. Another tactic is announcing negative news on a Friday afternoon, to miss the news cycle.

roflyear 4y ago

Layoffs always happen, but I imagine it is like a wave. Sometimes you have very few, other times you have a lot. "nowhere else to go" isn't really a thing right now - but "the mood is right" is probably more of what is happening. Employees are at least a little on edge (which significantly impacts performance, for what it is worth) right now. Most companies that are laying off people do not need to lay them off. Their survival is not at stake. Doordash, for example, is making something like 4billion $ of gross profit a year. That's enough to pay all of these 1200 employees $3m a year, with some left over.

ctchocula 4y ago
Like most growth-phase startups from SV, Doordash are not profitable at the moment and have no profit to speak of with an EPS of _negative_ $2.41. Please correct your "$700m in gross profit a quarter" to "$1.7b in revenue a quarter" or "$296m in net loss a quarter" [1]. [1] https://www.sec.gov/edgar/browse/?CIK=1 https://www.sec.gov/edgar/browse/?CIK=1
- lotsofpulp 4y ago
  And they have never had a profitable year: https://www.macrotrends.net/stocks/charts/DASH/doordash/net-income https://www.macrotrends.net/stocks/charts/DASH/doordash/net-...
- roflyear 4y ago
  Their Q3 earnings show over $700m gross profit: https://s22.q4cdn.com/280253921/files/doc_financials/2022/q3/DASH-Q3-2022-Shareholder-Letter_FINAL.pdf https://s22.q4cdn.com/280253921/files/doc_financials/2022/q3... Take it up with them.
  - zamadatix 4y ago
    "Gross profit" as seen on financial sheet doesn't work the way you might think it does, particularly for services companies. A positive gross profit doesn't imply a positive net income (i.e. that the company as a whole is making money instead of losing it). E.g. if you look at page 10 of that document you can see their total costs far exceed their total revenue it's just not all those costs are associated with making the revenue. https://www.investopedia.com/ask/answers/101314/what-are-differences-between-gross-profit-and-net-income.asp https://www.investopedia.com/ask/answers/101314/what-are-dif... So while the 700M statement is true in financial speak it's not true in the way you're impyling it i.e. it's not profit leftover they could be paying out instead it's just a certain financial measure in a company that overall is losing money pretty hard. Likely feeding into this reduction of corporate headcount to be honest.
    - Cupertino95014 4y ago
      As the accountants say: Profit is an opinion, but cash flow is a fact.
dev_tty01 4y ago
>"Their survival is not at stake." What do you base that on? As others have pointed out, DoorDash is losing money every quarter. These companies have experienced hyper growth in employee count while the economy is good. But they are still losing a lot of money every quarter. When the economy turns, that high burn rate quickly becomes a threat to their continued existence. I think most of these layoffs are essential and may still prove inadequate. DoorDash for instance is selling a non-essential service. When the economy tightens up, people stop spending on things like DoorDash.
- roflyear 4y ago
  I admit DD is not the most egregious example when it comes to this behavior.

xeromal 4y ago

I'd say there is an effect, but there are compound issues at hand. Another issue is that it's just damn hard to raise money right now either through debt or issuing stocks. Someone very close to me just got laid off at Volta because they were in an expansionist mindset but you need easy money to pull that off. Easy money is gone. Companies that balanced their budget without the need for debt to continue to operate are OK.

DenisM 4y ago
I’m trying to tease apart the bandwagon effect from the fundamentals you’re describing. The reason why the distinction is important is that the bandwagon effect will come and go, while the fundamentals can stay negative for any amount of time.
phpisthebest 4y ago
I am very lucky to work for a company that has zero debt. If I was looking to change jobs right now that would be one of the primary questions I would ask, the debt position of the company. Many companies are going to get hit hard when their corporate loans come due over the next 1-3 years.
- xeromal 4y ago
  Same with mine. We're small and lean but we are slow to grow or needlessly spend money. A bit less reward but way less risk.

balaji1 4y ago

Well there is cover fire