7 ms·
Ask HN: Why are big tech companies having mass layoffs?
Amazon, Google and Microsoft are clipping 10,000+ people each from their roster. Can someone explain why is this happening?
- gt565k 4y agoCuz a recession is coming and companies are trying to get ahead of it and also playing into it. Also a good time to trim and shutdown entire projects or departments and call it a “layoff”. But really you can also ask: Why did tech companies hire like 3-4x the amount they are laying off in the last 2-3 years? Why are they mass hiring? The inverse reason is usually why there are mass layoffs.
- bell-cot 4y agoNotice how badly the share prices of most such tech firms have fallen in the past year. Investors, Wall Street, and Boards of Directors are for-sure putting loads of pressure on tech firm CEO's to Do Something to fight that trend. Slashing some of the (supposed) payroll bloat that was built up "back when the living was easy" is a great way for a CEO to look like he's Doing Something.
- TillE 4y agoThis honestly seems like the more plausible explanation when a bunch of people laid off at Microsoft were working on highly profitable games.
- ReaLNero 4y agoWhich game?
- jeffbee 4y agoAre we just looking at one year now? Shares of google have doubled in the past five years.
- cratermoon 4y ago> Shares of google have doubled in the past five years Doesn't matter. Investors care about the next quarter.
- cudgy 4y agoShort term possibly foolish investors are about the next quarter. Long term investors consider far more than just the next, easily manipulable quarter.
- cratermoon 4y agoWhich ones dominate the financial system?
- DoingIsLearning 4y agoIrrespective of the real reason, I don't buy the argument that these companies are preempting a recession. Facebook, Amazon, Alphabet, Apple, Microsoft have an insane volume of cash reserves to the tune of hundreds of billions each company. Unless their are predicting a decade long crisis there is no way this is the real reason staff is getting trimmed, feels more like an excuse rather than a justificatíon at this point.
- jackmott42 4y agoWhat is the distinction between excuse and justification for a public company? We always know their motive, which is to maximize profit. If they believe growth is going to slow/end, then it makes sense to slash some people. An occasional culling seems like a healthy thing for a huge company to do. If we knew how to predict future needs perfectly and how to hire quality people perfectly, then sure we could avoid this, but that is impossible.
- neon_electro 4y agoCan we acknowledge that predicting the future is impossible, AND that the over-hiring and over-confidence in the moves "a huge company" makes is unsustainable and ultimately makes these places less desirable to work at? I sure as hell am not applying to anywhere that had layoffs - I don't want to reward those places with my labor.
- dcolkitt 4y agoEven if your business is entirely unaffected a recession, it may still be sensible to do a light layoff before things turn. Especially if you've just gone through several years of an extremely tight labor market. The reality is most of the big tech companies have had to staff under pretty unfavorable conditions over the past few years. That's meant either scraping the bottom of the barrel in terms of the less talented. Or ballooning TC packages. If you think that all of a sudden it's going to become a buyer's market for employers, then you probably want to free up some spots today. Especially among your weakest performers or your most overpaid.
- derefr 4y ago
- berkle4455 4y agoBecause they're big and 10,000 is a very small (~5%) percentage of their staff, and is entirely routine and normal housekeeping. Investors want to hear "layoffs" hit the newsprint.
- M2Ys4U 4y agoThey're doing it because everyone else is. It is, to a large extent, fashion. It's layoff season.
- mabbo 4y agoAmazon, Shopify, Wayfair, Google, Meta: all of these companies make money because e-commerce exists. The higher the proportion of all sales taking place on e-commerce, the more valuable the companies are. For Google and Meta, it's the advertising portion, but it's still impactful. If we track online sales as a proportion of all sales over the last 20 years, there's a pretty stable trend of increase. Then COVID hit, lockdowns, and we saw a 5-6 year jump ahead. Big question: How much of this is temporary, and how much is permanent? Maybe people discover that grocery delivery is way better than going to the store and never stop. Imagine if you bet against it being permanent, and you were wrong? Your company just lost out on a massive opportunity- a CEO that does that would be worried for their job. And if you bet for it being all permanent and are wrong, well, you just have to lay off a few people. They all bet that this was a permanent 5-year jump-ahead. They were wrong, there was no jump-ahead. Now there's a looming recession. Everyone has too much headcount. And for publicly traded companies, there are shareholders who will demand that something be done to prove you're not going to bankrupt the company. To minimize the PR hit, everyone quietly announces their layoffs just after someone bigger than them does, so that they aren't the headline in the news tomorrow.
- lapcat 4y ago> They all bet that this was a permanent 5-year jump-ahead. They were wrong This is the part that really needs explanation. How was every CEO of every major tech company wrong? Why aren't we having a big tech CEO layoff for massive wrongness? It certainly feels like there's a lot of groupthink here in any case. The Google severance looks pretty generous? That plus the last couple years of overhiring is going to end up being pretty costly for the company. These were expensive mistakes.
- prottog 4y agoGroupthink, yes, definitely. The shareholders, through the board, are responsible for hiring and firing management; so I guess shareholders haven't lost confidence in the CEOs yet, or perhaps it's too early still.
- dec0dedab0de 4y ago
- skizm 4y agoI mean if you look at the total number of employees by year, all these companies have still added massively to their headcounts in the last 3-4 years. It is not sustainable to continue adding 20-50k employees per year to your payroll.
- Tempest1981 4y agoIndeed. This article has a good graph of growth/hiring: https://www.cnbc.com/2023/01/18/apple-had-slower-headcount-growth-than-tech-peers-no-layoffs-yet.html https://www.cnbc.com/2023/01/18/apple-had-slower-headcount-g... Most grew 15-30%/year the past few years... probably since money was "cheap".
- browningstreet 4y agoMost of those companies doing layoffs are still hiring and growing headcount from the new base.
- throwayyy479087 4y agoThat some orgs overhired is not in question. What is _insane_ to me is that everyone being let go seems to be an engineer, while the DEI teams remain untouched. That section of the office sure seems to have a lot of free time, between shaming the rest of the company. Shows the power hierarchy I suppose. Wild world.
- vgatherps 4y agoEngineers are probably a lot more expensive than a DEI employee
- throwayyy479087 4y agoProbably a little more useful though, even on a per-dollar basis
- o0-0o 4y agoIf you want to find out who controls you, think about whom you cannot criticize.
- M2Ys4U 4y agoWhy are you quoting a neonazi in a thread about people being employed to do DEI work?
- UncleMeat 4y agoIt'd be socially unacceptable for me to criticize participants in the special olympics, but I'm pretty sure that they don't control me. That quote is from a neonazi who wanted to argue that jewish people secretly controlled the world because antisemitism is no longer socially acceptable in most circles.
- browningstreet 4y agoTo be fair, those teams are usually not very big nor paid on the same level as engineers. And, these companies with layoffs still have massive headcounts and cultures to manage. Whether you like/agree with the DEI initiatives or not… much of the company will keep doing what they are mandated to do.
- leet_thow 4y agoBecause it is more expensive to borrow money. Think of it like this, if it costs 1% to borrow money and you can use it to generate a 4% return with a less than efficient operation, the equation makes sense. However when that money is now 4% to borrow, you are forced to increase the efficiency of the operation or shut it down completely.
- calacatta 4y ago^^ POTD. Roughly 50% of all US dollars in circulation were printed in 2020 and 2021 -- the status quo became simply unsustainable. On top of that add Baby Boomer retirement capital going low-risk (i.e. out of tech). On top of the end of cheap money, add increased operating cost due to Baby Boomers leaving the work force (~400k net loss of workers), passed-down costs of reshoring supply chains, and a burgeoning energy crunch due to the war in Eurasia. Roughly speaking, "tech" investments are riding the tip of the bullwhip here. I expect that not-yet-profitable startups are the most vulnerable, but the sea change pervades anywhere that 2023 dollars are being spent chasing payoffs that are "many" years out and even mildly at risk.
- danpalmer 4y agoShort answer: they depend on revenue from businesses, ads, etc, and that is going down or likely to. Long answer: many people naively think that it's all about the money a company has, and these companies have a ton of money, so why are they laying off people when they could weather through the storm. While this feels like it should be the case, the answer is that it's a bit more complicated than that. Whether it should be more complicated or not is besides the point, sadly. Business health tends to be measured more in terms of cash flow, and in simple terms, more going out than is coming in is bad, even if you could deal with that for many years. There's also the difficulty for many of these big multinational companies that their cash reserves might not be in the right place, and moving them might incur significant taxes. Investors are theoretically investing for the prospect of future returns, and while with growth stocks this is in the form of increased share value, in the long term it's also about dividends which come from profit, and so investors want to see a long term profitable company. Also worth noting is that while, yes, CEOs are largely compensated in stock and therefore interested in seeing it go up, this is also good for the business in a general sense, as it makes it easier for them to raise money for things by selling stock. I don't necessarily agree with all of this, I have problems with the taxation issues, and I also think it's a bad thing for many employees, but my general point is that this is complicated and there are reasons for it, even if we might not understand or agree with them.
- o0-0o 4y agoBig tech is more focused on becoming software and automating everything than people. As people become numbers and targets and nothing more than dumb robots with opinions, they become more replaceable. Big tech leading the charge for woke mob diversity. Start your own company, run it, eat big tech.
- zzzeek 4y agosimple, ChatGPT will write all the code now
- md_ 4y agoI think the simple answer is that "investors demand it." Investors may indeed be predicting a recession, and it's probably true that many of these firms overhired. But there's no specific fiscal reason for most of these companies to cut staff--5% the cost of their workforce is not standing in the way of billion-dollar deals (e.g. MSFT/Blizzard) or long-term R&D spending (Meta, whatever you want to say about their Metaverse project). Bluntly: cutting staff is the new stock buyback.
- Apreche 4y agoBecause the capitalist system we have built demands constant growth. Even a very stable solidly profitable business is no good. A time comes when revenues go down and/or costs go up, that inhibits growth. The companies are so big they could weather the storm. Even if they kept all the employees and increased compensation, they would still be profitable. But if they did that, they wouldn't be growing. The stock price would go down. The investors and executives would lose a lot of their own net worth. The executives don't have some magical button they can press to magically increase revenues instantly. Most non-labor costs also can't be cut. They don't have much control over the prices of the material goods and resources the company needs to operate. The only easy and instant action they can take is to lay people off. To simply stop spending money on work that isn't generating immediate revenues. And what do you know, GOOG is up 4% today as of the time of this posting.
- dcolkitt 4y agoThere are many class groups that have a potential grievance against capitalism. But pretty sure that FAANG engineers are not one of them.
- neon_electro 4y agoIf they had any class solidarity they would. I guess this is why I have generally never been interested in working for FAANG despite the relevant skill set.
- woooooo 4y agoFAANG engineers are still labor, they're just well paid labor. We don't have an AMA or Bar association gatekeeping entry, even.
- dcolkitt 4y agoUnless you have an insanely optimistic viewpoint on socialism, it's very unlikely that every laborer will gain if capitalism ends. Even Lenin recognized the need to cap the wages of the highest paid skilled laborers.[1] [1]https://www.marxist.com/wage-differentials-under-lenin-and-the-bureaucracy.htm https://www.marxist.com/wage-differentials-under-lenin-and-t...
- vezzoni 4y agofinalcial markets now target efficiency rather than growth.
- vb-8448 4y agoDoes someone know a site where I can see the total number of employers of all major tech companies in time? I'm curious to see the difference between today and pre-covid, and also look for a correlation between headcount and market capitalization.
- ergonaught 4y ago"Safety in numbers" herd strategy. "Everyone else" is doing it, so they can "get away with it" now without as much "backlash" as they might otherwise experience. You will also sometimes see people referring to "bets that didn't pan out", but the more accurate term for the situation of having TENS OF THOUSANDS OF PEOPLE as "bets that didn't pan out" is gross mismanagement and active negligence. Every one of these CEOs should be out as a result.
- yucky 4y agoThis sort of buries the lede though. WHY they're laying off thousands isn't as important as HOW they're able to do that and still function. The reason tech companies are able to layoff all of these people is because they were so overly bloated and had too much deadweight. When you can layoff tens of thousands of people and not miss a beat, maybe those people weren't adding much value to the company to begin with..?
- ergonaught 4y agoNo doubt, but I think that only reinforces "gross mismanagement and active negligence", and again, the CEOs should be out as a result, for cause and therefore without their "my family and I are even more permanently wealthy" severance packages.
- yucky 4y agoYeah in theory, but the Board's let it happen so they really have themselves to blame. The Board's answer to the shareholders (again, in theory) and yet the composition of musical Board chairs never seems to be affected. So we just keep peeling away layers of the onion until we get to the abuses of proxy voting by large fund managers (e.g. Larry Fink of Blackrock), who unfortunately seem to be accountable to nobody.
- lazulicurio 4y agoIrrational investor expectations in a self-reinforcing feedback loop with economic policy decisions driven by core underlying beliefs that speculation can't destroy productive growth (i.e. if you create a bubble that pops, you'll still be net-positive compared to before the bubble) and that speculation is the best way to create growth in a population-constrained market.
- epicureanideal 4y agoAre the workers here on temporary worker visas like H1B the first to go? Or are companies taking extra steps to retain them and layoff people without immigration challenges?
- spamizbad 4y agoBecause they're publicly traded companies and the largest shareholders feel technology companies: 1) Are capable of "doing more with less" 2) Have too much headcount 2) Overpay engineers by 2-3x These views are not unique to Wallstreet shareholders; they are shared by a growing number of tech VCs and "thought leaders" (most notable a16z). The next phase will likely be longer hours for less pay. The halcyon days are over.
- jollyllama 4y ago10 years ago, they had access to cheap credit, offices full of people working hard 8 hours or more, solid product portfolios, no visible limits on growth, and foreign competition was weak. Fast forward to today. Credit is drying up. Devs feel entitled to WFH, and shorter work days (via WFH) and managers are nervous. Their products have regressed, they are actually worse than 10 years ago. Foreign firms like TikTok are now serious competitors. Perhaps most disturbing to the C-Suite, once they strip away all of the covid #'s, they can tell growth is or will be declining. It's not just about being revenue positive, it's about the derivative. In this situation it's standard procedure to reign in costs and send a message both to investors and the organization that they want the org to become leaner and meaner. They're not just copying each other, all of these companies are in the same position and this is how execs are trained to act in this situation.
- bsg75 4y ago> Devs feel entitled to WFH, and shorter work days (via WFH) and managers are nervous. _Shorter_ work days? If anything mine are longer, even considering time I no longer spend commuting. Any Dev "entitled" to shorter work days seems unlikely to have a long tenure. Source: Am manager, who codes 50% or more of my time. Nobody I work with feels "entitled" to work less.
- jollyllama 4y agoA lot of people have posted here about how when the WFH they don't do a full eight hours, and because of that they say they would never not want the option to WFH. Ok, I'm not explicitly against that, but they should be arguing for a shorter work day. This then gets lumped together with people who feel entitled to WFH for other reasons.
- Dave3of5 4y agoBecause they can. The signal is out that growth is slowing so they chop people. The culture in the Western world especially in USA is that "layoffs" are necessary. USA is one of the only countries in the world with "At Will" employment. In most other countries these level of layoffs would sink a company easily. USA is a rather ruthless work environment where workers rights are basically non existent.
- bottlepalm 4y agoBecause they all need an excuse to get rid of the bottom 10% every once in awhile. It’s not so obvious that’s the reason when they do it all at once. They all have more than enough cash on hand to keep people on through any downturn. Don’t blame them. If it were my company I’d do the same thing. In reality they could cut a lot more and be fine. Elon/Twitter is the extreme example.
- bryanlarsen 4y agoIf you do this unilaterally your best employees will rightly interpret the layoff as a sign the good times are over and will jump ship. However, if you do this at the same time as everybody else then your best employees will be less likely to jump ship.
- bmitc 4y agoThis is all really pathetic because these companies are laying off, likely thousands of, H-1B workers who will have a tough time finding work willing to sponsor in the 60 day deadline. Likely many will be forced to return to their home country. Trump's policies during COVID had the same effect, and many foreign workers returned to their home country either by choice or because of visa bans. All of this seems overly shortsighted for the U.S. to throw away top foreign talent.
- therealbilly 4y agoMy own theory is that the era of Big Tech firms like Google, etc., is passing or at least evolving. Companies are gaining confidence that they have answers for their needs and don't necessarily need input from those firms. So for the mundane line-of-business segment, companies want to try their own hand. I personally think there will still be a need for moderate sized Systems Houses that can deliver bespoke solutions weaving together state of the art software and hardware. In terms of jobs, I think they will be dispersed and not hoarded by the big tech firms going forward. All of this is just an opinion.
- mlhpdx 4y agoFirst, “companies” don’t decide to layoff staff - people do (for now). So think about the people involved if you’re legitimately interested in how/why it happens. Imagine for a moment you are the CEO and someone who may ultimately decide your pay or tenure asks “The future looks uncertain, what do you think?”. You’re very likely to think “I have no idea. I’ll ask the folks working for me.” and you do. You may get a mix of answers, a minority will be thoughtful but the majority will reflect the natural human tendency for self preservation, thinking along the lines of “Since the question was asked, it means I need to confirm the unstated assumption”, and be the one safe thing to say “We should cut spending”. It’s just people being people.
- college_physics 4y agoJust check stock market history (eg Nasdaq) [0] (select the entire length). Even though tech experienced a long exponential market value rise after the dot com crash (2000) in the last few years (2019+) there was a super-exponential event (bubble) of even faster rise. This was even reinforced in the pandemic. Instead of worrying about all the fragilities exposed in society, the streched supply chains etc, this dramatic event was even turned into a tech positive (remote working etc). The tech sector was the only official speculative game in town (unofficially we also had crypto bubble) and management could get away with everything. What happened since is not so much a recession but the invasion of Ukraine and the further disruption of global trade, inflation, simmering geopolitical tensions, acceptance of climate risk etc. Basically the virtual reality of tech got discounted in markets and people focus now on formerly unfashionable bricks and mortars. So nothing personal or technically relevant, just stock prices, executive remuneration and incentives. [0] https://www.marketwatch.com/investing/index/comp?mod=market-data-center https://www.marketwatch.com/investing/index/comp?mod=market-...
- acdha 4y agoBeyond looking good to Wall Street, I’ve been wondering how much the boosts in compensation/ benefits and all of the reflexive “back to the office!” pushes factor into this. It would not be out of character for senior executives to be thinking of their workers as too demanding or even disobedient and the economic slowdown is a great excuse to send a message to everyone reminding them who’s in charge.
- phendrenad2 4y agoThey overhired. I've heard on the grapevine that FAANG companies were lowering their standards to keep up with the high pace of hiring demanded by the higher-ups. It seems like they were all stuck in an arms race and now they're all overcorrecting.
- anthlax 4y agoWhere the hell are all these “bloat jobs”? Perhaps I’m too optimistic about other people, but I couldn’t name a single person that wasn’t pulling their weight. Perhaps people that were operating more slowly than others, but no one who was outright costing more than they provided. At Google, for reference