18 ms·

The professor recommends across the board pay cuts as an alternative to layoffs. > One thing that Lincoln Electric, which is a famous manufacturer of arc weldi

by tarr11 4y ago

The professor recommends across the board pay cuts as an alternative to layoffs. > One thing that Lincoln Electric, which is a famous manufacturer of arc welding equipment, did well is instead of laying off 10% of their workforce, they had everybody take a 10% wage cut except for senior management, which took a larger cut. So instead of giving 100% of the pain to 10% of the people, they give 100% of the people 10% of the pain. Curious if there is research here on how this impacts the company? Seems like it would also increase stress and encourage top performers to seek new opportunities. He also recommends hiring during a recession: > He actually hired during the 2000 recession and saw it as an opportunity to gain ground on the competition and gain market share when everybody was cutting jobs and stopped innovating. I suppose this works when it works, and then fails completely when it doesn’t. In essence, this increases the risk profile on the company which seems problematic too. Would be curious if there are studies that show the outcomes of these strategies. Perhaps there are no “good” strategies- just those that favor employees or those that favor investors.

zht 4y ago
You would need more than 10 percent pay cut to offset 10 percent in personnel spend. Health insurance/benefits is a significant source of spending
- vineyardmike 4y ago
  This probably is less true in tech where the salaries are higher.
  - farmdawgnation 4y ago
    "Less true" is a bit of a bold statement here. It's still _true_, but you're right in saying that the additional percentage you would need to affect the change might be different between different industries. It's also possible to optimize costs on the benefits themselves to avoid needing to do that, at times.
onlyrealcuzzo 4y ago
It's also based on the idea that Microsoft and Google and AWS are factories - and they aren't. It's easy to get ambitious and hire a bunch of people for growth targets that aren't viable without ZIRP. It's less so when you hire people to build orders you've largely already sold... Why should you keep hiring if you already over hired?
idopmstuff 4y ago
I think the problem with this strategy is that it causes the wrong people to leave. If you're a top performer, you're going to feel like a 10% pay cut is very unfair, and you're going to be able to get another job elsewhere fairly easily, even in this environment. If you're not performing particularly well, it probably doesn't feel as unreasonable, and even if you don't like it, it's tough to leave. When done correctly, layoffs give 100% of the pain to 10% (or whatever) of the people, but you get to select the worst-performing people. Spreading the pain equally is much more liable to cost you your best-performing people. I do think the one important thing to note is that the reference you quoted is to a manufacturer, where you've probably got more consistent performance across a given type of employee as compared to software developers.
- b112 4y ago
  If you're a top performer, you're going to feel like a 10% pay cut is very unfair This is also different too, in that, there was almost deflation at thst time. Now, there has been great inflation! So a 10% cut hurt less then, where as now, all workers should be pushing for a 10%, almost yearly pay increase. Even if inflation is less than 10%, you have a year of extra experience. Right now, I'd say most workers are 25% behind on 3 years of raises. So in a sense, everyone already has had a 10% pay cut this year. edit: You know, just a thought, all of these companies were caught colluding to suppress wages in the past. Whether tracking, or any form of behaviour punished by the courts, it never stops. So if you are looking at inflation, at high increases coming at 25% over three years due to that inflation, why not all lay off people together, even if profits don't require it? Why not put fear into people during contract renegotiation, during hiring? Why not, over return to office orders?
- oxfordmale 4y ago
  As a top performer, you are more likely to leave after layoffs, especially if layoffs feel indiscriminate. From LinkedIn, some people were let go as their projects failed, not necessarily because of their own performance.
- notfromhere 4y ago
  If you are a top performer, you're gonna leave one way or another. Because you have options.
paxys 4y ago
Hiring during a recession is a proven strategy. Google is what it is today because it doubled down on hiring during the 2008 recession when the rest of the industry was in the midst of layoffs and because of it was able to monopolize on top tech talent for the next decade.
fulltimeloser 4y ago
"I suppose this works when it works, and then fails completely when it doesn’t." "60% of the time, it works every time"
mc32 4y ago
Even Stanford with its multi-deca Billions in endowment cuts technical staff. They may not call them layoffs but they do cut budgets and headcount. I don’t believe they reduce pay in lieu of headcount. They’re hypocrites! As others pony out, you risk having your best leave, unless they harbor true communist spirit and take one for the team.
- twelve40 4y ago
  ok I really can't speak for the first part, but the more I think about it, the more preferable than the layoffs to me it seems... * not sure why is this communist spirit, the difference in levels and salaries still remains, but presumably you're not as mad because the cut is by design not targeted at you * discerning who is a performer and who is not cannot be done instantly, especially if the managers themselves are getting cut (and kept out of these conversations), so even the layoffs end up being random and blind, like the cut. Just read all those linkedin posts from people with 10+ years and recent promos getting booted currently * if you are really concerned about top performers, double down on bonuses, say next time you're going to get 2x the usual bonus, which will give the company some time to measure performance at a normal pace
  - mc32 4y ago
    In a harmonious and fair world where moochers don’t exist and people are reasonable yes I think ideally an even shave seems fair (communists kind of do this) however in practice I’m not aware of unions pushing back on furloughs or layoffs and preferring all members getting an equal cut back on wages. There are probably exceptions but by and large even unions don’t make this choice for their members.
chrismcb 4y ago
Cutting 10% of the staff isn't the same as cutting 10% of all wages. I would also think you run the risk of losing some of your best performers
ejb999 4y ago
>>The professor recommends across the board pay cuts as an alternative to layoffs. Terrible idea imo, there is almost no company that can't cut 5% of their staff without negatively impacting the company as a whole if done more or less right, you cut the people who are lower performers - or average performers who, thru no fault of their own, are not currently assigned to something that matters anymore to the company. Cutting the pay of the best/better performers, and/or the pay of people that are actively contributing to high value projects, so the less qualified or less needed people can stay employed seems like a huge disincentive to keeping your top performers. If my manager came to me with that proposal I would give my notice on the spot.
- scarface74 4y ago
  Well seeing that everyone working at a public tech company has seen far more than a 5% pay cut because of declining stock prices and their unvested RSUs, that’s clearly a Counterexample
deleted 4y ago
[deleted]
danaris 4y ago
Strategies that favor employees are more humane, more ethical, and more likely to pay off in the long run. All the investors have in this is money—and the investors who have enough money in it to actually influence decisions have so absurdly much anyway that the amount they would stand to lose based on this strategy or that one is very unlikely to materially affect their lifestyle. The employees have their whole livelihoods invested in the company, so any decision that is made without regard for their interests and needs is necessarily a heartless and inhumane one. We should be making decisions based on how they affect humans, not based on how they affect money.
uxp100 4y ago
NVIDIA did across the board cuts instead of layoffs in 2009 IIRC.
e40 4y ago
I think the first stage of cutting should be management taking a cut. That's what I've always done (3 times in the last 20+ years). Then all employees. Then layoffs.
- petre 4y ago
  Fair enough. Bad company performance is usually management's fault to adapt to market dynamic, lack of vision on the CEO's part. Yes, one could blame it on external factors such as a recession as well, but even Apple's CEO took a voluntary pay cut.
JKCalhoun 4y ago
I believe simply a pay freeze would be equivalent to a 3% cut. That way people don't feel you are "taking away" salary they may have come to expect. That in addition to a hiring freeze might get the company close to the mark in a year's time. An annual pay freeze then can be re-evaluated again next year.
- deleted 4y ago
  [deleted]
- smugma 4y ago
  Agreed. Except this year it’s probably more like a 7% cut (inflation is still pretty high).
98codes 4y ago
> except for senior management, which took a larger cut. There's your trouble -- even if a company would go the "pay cut" route now, there is no chance in a million where the leadership at the top would ever agree to losing a single dime. If anything, it would be performative, with other payment options making up the difference.
- smugma 4y ago
  Hyperbole. From a recent WaPo article: Apple chief executive Tim Cook has voluntarily taken a 40 percent pay cut for 2023, an unusual move that comes “in response to shareholder feedback,” according to the company's annual proxy statement. The decision puts Cook's target compensation at $49 million, down from $84 million in 2022.
golemiprague 4y ago
[dead]
willmadden 4y ago
Bluntly, taking business advice from an academic who has never worked in the private sector is suicide. If you attempt to socialize losses and cut pay, your best employees leave for other opportunities while your worst performers stick around. That’s a recipe for disaster in a competitive market. When done surgically, laying off non-productive employees can improve the morale of the top performing employees, because it shows that management is aware and appreciates them.
- petre 4y ago
  You know that's bs, right? They took the cheap money, hired a bunch of people to do 'cool' stuff like VR and feed junk adtech directly to your brain, speech assistants to buy stuff that you don't need and self driving which failed to deliver on inflated promisses and when those things failed they're axing those projects along with the people who worked on them.
  - willmadden 4y ago
    What is BS? I don't understand the context of your reply. I agree that large tech companies invest in stupid/frivolous projects during bull markets and over-hire/acquire. They also tend to neglect their core products, focusing on extracting money from those with an established network effect instead of improving the services.
    - petre 4y ago
      > What is BS? HR measuring employee productivity and surgically laying off non-productive empmployes, boosting the morale of top performers. /s
      - willmadden 4y ago
        HR? It's not HR. It's competition. Unless your company is a monopoly or protected in some way by the government through regulation, if you do not do that, you go out of business. I can tell you aren't a startup founder.
MuffinFlavored 4y ago
> they had everybody take a 10% wage cut except for senior management, which took a larger cut. The problem (to me) is... senior management is almost universally involved in making these types of decisions, basically in a vacuum with no outside input (aka, no democracy/voting) how often do a collective group of senior managers decide to give themselves paycuts? almost never?... everybody thinks they work hard, overcame a ton of adversity, and deserve "theirs" reminds me of the goodfellas scene where billy batts is drunk at the bar talking to jimmy CONWAY: It's changed, now. You've been away for six years, everything is different. BATTS: I did my time, Jimmy. I did my fuckin' time, I come home, and I want what I wanna get. I got fuckin' mouths to feed. You understand? CONWAY: (acquiescing) You're gonna get it. You're gonna get it.
indymike 4y ago
> The professor recommends across the board pay cuts as an alternative to layoffs. This is the fourth bout of "layoffitis" I've lived through in the tech industry, and I think this professor is really nailing it. > Seems like it would also increase stress and encourage top performers to seek new opportunities. You don't have to cut pay for key performers. You can offer retention incentives to key people. You can cut bad leaders and promote people (and give them a raise). Every time I've had to preside over layoffs (three times, all working for a big corporation), I got to ID my key people and offer them raises to stay on after the layoffs. The high performers that were laid off? They weren't the people that were the right ones to get the company through the hard times and the recovery. Often they were people that were great at their core job, but did not take on anything extra - and when everyone will have to take on extra, hearing "not in my job description" is, well, a big problem for the remaining team. > hired during the 2000 recession Ok, I'll let you in on a secret. When you see companies do layoffs, they are cutting costs, and big salaries are easy targets for cuts. The secret is that layoffs aren't permanent headcount cuts. Almost every time, the highest cost, non-essential people are cut, and then shortly after, people are promoted and the hiring starts anew, at a lower starting wage than before (I suspect in this economy, there's enough wage pressure that this will not work). I remember when I was in my 20s and 30s hearing older employees getting laid off who had 30 years of cost-of-living raises and made 2.5x what I did for the same job lament how it was ageism. Now that I'm 50, I see this as a sad truth: if you don't make yourself worth 2.5x someone 20 years younger, you aren't going to get paid 2.5x more forever. > I suppose this works when it works, and then fails completely when it doesn’t. You have to have an empathetic, "yes" to the question, "will customers continue to buy from US (over the competition) during a recession." If there's no way to grow, no way to win market share, then you really do have to batten down the hatches. > this increases the risk profile on the company This is especially true if you have to raise money to hire during a recession.
- I_AM_A_SMURF 4y ago
  But the thing is... in tech usually it doesn't work that way. A 15yr tenured L6 is most likely making less than a newly hired L6. Why would you fire the one with experience? I've seen so many of these coming form MS and Google's layoffs.
indymike 4y ago
> Perhaps there are no “good” strategies- just those that favor employees or those that favor investors. I don't think this is the case. Cutting costs is hard in tech companies because the biggest cost is usually people. If cuts are intelligent and needed, it's good for the remaining employees, customers and investors. If cuts are for the sake of "everyone is doing it" then, it's extra.
adrianmonk 4y ago
> Seems like it would also increase stress and encourage top performers to seek new opportunities. There's a third route: cut hours. Everybody gets every other Friday off, and with that 10% reduction in hours, they get a 10% reduction in pay. It doesn't solve everything, but reduces the feeling of unfairness because your per-hour rate stays the same. (Provided you cancel less-important projects, etc. so that people actually have less work, not just nominally.) I think this approach is more common in cyclical industries like manufacturing. If you're probably going to need those people again, you want to keep them around. But if the goal is to reduce the company size, you could try combining it with attrition.
- sitkack 4y ago
  This. Profit per employee is still high. Revenue per employee hired might be lower after the hiring spree, but the total revenue is still higher. Pay that back w/o culling the herd. The other option is forming a coop like Igalia or moving to a democratically run organization. I say this not not to stoke a needless discussion, but corporations are fascist cabals. Employees are tools that are on the out-group and nothing more.
smugma 4y ago
In a high inflation environment, not giving raises is essentially a pay cut but doesn’t have the same negative psychological effect. And RSU’s are a huge portion of comp in tech companies, it’s easy to cut RSU’s. Setting aside the very top performers, the middle 80% are not going to have an easy time finding a job in this environment. And may be less likely to leave when so many other companies are cutting but they happen to be at one of the few that didn’t cut but simply scaled back bonuses.
TomSwirly 4y ago
> encourage top performers to seek new opportunities. Top performer here. I would welcome a corporation that treated my coworkers properly. Don't project your antisocial attitudes onto the rest of us.
latexr 4y ago
> Curious if there is research here on how this impacts the company? I remember reading something like this in Simon Sinek’s “Leaders Eat Last”[1]. Might’ve been anecdotal examples instead of research, though. I don’t necessarily recommend you read the whole book, but it may be a starting point for references. My answer to the next quote is partially informed by memories of the book. > Seems like it would also increase stress and encourage top performers to seek new opportunities. In the case you cited, everyone got a proportional cut but senior management’s was higher. That signals to workers the company is prioritising them over short-term profits, increasing trust and making workers more invested in getting through the slump with the company as opposed to running away. If they’re successful and wages go back up, a powerful precedent of trust will have been set. Which might not even be necessary, as a company which goes this route probably has given other signals over the years. Maybe that doesn’t matter to top performers who only care about money, but fortunately I don’t think those are as prevalent as HN may make us think. [1]: https://www.goodreads.com/book/show/16144853-leaders-eat-last https://www.goodreads.com/book/show/16144853-leaders-eat-las...
zeruch 4y ago
I was at a firm that did a similar strategy once (during the 2008 hellscape) and it worked (20% across the board except for one non-salaried (hourly) team that was so junior cutting by 20 was just sadism). It kept things afloat, and it definitely favored the workers (myself included at the time) than anyone else.
nswest23 4y ago
> this increases the risk profile on the company not sure why you think this is categorically true.

by tarr11 4y ago

zht 4y ago

You would need more than 10 percent pay cut to offset 10 percent in personnel spend. Health insurance/benefits is a significant source of spending

vineyardmike 4y ago
This probably is less true in tech where the salaries are higher.
- farmdawgnation 4y ago
  "Less true" is a bit of a bold statement here. It's still _true_, but you're right in saying that the additional percentage you would need to affect the change might be different between different industries. It's also possible to optimize costs on the benefits themselves to avoid needing to do that, at times.

onlyrealcuzzo 4y ago

It's also based on the idea that Microsoft and Google and AWS are factories - and they aren't. It's easy to get ambitious and hire a bunch of people for growth targets that aren't viable without ZIRP. It's less so when you hire people to build orders you've largely already sold... Why should you keep hiring if you already over hired?

idopmstuff 4y ago

I think the problem with this strategy is that it causes the wrong people to leave. If you're a top performer, you're going to feel like a 10% pay cut is very unfair, and you're going to be able to get another job elsewhere fairly easily, even in this environment. If you're not performing particularly well, it probably doesn't feel as unreasonable, and even if you don't like it, it's tough to leave. When done correctly, layoffs give 100% of the pain to 10% (or whatever) of the people, but you get to select the worst-performing people. Spreading the pain equally is much more liable to cost you your best-performing people. I do think the one important thing to note is that the reference you quoted is to a manufacturer, where you've probably got more consistent performance across a given type of employee as compared to software developers.

b112 4y ago
If you're a top performer, you're going to feel like a 10% pay cut is very unfair This is also different too, in that, there was almost deflation at thst time. Now, there has been great inflation! So a 10% cut hurt less then, where as now, all workers should be pushing for a 10%, almost yearly pay increase. Even if inflation is less than 10%, you have a year of extra experience. Right now, I'd say most workers are 25% behind on 3 years of raises. So in a sense, everyone already has had a 10% pay cut this year. edit: You know, just a thought, all of these companies were caught colluding to suppress wages in the past. Whether tracking, or any form of behaviour punished by the courts, it never stops. So if you are looking at inflation, at high increases coming at 25% over three years due to that inflation, why not all lay off people together, even if profits don't require it? Why not put fear into people during contract renegotiation, during hiring? Why not, over return to office orders?
oxfordmale 4y ago
As a top performer, you are more likely to leave after layoffs, especially if layoffs feel indiscriminate. From LinkedIn, some people were let go as their projects failed, not necessarily because of their own performance.
notfromhere 4y ago
If you are a top performer, you're gonna leave one way or another. Because you have options.

paxys 4y ago

Hiring during a recession is a proven strategy. Google is what it is today because it doubled down on hiring during the 2008 recession when the rest of the industry was in the midst of layoffs and because of it was able to monopolize on top tech talent for the next decade.

fulltimeloser 4y ago

"I suppose this works when it works, and then fails completely when it doesn’t." "60% of the time, it works every time"

mc32 4y ago

Even Stanford with its multi-deca Billions in endowment cuts technical staff. They may not call them layoffs but they do cut budgets and headcount. I don’t believe they reduce pay in lieu of headcount. They’re hypocrites! As others pony out, you risk having your best leave, unless they harbor true communist spirit and take one for the team.

twelve40 4y ago
ok I really can't speak for the first part, but the more I think about it, the more preferable than the layoffs to me it seems... * not sure why is this communist spirit, the difference in levels and salaries still remains, but presumably you're not as mad because the cut is by design not targeted at you * discerning who is a performer and who is not cannot be done instantly, especially if the managers themselves are getting cut (and kept out of these conversations), so even the layoffs end up being random and blind, like the cut. Just read all those linkedin posts from people with 10+ years and recent promos getting booted currently * if you are really concerned about top performers, double down on bonuses, say next time you're going to get 2x the usual bonus, which will give the company some time to measure performance at a normal pace
- mc32 4y ago
  In a harmonious and fair world where moochers don’t exist and people are reasonable yes I think ideally an even shave seems fair (communists kind of do this) however in practice I’m not aware of unions pushing back on furloughs or layoffs and preferring all members getting an equal cut back on wages. There are probably exceptions but by and large even unions don’t make this choice for their members.

chrismcb 4y ago

Cutting 10% of the staff isn't the same as cutting 10% of all wages. I would also think you run the risk of losing some of your best performers

ejb999 4y ago

>>The professor recommends across the board pay cuts as an alternative to layoffs. Terrible idea imo, there is almost no company that can't cut 5% of their staff without negatively impacting the company as a whole if done more or less right, you cut the people who are lower performers - or average performers who, thru no fault of their own, are not currently assigned to something that matters anymore to the company. Cutting the pay of the best/better performers, and/or the pay of people that are actively contributing to high value projects, so the less qualified or less needed people can stay employed seems like a huge disincentive to keeping your top performers. If my manager came to me with that proposal I would give my notice on the spot.

scarface74 4y ago
Well seeing that everyone working at a public tech company has seen far more than a 5% pay cut because of declining stock prices and their unvested RSUs, that’s clearly a Counterexample

deleted 4y ago

[deleted]

danaris 4y ago

Strategies that favor employees are more humane, more ethical, and more likely to pay off in the long run. All the investors have in this is money—and the investors who have enough money in it to actually influence decisions have so absurdly much anyway that the amount they would stand to lose based on this strategy or that one is very unlikely to materially affect their lifestyle. The employees have their whole livelihoods invested in the company, so any decision that is made without regard for their interests and needs is necessarily a heartless and inhumane one. We should be making decisions based on how they affect humans, not based on how they affect money.

uxp100 4y ago

NVIDIA did across the board cuts instead of layoffs in 2009 IIRC.

e40 4y ago

I think the first stage of cutting should be management taking a cut. That's what I've always done (3 times in the last 20+ years). Then all employees. Then layoffs.

petre 4y ago
Fair enough. Bad company performance is usually management's fault to adapt to market dynamic, lack of vision on the CEO's part. Yes, one could blame it on external factors such as a recession as well, but even Apple's CEO took a voluntary pay cut.

JKCalhoun 4y ago

I believe simply a pay freeze would be equivalent to a 3% cut. That way people don't feel you are "taking away" salary they may have come to expect. That in addition to a hiring freeze might get the company close to the mark in a year's time. An annual pay freeze then can be re-evaluated again next year.

deleted 4y ago
[deleted]
smugma 4y ago
Agreed. Except this year it’s probably more like a 7% cut (inflation is still pretty high).

98codes 4y ago

> except for senior management, which took a larger cut. There's your trouble -- even if a company would go the "pay cut" route now, there is no chance in a million where the leadership at the top would ever agree to losing a single dime. If anything, it would be performative, with other payment options making up the difference.

smugma 4y ago
Hyperbole. From a recent WaPo article: Apple chief executive Tim Cook has voluntarily taken a 40 percent pay cut for 2023, an unusual move that comes “in response to shareholder feedback,” according to the company's annual proxy statement. The decision puts Cook's target compensation at $49 million, down from $84 million in 2022.

golemiprague 4y ago

[dead]

willmadden 4y ago

Bluntly, taking business advice from an academic who has never worked in the private sector is suicide. If you attempt to socialize losses and cut pay, your best employees leave for other opportunities while your worst performers stick around. That’s a recipe for disaster in a competitive market. When done surgically, laying off non-productive employees can improve the morale of the top performing employees, because it shows that management is aware and appreciates them.

petre 4y ago
You know that's bs, right? They took the cheap money, hired a bunch of people to do 'cool' stuff like VR and feed junk adtech directly to your brain, speech assistants to buy stuff that you don't need and self driving which failed to deliver on inflated promisses and when those things failed they're axing those projects along with the people who worked on them.
- willmadden 4y ago
  What is BS? I don't understand the context of your reply. I agree that large tech companies invest in stupid/frivolous projects during bull markets and over-hire/acquire. They also tend to neglect their core products, focusing on extracting money from those with an established network effect instead of improving the services.
  - petre 4y ago
    > What is BS? HR measuring employee productivity and surgically laying off non-productive empmployes, boosting the morale of top performers. /s
    - willmadden 4y ago
      HR? It's not HR. It's competition. Unless your company is a monopoly or protected in some way by the government through regulation, if you do not do that, you go out of business. I can tell you aren't a startup founder.

MuffinFlavored 4y ago

> they had everybody take a 10% wage cut except for senior management, which took a larger cut. The problem (to me) is... senior management is almost universally involved in making these types of decisions, basically in a vacuum with no outside input (aka, no democracy/voting) how often do a collective group of senior managers decide to give themselves paycuts? almost never?... everybody thinks they work hard, overcame a ton of adversity, and deserve "theirs" reminds me of the goodfellas scene where billy batts is drunk at the bar talking to jimmy CONWAY: It's changed, now. You've been away for six years, everything is different. BATTS: I did my time, Jimmy. I did my fuckin' time, I come home, and I want what I wanna get. I got fuckin' mouths to feed. You understand? CONWAY: (acquiescing) You're gonna get it. You're gonna get it.

indymike 4y ago

> The professor recommends across the board pay cuts as an alternative to layoffs. This is the fourth bout of "layoffitis" I've lived through in the tech industry, and I think this professor is really nailing it. > Seems like it would also increase stress and encourage top performers to seek new opportunities. You don't have to cut pay for key performers. You can offer retention incentives to key people. You can cut bad leaders and promote people (and give them a raise). Every time I've had to preside over layoffs (three times, all working for a big corporation), I got to ID my key people and offer them raises to stay on after the layoffs. The high performers that were laid off? They weren't the people that were the right ones to get the company through the hard times and the recovery. Often they were people that were great at their core job, but did not take on anything extra - and when everyone will have to take on extra, hearing "not in my job description" is, well, a big problem for the remaining team. > hired during the 2000 recession Ok, I'll let you in on a secret. When you see companies do layoffs, they are cutting costs, and big salaries are easy targets for cuts. The secret is that layoffs aren't permanent headcount cuts. Almost every time, the highest cost, non-essential people are cut, and then shortly after, people are promoted and the hiring starts anew, at a lower starting wage than before (I suspect in this economy, there's enough wage pressure that this will not work). I remember when I was in my 20s and 30s hearing older employees getting laid off who had 30 years of cost-of-living raises and made 2.5x what I did for the same job lament how it was ageism. Now that I'm 50, I see this as a sad truth: if you don't make yourself worth 2.5x someone 20 years younger, you aren't going to get paid 2.5x more forever. > I suppose this works when it works, and then fails completely when it doesn’t. You have to have an empathetic, "yes" to the question, "will customers continue to buy from US (over the competition) during a recession." If there's no way to grow, no way to win market share, then you really do have to batten down the hatches. > this increases the risk profile on the company This is especially true if you have to raise money to hire during a recession.

I_AM_A_SMURF 4y ago
But the thing is... in tech usually it doesn't work that way. A 15yr tenured L6 is most likely making less than a newly hired L6. Why would you fire the one with experience? I've seen so many of these coming form MS and Google's layoffs.

indymike 4y ago

> Perhaps there are no “good” strategies- just those that favor employees or those that favor investors. I don't think this is the case. Cutting costs is hard in tech companies because the biggest cost is usually people. If cuts are intelligent and needed, it's good for the remaining employees, customers and investors. If cuts are for the sake of "everyone is doing it" then, it's extra.

adrianmonk 4y ago

> Seems like it would also increase stress and encourage top performers to seek new opportunities. There's a third route: cut hours. Everybody gets every other Friday off, and with that 10% reduction in hours, they get a 10% reduction in pay. It doesn't solve everything, but reduces the feeling of unfairness because your per-hour rate stays the same. (Provided you cancel less-important projects, etc. so that people actually have less work, not just nominally.) I think this approach is more common in cyclical industries like manufacturing. If you're probably going to need those people again, you want to keep them around. But if the goal is to reduce the company size, you could try combining it with attrition.

sitkack 4y ago
This. Profit per employee is still high. Revenue per employee hired might be lower after the hiring spree, but the total revenue is still higher. Pay that back w/o culling the herd. The other option is forming a coop like Igalia or moving to a democratically run organization. I say this not not to stoke a needless discussion, but corporations are fascist cabals. Employees are tools that are on the out-group and nothing more.

smugma 4y ago

In a high inflation environment, not giving raises is essentially a pay cut but doesn’t have the same negative psychological effect. And RSU’s are a huge portion of comp in tech companies, it’s easy to cut RSU’s. Setting aside the very top performers, the middle 80% are not going to have an easy time finding a job in this environment. And may be less likely to leave when so many other companies are cutting but they happen to be at one of the few that didn’t cut but simply scaled back bonuses.

TomSwirly 4y ago

> encourage top performers to seek new opportunities. Top performer here. I would welcome a corporation that treated my coworkers properly. Don't project your antisocial attitudes onto the rest of us.

latexr 4y ago

> Curious if there is research here on how this impacts the company? I remember reading something like this in Simon Sinek’s “Leaders Eat Last”[1]. Might’ve been anecdotal examples instead of research, though. I don’t necessarily recommend you read the whole book, but it may be a starting point for references. My answer to the next quote is partially informed by memories of the book. > Seems like it would also increase stress and encourage top performers to seek new opportunities. In the case you cited, everyone got a proportional cut but senior management’s was higher. That signals to workers the company is prioritising them over short-term profits, increasing trust and making workers more invested in getting through the slump with the company as opposed to running away. If they’re successful and wages go back up, a powerful precedent of trust will have been set. Which might not even be necessary, as a company which goes this route probably has given other signals over the years. Maybe that doesn’t matter to top performers who only care about money, but fortunately I don’t think those are as prevalent as HN may make us think. [1]: https://www.goodreads.com/book/show/16144853-leaders-eat-last https://www.goodreads.com/book/show/16144853-leaders-eat-las...

zeruch 4y ago

I was at a firm that did a similar strategy once (during the 2008 hellscape) and it worked (20% across the board except for one non-salaried (hourly) team that was so junior cutting by 20 was just sadism). It kept things afloat, and it definitely favored the workers (myself included at the time) than anyone else.

nswest23 4y ago

> this increases the risk profile on the company not sure why you think this is categorically true.