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I get needing to keep a company lean and that businesses operate to make money... But most of these recent layoffs really make me feel uneasy. Spotify is a litt

I get needing to keep a company lean and that businesses operate to make money... But most of these recent layoffs really make me feel uneasy. Spotify is a little different because AFAIK they are still operating at a negative net income, but still let's take a look at this. They're going to let go 600 people.. that's maybe an annual 90 million in savings (150k salary). The company's revenue is about 9 billion with -39 million in net income. So while this move might take them into the positive net income, it's still only going to save them what? 0.1% of their revenue. I realize it's much more complex than this, but I have been looking at it this way for nearly every recent headline/company and the savings are never really that significant. I'm not saying that people who don't contribute or people who are bad employees should be kept around forever because the company is healthy. I'm just observing the financial "cost" of these laid off employees compared against the companies revenue/net income. Having been at a company that's doing layoffs and surviving multiple rounds of layoffs myself, the impact (in my opinion) on the remaining employees is quite significant. I have seen people constantly frustrated with losing team members, managers leaving once a few of their employees have left, good employees finding other employment, etc. I'm not sure what I would do in these companies positions, but it seems strange to just cut your workforce when the trend has been going up financially for your company. These types of layoffs just create negative, especially with the current state of the world. Are any of the board members taking a salary cut? Are any of the C level's taking a cut? end rant, I need to get back to work so this doesn't happen to me.

overgard 4y ago
Considering how generous the severance is (a good thing), I wonder if it will even save them much money this year (granted, there will probably be some resignations from people that disagree with the direction).
- mason55 4y ago
  > I wonder if it will even save them much money this year They also get to account for it differently. The severance payments can be written off as a one-time charge, so from that perspective they get to take the GAAP benefits this year. Even though the cash flow is ~the same between letting people work for a year and then laying them off with no severance, doing it this way makes the business immediately look better.
- phamilton4 4y ago
  Edit: I'm wrong looks like they can write it off.
eloisant 4y ago
The saving isn't that obvious because they might need to hire contracters (sometimes even the same worker) to make up for the lost workforce. Also severance packages are expensive! In addition to all the costs associated with a big layoff plan like this one.
- marginalia_nu 4y ago
  Probably more about sending a message to anxious tech-shareholders than anything else. 2023 is not the right year for a tech investment to appear to hemorrhage money.
  - nibbleshifter 4y ago
    > Probably more about sending a message to anxious tech-shareholders than anything else. That's basically the whole deal. You have to be seen to be cutting costs, to assuage the board and shareholders that you are performing your duty. Layoffs are an incredibly easy way to do that.
michaelbuckbee 4y ago
My presumption is that it's both signaling to wall st to keep the stock price up (and for the C levels to keep their jobs) and also that companies did over hire in all sorts of weird ways in the last couple of years.
shmatt 4y ago
It's very naive to think these huge orgs don't have dead weight which is much bigger than 6%. If you start figuring some of your moonshot ideas aren't hitting their OKR's, you have a few options: * Just let them keep doing whatever without delivering what they claim they can * Create new moonshots for them just because * Move them to other products, but that doesn't mean they'll create more value as an org with (now) double the people So what ends up happening is re-orgs which actually mean shutting down some failed ideas, moving the high performers to other products, moving low performers out of those products, then firing people who were left without a team. Plus you need to take into the equation an assumption that because of how things look right now, natural attrition will be almost 0 in the next year or 2. If you're used to 5% of people leaving on their own per year, assume its closer to 0% for 2023 and 2024 This is way beyond the cynical claim that this keeps the stock up for another 2 months before it goes down again. There are teams delivering nothing. There are teams delivering 90% of the companies income. You can't just decide not to fire anyone, move 100% of the employees to the 90% income team, and think that income will grow just because more people work there now Now, do these companies do it right? really finding the good people and keeping them, and removing the weaker people, thats up to debate
- eigen-vector 4y ago
  Presumably they already have performance processes that eliminate "dead weight". Be assured that layoffs never really mean that usual performance bases firings are paused. It's pretty much always happening on top of existing performance processes.
  - LanceH 4y ago
    Layoffs like this mean you can blame external forces like the economy rather than saying, "our projects failed". Some of these layoffs may have been coming anyway, but not the corporate statement about them is different.
- twawaaay 4y ago
  > It's very naive to think these huge orgs don't have dead weight which is much bigger than 6%. Pretty much my experience that when a company keeps growing, at some point most corporate employees will not actually be contributing anything. Paradoxically, constraining teams with resources (but allowing them to make their own decisions) makes teams more efficient than if they had resources. Necessity is the mother of invention -- when people are forced to deal with the problem they will find a solution. Corporations are worst possible places to be efficient -- not only you have the resources (and most people get lazy when they don't have to be inventive) but you are also typically not even allowed to be inventive as companies typically work towards centralising decisionmaking rather than allowing teams to steer themselves. Same goes for hiring. I worked with teams which hired anybody because the manager was forced to hire quickly or loose budget. Or managers hired people just to enlarge their estates because headcount was how they decided who is more important. So I completely understand why companies are laying off people. The only question is whether they are too optimistic about being able to identify who to lay off, exactly. In my experience it is pretty difficult even for managers to understand who are best contributors in their teams. Get removed 2-3 levels from a line manager (2-3 levels is where the decisions would typically be made) and you can pretty much dream about understanding who to lay off, individually.
karl11 4y ago
Revenue is irrelevant when looking at savings, you have to look at net revenue or gross margin. Majority of Spotify’s revenue goes to record labels. If you are making -40mm / yr then a $90mm swing is a huge deal. Also, can’t just look at salary - employees cost a lot more than their salary. 10% employer tax, health care, other ancillary benefits, IT equipment / space, etc. A $150k salary probably costs the company $250k all in.
- MuffinFlavored 4y ago
  What does laying off 600 people do to their net revenue/gross margins?
- oxfordmale 4y ago
  The cost picture is as follows: money saved on staff reduction - money spent on layoff packages - (temporary reduction in productivity, because of lower staff morale) Research shows there is no long-term benefit of layoffs other than the short-term gain in cash flow. Layoffs are only beneficial if they are needed for survival of the company
  - thehappypm 4y ago
    Lower productivity is highly questionable. I’ve really only seen layoffs boost productivity. Suddenly there is less overhead and fewer cooks-in-the-kitchen. Morale hits are real, but tend to fade if people feel confident that they’ve survived another day.
    - oxfordmale 4y ago
      Research shows layoffs result in a lowering of productivity: https://www.boardoptions.com/Learning%20from%20the%20past%20-%20Downsizing%20lessons%20for%20managers.pdf https://www.boardoptions.com/Learning%20from%20the%20past%20... https://pavestep.com/post/the-effects-of-downsizing-on-remaining-employees/ https://pavestep.com/post/the-effects-of-downsizing-on-remai... https://knowledge.wharton.upenn.edu/article/how-layoffs-cost-companies/ https://knowledge.wharton.upenn.edu/article/how-layoffs-cost... https://garfinkleexecutivecoaching.com/articles/career-advice/downsizing-hurts-productivity https://garfinkleexecutivecoaching.com/articles/career-advic... https://www.forbes.com/sites/radhikaphilip/2020/07/23/the-paradox-of-layoffs-engagement-drops-when-you-need-it-most/?sh=7c451d0e3fd2 https://www.forbes.com/sites/radhikaphilip/2020/07/23/the-pa...
nytesky 4y ago
The layoffs aren’t about actually saving the cost of those specific employees. Instead, the threat of being laid off is being used as a stick to bring the remaining employees in line — productivity has been lower the last few years, and leadership has no real way to measure on an individual level or how to improve it, so putting the pressure on employees is a tried and true tactics. Further, they can make lower TC offers to future employees, and give lower raises, pointing to the “need” to do so as demonstrated by earlier layoffs. So you lay off 6% but freeze the wages of the remaining 94% (who are grateful to have a job rather than carping about wages not tracking inflation) — big savings.
- disruptiveink 4y ago
  Pretty sure layoffs decrease productivity of the remaining employees, unless you're a H-1B visa worker, no one "works harder" after layoffs. Morale is low, resentment over "now I have to do X as well" grows and productivity gets hit.
  - nsxwolf 4y ago
    I don't stay after a big round of layoffs for the same reason I'd rather buy stocks when they look like they're going up, not down. The company is signaling that it is not doing well - why shouldn't I leave for a company that is doing well? The only way I'll stay is if you want me to be part of a real plan to turn things around. And my involvement in that has to be rewarded - not just at the successful end of that process, but immediately.
    - myth_drannon 4y ago
      The thing is there is no important signal about a specific company here, everyone is doing layoffs, the same as in previous years that everyone was in a hiring spree ignoring the actual company fundamentals. You can't just leave a company which is laying off people because everyone around you is also doing layoffs!
      - deleted 4y ago
achiang 4y ago
You need to use the fully loaded cost of an employee when estimating opex savings, which includes health care costs, retirement funding, etc. Rule of thumb is that fully loaded cost for US employees is approximately 2x yearly salary (although people who've actually run a company can correct my potentially stale or incorrect understanding).
- CydeWeys 4y ago
  2X is my understanding as well. Whatever you think an employee costs based on TC, double it to get the rough cost to the employer. Some other big employer costs related to employees you forgot include employment taxes, hardware/software expenses and licenses, and office space and related perks. Also I suspect that $150k as the mean TC of those being let go is low. Spotify might be saving up to $500k all-in per employee let go.
  - WastingMyTime89 4y ago
    > Also I suspect that $150k as the mean TC of those being let go is low. Probably not low. It's an enormous salary for a developer outside of the Valley and Spotify has plenty of employees which are not in the USA.
    - phamilton4 4y ago
      TBH I think the average Sr. Developer is ~130k in the US. Of course this varies so much depending on the role and company.
      - CydeWeys 4y ago
        Spotify pays significantly above the average, though. Not as high as the top-tier FANGs, but still high.
      - bumby 4y ago
        The average software developer (not sure that it's pertinent to constrain it to "senior" devs) is $120k in the US. In San Francisco, the median is $161k [1] [1] https://www.onetonline.org/link/summary/15-1252.00 https://www.onetonline.org/link/summary/15-1252.00
mattbrewsbytes 4y ago
I think what we don't see talked about is the avoidance of continuing to take on debt when interest rates are much higher than in recent past. Companies can issue bonds to raise money instead of loans but both are based on interest rates. Companies pulling back on growth investments will help their bottom line sooner. For tech companies their greatest cost is employees which also is where they invest for more growth in new products/services. Cash flow is king when interest rates are high.
- hef19898 4y ago
  Cash flow is always king, as positive cash flow is what keeps a company default alive like forever, or rather as long as cash flow is positive. And yes, I think high interest rates play role. Either because credit lines become more expensive or because investor and VC money is harder to come by.
iovrthoughtthis 4y ago
this is partially about wage depression
baby-yoda 4y ago
Broadly speaking, my opinion is alot of businesses are getting the feeling that the next 6-12 months are going to be bad. Layoffs, decreased consumer spending, rates continuing to rise, banks tightening with lending, ad spending dries up. A vicious cycle is starting to accelerate. Some companies are just going to follow the trend, sure, but I just think there is probably alot of internal data suggesting a slowdown and its too much to ignore. Spotify in particular, their revenue is Ads and subscriptions. Consumers can very easily cut a streaming subscription if money starts to dry up, same with companies purchasing ad space. They do have lots of cash on hand so I don't think they are anywhere near risk of going bankrupt. I'm curious to see their earnings release next week and any changes in cash flow. Another thing to consider is the opportunity cost of spending 90 million, there might be other internal priorities in the short term like acquisitions or paying down debt that supersede any potential "brain drain". Not to downplay the layoffs of course but the dynamic of competing priorities and larger headwinds is just difficult to navigate.
guelo 4y ago
Hey those 90 million will help pay for Joe Rogan's 200 million.
- nebula8804 4y ago
  I thought the Joe Rogan deal was 100 million. Many people have been stating he was seriously underpaid but I think he was one of the first major deals so maybe there wasn't any strong metric to gauge what he is worth. Furthermore, they play multiple ads during his podcast regardless of if you are a paying customer or not. This one really grinds my gears. If they haven't made back their money yet then I'd be shocked.
  - guelo 4y ago
    "two people familiar with the details of the transaction" told NYT that it was at least $200 million for three and a half years. https://www.nytimes.com/2022/02/17/arts/music/spotify-joe-rogan-misinformation.html https://www.nytimes.com/2022/02/17/arts/music/spotify-joe-ro...
    - nebula8804 4y ago
      oh I guess I was mistaken. I constantly heard 100 million but it was just a guess since the number was never disclosed officially.
apercu 4y ago
If the end game is suppress salaries and increase control (by forcing people back to offices), maybe the morale hit is worth it over a couple years.
schnitzelstoat 4y ago
Aren't most of the employees based in Europe? In that case it's more like $100k or less.
- estomagordo 4y ago
  Even in Sweden, where engineers earn way less than in the US, it's going to be over $100k. On any salary you would have to add 30% payroll tax, and then maybe 15% or so in pension contributions.
bastardoperator 4y ago
I don't think it is that complex. Who benefits from these mass layoffs? Everyone at the top benefits, and everyone at the bottom suffers. You are spot on when it comes to impact of layoffs. If you want to destroy productivity, firing people is a sure proof way of doing that. To your point, I can't take any executive seriously if they're not self reflecting on their own failure. Mass layoffs should equal a new board in my opinion.
- chitowneats 4y ago
  > If you want to destroy productivity, firing people is a sure proof way of doing that. Not as sure proof as paying people to do nothing. Or worse, paying people who are actively working against the interests of the company, intentionally or otherwise.
  - deleted 4y ago
    [deleted]
  - bastardoperator 4y ago
    If I pay someone to do nothing, who is at fault? The person who shows up ready to work everyday or the person who made a bad hiring decision and doesn't have the work for that person? I'm not arguing against layoffs, I'm arguing that the people making the hiring mistakes are not accountable. If I as a CFO give the green light to increase the company's workforce by 10% and two years later make a full reverse, that CFO/Board should be let go too or since they're all about taking "personal responsibility" should step down. Most companies employ a board of narcissists that only care about themselves and their wallet and they get paid the most so I'm not sure your analogy is hitting with me.
    - alldayeveryday 4y ago
      > Most companies employ a board of narcissists that only care about themselves and their wallet My read is a bit different, in that the board optimizes to the stock price above all, which yes they benefit from but that just means their personal interests are in alignment with the interests of stock holders. I do not blame the leaders so much as I blame the model. Leaders who do not optimize the stock price are quickly expelled. When the stock market was flush with covid stimulus cash, and even before that whilst the market was hot, the name of the game was showing growth. Companies were incentivized to show growth even at the cost of burning cash. Companies took on massive debt and in many cases, either did stock buybacks and/or hired rapidly in an effort to scale their organization for growth. When the market fundamentals changed, and money started swinging back towards safer bets (cash flow positive companies), suddenly the game had changed and leaders needed to react accordingly. I guess in summary, hate the game not the player.
isitmadeofglass 4y ago
[dead]
deleted 4y ago
[deleted]
ren_engineer 4y ago
if you expect a multi year recession it makes sense, especially when you aren't profitable and interest rates are rising
deleted 4y ago
[deleted]
voisin 4y ago
I think companies are doing it to tilt the balance of power back toward companies so they can force people back into the office. WFH is going to shrink back to a minority of the workforce.
leokennis 4y ago
While I can’t speak to the numbers, in general I think companies that so casually abandon employees by immediately announcing layoffs when times are tough cannot expect any loyalty or flex from the people that remain in times the economy picks up again. Maybe they’re fine with that, and it’s all good. But if you sack people on a whim don’t be surprised if they walk out on you on a whim if some better opportunity comes along.
srcreigh 4y ago
The savings are 1%, not 0.1%.
xnx 4y ago
There's another side too. If those fired were overpaid underperformers, there can be an improvement in morale for those who weren't fired.
berniedurfee 4y ago
There’s also a micro-environment at play. Those 600 former employees likely worked across a bunch of different orgs for different product and management lines. At that level, it probably represents some groups losing 25, 50 or even 100% of their team members. So that 600 might not be consequential at the business level, but was probably devastating at the team level.

overgard 4y ago

Considering how generous the severance is (a good thing), I wonder if it will even save them much money this year (granted, there will probably be some resignations from people that disagree with the direction).

mason55 4y ago
> I wonder if it will even save them much money this year They also get to account for it differently. The severance payments can be written off as a one-time charge, so from that perspective they get to take the GAAP benefits this year. Even though the cash flow is ~the same between letting people work for a year and then laying them off with no severance, doing it this way makes the business immediately look better.
phamilton4 4y ago
Edit: I'm wrong looks like they can write it off.

eloisant 4y ago

The saving isn't that obvious because they might need to hire contracters (sometimes even the same worker) to make up for the lost workforce. Also severance packages are expensive! In addition to all the costs associated with a big layoff plan like this one.

marginalia_nu 4y ago
Probably more about sending a message to anxious tech-shareholders than anything else. 2023 is not the right year for a tech investment to appear to hemorrhage money.
- nibbleshifter 4y ago
  > Probably more about sending a message to anxious tech-shareholders than anything else. That's basically the whole deal. You have to be seen to be cutting costs, to assuage the board and shareholders that you are performing your duty. Layoffs are an incredibly easy way to do that.

michaelbuckbee 4y ago

My presumption is that it's both signaling to wall st to keep the stock price up (and for the C levels to keep their jobs) and also that companies did over hire in all sorts of weird ways in the last couple of years.

shmatt 4y ago

It's very naive to think these huge orgs don't have dead weight which is much bigger than 6%. If you start figuring some of your moonshot ideas aren't hitting their OKR's, you have a few options: * Just let them keep doing whatever without delivering what they claim they can * Create new moonshots for them just because * Move them to other products, but that doesn't mean they'll create more value as an org with (now) double the people So what ends up happening is re-orgs which actually mean shutting down some failed ideas, moving the high performers to other products, moving low performers out of those products, then firing people who were left without a team. Plus you need to take into the equation an assumption that because of how things look right now, natural attrition will be almost 0 in the next year or 2. If you're used to 5% of people leaving on their own per year, assume its closer to 0% for 2023 and 2024 This is way beyond the cynical claim that this keeps the stock up for another 2 months before it goes down again. There are teams delivering nothing. There are teams delivering 90% of the companies income. You can't just decide not to fire anyone, move 100% of the employees to the 90% income team, and think that income will grow just because more people work there now Now, do these companies do it right? really finding the good people and keeping them, and removing the weaker people, thats up to debate

eigen-vector 4y ago
Presumably they already have performance processes that eliminate "dead weight". Be assured that layoffs never really mean that usual performance bases firings are paused. It's pretty much always happening on top of existing performance processes.
- LanceH 4y ago
  Layoffs like this mean you can blame external forces like the economy rather than saying, "our projects failed". Some of these layoffs may have been coming anyway, but not the corporate statement about them is different.
twawaaay 4y ago
> It's very naive to think these huge orgs don't have dead weight which is much bigger than 6%. Pretty much my experience that when a company keeps growing, at some point most corporate employees will not actually be contributing anything. Paradoxically, constraining teams with resources (but allowing them to make their own decisions) makes teams more efficient than if they had resources. Necessity is the mother of invention -- when people are forced to deal with the problem they will find a solution. Corporations are worst possible places to be efficient -- not only you have the resources (and most people get lazy when they don't have to be inventive) but you are also typically not even allowed to be inventive as companies typically work towards centralising decisionmaking rather than allowing teams to steer themselves. Same goes for hiring. I worked with teams which hired anybody because the manager was forced to hire quickly or loose budget. Or managers hired people just to enlarge their estates because headcount was how they decided who is more important. So I completely understand why companies are laying off people. The only question is whether they are too optimistic about being able to identify who to lay off, exactly. In my experience it is pretty difficult even for managers to understand who are best contributors in their teams. Get removed 2-3 levels from a line manager (2-3 levels is where the decisions would typically be made) and you can pretty much dream about understanding who to lay off, individually.

karl11 4y ago

Revenue is irrelevant when looking at savings, you have to look at net revenue or gross margin. Majority of Spotify’s revenue goes to record labels. If you are making -40mm / yr then a $90mm swing is a huge deal. Also, can’t just look at salary - employees cost a lot more than their salary. 10% employer tax, health care, other ancillary benefits, IT equipment / space, etc. A $150k salary probably costs the company $250k all in.

MuffinFlavored 4y ago
What does laying off 600 people do to their net revenue/gross margins?
oxfordmale 4y ago
The cost picture is as follows: money saved on staff reduction - money spent on layoff packages - (temporary reduction in productivity, because of lower staff morale) Research shows there is no long-term benefit of layoffs other than the short-term gain in cash flow. Layoffs are only beneficial if they are needed for survival of the company
- thehappypm 4y ago
  Lower productivity is highly questionable. I’ve really only seen layoffs boost productivity. Suddenly there is less overhead and fewer cooks-in-the-kitchen. Morale hits are real, but tend to fade if people feel confident that they’ve survived another day.
  - oxfordmale 4y ago
    Research shows layoffs result in a lowering of productivity: https://www.boardoptions.com/Learning%20from%20the%20past%20-%20Downsizing%20lessons%20for%20managers.pdf https://www.boardoptions.com/Learning%20from%20the%20past%20... https://pavestep.com/post/the-effects-of-downsizing-on-remaining-employees/ https://pavestep.com/post/the-effects-of-downsizing-on-remai... https://knowledge.wharton.upenn.edu/article/how-layoffs-cost-companies/ https://knowledge.wharton.upenn.edu/article/how-layoffs-cost... https://garfinkleexecutivecoaching.com/articles/career-advice/downsizing-hurts-productivity https://garfinkleexecutivecoaching.com/articles/career-advic... https://www.forbes.com/sites/radhikaphilip/2020/07/23/the-paradox-of-layoffs-engagement-drops-when-you-need-it-most/?sh=7c451d0e3fd2 https://www.forbes.com/sites/radhikaphilip/2020/07/23/the-pa...

nytesky 4y ago

The layoffs aren’t about actually saving the cost of those specific employees. Instead, the threat of being laid off is being used as a stick to bring the remaining employees in line — productivity has been lower the last few years, and leadership has no real way to measure on an individual level or how to improve it, so putting the pressure on employees is a tried and true tactics. Further, they can make lower TC offers to future employees, and give lower raises, pointing to the “need” to do so as demonstrated by earlier layoffs. So you lay off 6% but freeze the wages of the remaining 94% (who are grateful to have a job rather than carping about wages not tracking inflation) — big savings.

disruptiveink 4y ago
Pretty sure layoffs decrease productivity of the remaining employees, unless you're a H-1B visa worker, no one "works harder" after layoffs. Morale is low, resentment over "now I have to do X as well" grows and productivity gets hit.
- nsxwolf 4y ago
  I don't stay after a big round of layoffs for the same reason I'd rather buy stocks when they look like they're going up, not down. The company is signaling that it is not doing well - why shouldn't I leave for a company that is doing well? The only way I'll stay is if you want me to be part of a real plan to turn things around. And my involvement in that has to be rewarded - not just at the successful end of that process, but immediately.
  - myth_drannon 4y ago
    The thing is there is no important signal about a specific company here, everyone is doing layoffs, the same as in previous years that everyone was in a hiring spree ignoring the actual company fundamentals. You can't just leave a company which is laying off people because everyone around you is also doing layoffs!
    - deleted 4y ago

achiang 4y ago

You need to use the fully loaded cost of an employee when estimating opex savings, which includes health care costs, retirement funding, etc. Rule of thumb is that fully loaded cost for US employees is approximately 2x yearly salary (although people who've actually run a company can correct my potentially stale or incorrect understanding).

CydeWeys 4y ago
2X is my understanding as well. Whatever you think an employee costs based on TC, double it to get the rough cost to the employer. Some other big employer costs related to employees you forgot include employment taxes, hardware/software expenses and licenses, and office space and related perks. Also I suspect that $150k as the mean TC of those being let go is low. Spotify might be saving up to $500k all-in per employee let go.
- WastingMyTime89 4y ago
  > Also I suspect that $150k as the mean TC of those being let go is low. Probably not low. It's an enormous salary for a developer outside of the Valley and Spotify has plenty of employees which are not in the USA.
  - phamilton4 4y ago
    TBH I think the average Sr. Developer is ~130k in the US. Of course this varies so much depending on the role and company.
    - CydeWeys 4y ago
      Spotify pays significantly above the average, though. Not as high as the top-tier FANGs, but still high.
    - bumby 4y ago
      The average software developer (not sure that it's pertinent to constrain it to "senior" devs) is $120k in the US. In San Francisco, the median is $161k [1] [1] https://www.onetonline.org/link/summary/15-1252.00 https://www.onetonline.org/link/summary/15-1252.00

mattbrewsbytes 4y ago

I think what we don't see talked about is the avoidance of continuing to take on debt when interest rates are much higher than in recent past. Companies can issue bonds to raise money instead of loans but both are based on interest rates. Companies pulling back on growth investments will help their bottom line sooner. For tech companies their greatest cost is employees which also is where they invest for more growth in new products/services. Cash flow is king when interest rates are high.

hef19898 4y ago
Cash flow is always king, as positive cash flow is what keeps a company default alive like forever, or rather as long as cash flow is positive. And yes, I think high interest rates play role. Either because credit lines become more expensive or because investor and VC money is harder to come by.

iovrthoughtthis 4y ago

this is partially about wage depression

baby-yoda 4y ago

Broadly speaking, my opinion is alot of businesses are getting the feeling that the next 6-12 months are going to be bad. Layoffs, decreased consumer spending, rates continuing to rise, banks tightening with lending, ad spending dries up. A vicious cycle is starting to accelerate. Some companies are just going to follow the trend, sure, but I just think there is probably alot of internal data suggesting a slowdown and its too much to ignore. Spotify in particular, their revenue is Ads and subscriptions. Consumers can very easily cut a streaming subscription if money starts to dry up, same with companies purchasing ad space. They do have lots of cash on hand so I don't think they are anywhere near risk of going bankrupt. I'm curious to see their earnings release next week and any changes in cash flow. Another thing to consider is the opportunity cost of spending 90 million, there might be other internal priorities in the short term like acquisitions or paying down debt that supersede any potential "brain drain". Not to downplay the layoffs of course but the dynamic of competing priorities and larger headwinds is just difficult to navigate.

guelo 4y ago

Hey those 90 million will help pay for Joe Rogan's 200 million.

nebula8804 4y ago
I thought the Joe Rogan deal was 100 million. Many people have been stating he was seriously underpaid but I think he was one of the first major deals so maybe there wasn't any strong metric to gauge what he is worth. Furthermore, they play multiple ads during his podcast regardless of if you are a paying customer or not. This one really grinds my gears. If they haven't made back their money yet then I'd be shocked.
- guelo 4y ago
  "two people familiar with the details of the transaction" told NYT that it was at least $200 million for three and a half years. https://www.nytimes.com/2022/02/17/arts/music/spotify-joe-rogan-misinformation.html https://www.nytimes.com/2022/02/17/arts/music/spotify-joe-ro...
  - nebula8804 4y ago
    oh I guess I was mistaken. I constantly heard 100 million but it was just a guess since the number was never disclosed officially.

apercu 4y ago

If the end game is suppress salaries and increase control (by forcing people back to offices), maybe the morale hit is worth it over a couple years.

schnitzelstoat 4y ago

Aren't most of the employees based in Europe? In that case it's more like $100k or less.

estomagordo 4y ago
Even in Sweden, where engineers earn way less than in the US, it's going to be over $100k. On any salary you would have to add 30% payroll tax, and then maybe 15% or so in pension contributions.

bastardoperator 4y ago

I don't think it is that complex. Who benefits from these mass layoffs? Everyone at the top benefits, and everyone at the bottom suffers. You are spot on when it comes to impact of layoffs. If you want to destroy productivity, firing people is a sure proof way of doing that. To your point, I can't take any executive seriously if they're not self reflecting on their own failure. Mass layoffs should equal a new board in my opinion.

chitowneats 4y ago
> If you want to destroy productivity, firing people is a sure proof way of doing that. Not as sure proof as paying people to do nothing. Or worse, paying people who are actively working against the interests of the company, intentionally or otherwise.
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- bastardoperator 4y ago
  If I pay someone to do nothing, who is at fault? The person who shows up ready to work everyday or the person who made a bad hiring decision and doesn't have the work for that person? I'm not arguing against layoffs, I'm arguing that the people making the hiring mistakes are not accountable. If I as a CFO give the green light to increase the company's workforce by 10% and two years later make a full reverse, that CFO/Board should be let go too or since they're all about taking "personal responsibility" should step down. Most companies employ a board of narcissists that only care about themselves and their wallet and they get paid the most so I'm not sure your analogy is hitting with me.
  - alldayeveryday 4y ago
    > Most companies employ a board of narcissists that only care about themselves and their wallet My read is a bit different, in that the board optimizes to the stock price above all, which yes they benefit from but that just means their personal interests are in alignment with the interests of stock holders. I do not blame the leaders so much as I blame the model. Leaders who do not optimize the stock price are quickly expelled. When the stock market was flush with covid stimulus cash, and even before that whilst the market was hot, the name of the game was showing growth. Companies were incentivized to show growth even at the cost of burning cash. Companies took on massive debt and in many cases, either did stock buybacks and/or hired rapidly in an effort to scale their organization for growth. When the market fundamentals changed, and money started swinging back towards safer bets (cash flow positive companies), suddenly the game had changed and leaders needed to react accordingly. I guess in summary, hate the game not the player.

isitmadeofglass 4y ago

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ren_engineer 4y ago

if you expect a multi year recession it makes sense, especially when you aren't profitable and interest rates are rising

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voisin 4y ago

I think companies are doing it to tilt the balance of power back toward companies so they can force people back into the office. WFH is going to shrink back to a minority of the workforce.

leokennis 4y ago

While I can’t speak to the numbers, in general I think companies that so casually abandon employees by immediately announcing layoffs when times are tough cannot expect any loyalty or flex from the people that remain in times the economy picks up again. Maybe they’re fine with that, and it’s all good. But if you sack people on a whim don’t be surprised if they walk out on you on a whim if some better opportunity comes along.

srcreigh 4y ago

The savings are 1%, not 0.1%.

xnx 4y ago

There's another side too. If those fired were overpaid underperformers, there can be an improvement in morale for those who weren't fired.

berniedurfee 4y ago

There’s also a micro-environment at play. Those 600 former employees likely worked across a bunch of different orgs for different product and management lines. At that level, it probably represents some groups losing 25, 50 or even 100% of their team members. So that 600 might not be consequential at the business level, but was probably devastating at the team level.