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This is incredibly dumb. > The downsized companies, however, were outperformed consistently by the nondownsized ones during the initial two years following the

This is incredibly dumb. > The downsized companies, however, were outperformed consistently by the nondownsized ones during the initial two years following the downsizing. Can you think of any confounding factors in this analysis? How do you control for important factors like, say: whether the board is in enough financial trouble to downsize?

brookst 4y ago
What? Next you’re going to find fault in my analysis that proves CPR kills people, as evidenced by the number of people who die after receiving CPR compared to those who just have a normal day.
- ejb999 4y ago
  good analogy (not being sarcastic)
- cuteboy19 4y ago
  You have to prove that CPR works. The burden of proof is not on anyone to prove that CPR does not work. In that sense the idea that the difference becomes insignificant after just 3 years is quite damning
  - recursive 4y ago
    Damning to which side of the argument? Sounds like evidence that the layoffs worked to me.
    - cuteboy19 4y ago
      If an action makes no difference then it makes no sense to actively do it.
      - mlyle 4y ago
        Assuming the companies that layoff are in equivalent situation to those that didn't. If the companies that lay people off are much worse off than the average comparison company, and they look the same as comparison companies after 3 years... then it sure makes sense to do it.
      - recursive 4y ago
        Companies do layoffs when things are bad. "makes no difference" != "ended up in the same place"
        whitemary 4y ago
        >Companies do layoffs when things are bad. Recent history has shown companies also do layoffs when things aren't bad.
    - twelve40 4y ago
      yeah it's like doing CPR on a healthy person (profitable company). of course it works! but is it necessary?
tomnipotent 4y ago
Don't forget the next bit, "by the third year, these differences became statistically nonsignificant". So the layoffs... worked?
- lapcat 4y ago
  > So the layoffs... worked? How does that follow? The conclusion would be that both the companies and workers suffered unnecessarily for 2 years, with no long-term benefit afterward to the layoffs. In other words, you should just ride out the downtimes instead of panicking.
  - dtdimond 4y ago
    Group 1: companies in a good enough financial situation to not need layoffs Group 2: companies in a dire financial situation requiring layoffs After 3 years, what group would you expect to perform better financially? And if we told you it was a tie, you might ask: what did group 2 to improve their situation? Layoffs? Ok, sounds like they worked.
    - lapcat 4y ago
      > Group 1: companies in a good enough financial situation to not need layoffs Group 2: companies in a dire financial situation requiring layoffs None of the big tech companies are in a "dire" financial situation. Indeed, some of them have just announced modest revenue increases this week. Yet they still conducted big layoffs. Did they "need" to do it? (Note in contrast that Apple announced a significant revenue decrease yet didn't panic and do layoffs.)
      - geph2021 4y ago
        Did they "need" to do it? Yes, that's the question. GP's point is that the financial situation of the companies is a confounding factor, and unfortunately the analysis does not address this. The conclusion, "Layoffs don't work", does not seem to be supported by the data/analysis that was presented.
      - 4y ago
Joeri 4y ago
Has anyone here read the full paper and checked whether they controlled for this?
- s1artibartfast 4y ago
  Per the article, they just took the fortune 1,000 companies and look at the ones that laid off during the 2008 crash versus the ones that didn't.
klyrs 4y ago
> How do you control for important factors like, say: whether the board is in enough financial trouble to downsize? I'd love to see this controlled for shareholder dividends and stock buybacks. A big trend we're seeing in this round of layoffs is companies doing a lot of service for their shareholders, some posting record profits, and sacking fractions of their workforce. It doesn't tell a story of sacrifices made due to financial trouble, it looks like nothing but ruthless profiteering and class warfare.
ricardobeat 4y ago
You’re assuming downsizing is a consequence of financial trouble. It has not been the case for almost every layoff that happened recently.
- zeroonetwothree 4y ago
  How do you reckon that? All the big tech companies had huge income declines.
  - fithisux 4y ago
    This is what they say! But is this supported by data?
  - SturgeonsLaw 4y ago
    Oh no, poor Alphabet, they only made $23 billion in profit Q4 2022. The wolves are really at their door.
anothernewdude 4y ago
Yes. They won't have data for companies that failed. So the downsized group should be doing even worse than the data suggests.
kqr 4y ago
I read the referenced (apparently peer reviewed) study hoping that it controlled for this obvious problem, but no. (I don't count that they measured "in a period characterised by growth" because individual organisational performance is rather noisy.) Maybe I'm the dumb one here, but when I read their results I draw the complete opposite conclusion: layoffs work but they are not a quick fix; it takes some time for the positive effects to kick in. This is somewhat counter-intuitive to me so I suspect there are other confounders (overhiring, measuring financial performance in a complicated way, etc.) but I haven't had time to run the analysis for myself yet. Maybe the data is too sparse to support a more sophisticated model. If someone else would like to give it a shot, it looks like these people have compiled the data in a convenient format, for at least the past two years: https://fueled.com/blog/2022-fortune-1000-companies-spreadsheet-download/ https://fueled.com/blog/2022-fortune-1000-companies-spreadsh...
langsoul-com 4y ago
In context of the article, the big tech companies are widely profitable and no way in any financial trouble. Hence no point downsizing.
jjav 4y ago
> Can you think of any confounding factors in this analysis? How do you control for important factors like, say: whether the board is in enough financial trouble to downsize? You're correct, obviously, on the general correlation aspect of companies having financial trouble and having to do layoffs. The thing with many of these tech layoffs though, is these are in some cases companies with no trouble whatsoever. Companies with so many billions in the bank that they could continue to pay all salaries to everyone for a century without breaking a sweat. So they have zero need to reduce expenses.

brookst 4y ago

What? Next you’re going to find fault in my analysis that proves CPR kills people, as evidenced by the number of people who die after receiving CPR compared to those who just have a normal day.

ejb999 4y ago
good analogy (not being sarcastic)
cuteboy19 4y ago
You have to prove that CPR works. The burden of proof is not on anyone to prove that CPR does not work. In that sense the idea that the difference becomes insignificant after just 3 years is quite damning
- recursive 4y ago
  Damning to which side of the argument? Sounds like evidence that the layoffs worked to me.
  - cuteboy19 4y ago
    If an action makes no difference then it makes no sense to actively do it.
    - mlyle 4y ago
      Assuming the companies that layoff are in equivalent situation to those that didn't. If the companies that lay people off are much worse off than the average comparison company, and they look the same as comparison companies after 3 years... then it sure makes sense to do it.
    - recursive 4y ago
      Companies do layoffs when things are bad. "makes no difference" != "ended up in the same place"
      - whitemary 4y ago
        >Companies do layoffs when things are bad. Recent history has shown companies also do layoffs when things aren't bad.
  - twelve40 4y ago
    yeah it's like doing CPR on a healthy person (profitable company). of course it works! but is it necessary?

tomnipotent 4y ago

Don't forget the next bit, "by the third year, these differences became statistically nonsignificant". So the layoffs... worked?

lapcat 4y ago
> So the layoffs... worked? How does that follow? The conclusion would be that both the companies and workers suffered unnecessarily for 2 years, with no long-term benefit afterward to the layoffs. In other words, you should just ride out the downtimes instead of panicking.
- dtdimond 4y ago
  Group 1: companies in a good enough financial situation to not need layoffs Group 2: companies in a dire financial situation requiring layoffs After 3 years, what group would you expect to perform better financially? And if we told you it was a tie, you might ask: what did group 2 to improve their situation? Layoffs? Ok, sounds like they worked.
  - lapcat 4y ago
    > Group 1: companies in a good enough financial situation to not need layoffs Group 2: companies in a dire financial situation requiring layoffs None of the big tech companies are in a "dire" financial situation. Indeed, some of them have just announced modest revenue increases this week. Yet they still conducted big layoffs. Did they "need" to do it? (Note in contrast that Apple announced a significant revenue decrease yet didn't panic and do layoffs.)
    - geph2021 4y ago
      Did they "need" to do it? Yes, that's the question. GP's point is that the financial situation of the companies is a confounding factor, and unfortunately the analysis does not address this. The conclusion, "Layoffs don't work", does not seem to be supported by the data/analysis that was presented.
    - 4y ago

Joeri 4y ago

Has anyone here read the full paper and checked whether they controlled for this?

s1artibartfast 4y ago
Per the article, they just took the fortune 1,000 companies and look at the ones that laid off during the 2008 crash versus the ones that didn't.

klyrs 4y ago

> How do you control for important factors like, say: whether the board is in enough financial trouble to downsize? I'd love to see this controlled for shareholder dividends and stock buybacks. A big trend we're seeing in this round of layoffs is companies doing a lot of service for their shareholders, some posting record profits, and sacking fractions of their workforce. It doesn't tell a story of sacrifices made due to financial trouble, it looks like nothing but ruthless profiteering and class warfare.

ricardobeat 4y ago

You’re assuming downsizing is a consequence of financial trouble. It has not been the case for almost every layoff that happened recently.

zeroonetwothree 4y ago
How do you reckon that? All the big tech companies had huge income declines.
- fithisux 4y ago
  This is what they say! But is this supported by data?
- SturgeonsLaw 4y ago
  Oh no, poor Alphabet, they only made $23 billion in profit Q4 2022. The wolves are really at their door.

anothernewdude 4y ago

Yes. They won't have data for companies that failed. So the downsized group should be doing even worse than the data suggests.

kqr 4y ago

I read the referenced (apparently peer reviewed) study hoping that it controlled for this obvious problem, but no. (I don't count that they measured "in a period characterised by growth" because individual organisational performance is rather noisy.) Maybe I'm the dumb one here, but when I read their results I draw the complete opposite conclusion: layoffs work but they are not a quick fix; it takes some time for the positive effects to kick in. This is somewhat counter-intuitive to me so I suspect there are other confounders (overhiring, measuring financial performance in a complicated way, etc.) but I haven't had time to run the analysis for myself yet. Maybe the data is too sparse to support a more sophisticated model. If someone else would like to give it a shot, it looks like these people have compiled the data in a convenient format, for at least the past two years: https://fueled.com/blog/2022-fortune-1000-companies-spreadsheet-download/ https://fueled.com/blog/2022-fortune-1000-companies-spreadsh...

langsoul-com 4y ago

In context of the article, the big tech companies are widely profitable and no way in any financial trouble. Hence no point downsizing.

jjav 4y ago

> Can you think of any confounding factors in this analysis? How do you control for important factors like, say: whether the board is in enough financial trouble to downsize? You're correct, obviously, on the general correlation aspect of companies having financial trouble and having to do layoffs. The thing with many of these tech layoffs though, is these are in some cases companies with no trouble whatsoever. Companies with so many billions in the bank that they could continue to pay all salaries to everyone for a century without breaking a sweat. So they have zero need to reduce expenses.