6 ms·

Turns out all the people asking: "Why does company X have so many employees?" weren't completely wrong.

x86x87 4y ago
Even a broken clock is right twice per day. The question that I have is: why are all these big corporations doing synchronized layoffs? Is it about having more people than needed or is it pure greed and expectations that they can easily get away with it because "everyone is doing it"?
- tnzk 4y ago
  More layoffs -> more supplies in job market -> able to reduce labor cost per person on average
- cfeduke 4y ago
  It's a good time to do it; copycat layoffs (The Board: "everyone is doing layoffs, why aren't we?") and it's a way to give a short term boost to the stock price - at least for publicly traded companies - when technology earnings are mixed or poor.
- qqtt 4y ago
  I don't think it's really a mystery as to why most tech companies are doing layoffs (also import to note that other industries still have tight labor markets, like oil and gas which happens to be rapidly growing during this downturn). Tech company growth rates were high during the pandemic so they hired to fuel that growth. Now that growth rates are lower, they have to re-balance their cost structure to match their new forecasted growth. This is happening at every company currently doing layoffs. In Twilio's case, they went from almost 70% year over year growth during the pandemic to currently about 20-30% year over year growth. The same evaporating growth rates is true across the tech industry - Meta is actually seeing revenue decline year over year, Google has seen growth shrink to just 1%. Even more telling are operating margins which are evaporating very quickly as growth stalls - Google's operating margins are down 17% year over year. No one has a crystal ball, so companies hire during high growth periods to capitalize on growth, and lay off during low growth periods to re-balance their cost structure towards profit. This is true of many industries - you see the same effects play out in the boom and bust cycle of industries like O&G - which are currently hiring and not too long ago were laying off as well. People want to frame lay offs as de facto failure, but really it is just companies responding to market conditions - no different then companies hiring when growth is high.
  - deleted 4y ago
    [deleted]
- time_to_smile 4y ago
  It's because the fundamental economics of nearly the entire sector don't make sense. I predicted there would be mass layoffs in tech right like this last year, and more specifically predicted 6 months ago that we'd be seeing basically what we're seeing as far as layoffs. With rising rates investors are asking companies to show a clear path towards profitability. Most of these companies are losing more money each quarter and industry wide this has to stop. For the larger profitable companies it's likely because they realize a huge amount of their revenue is coming from these companies that don't make money. While I'll be the first to criticize companies for working to remove power from workers, what we're seeing is simply investors waking up to the economic reality that growth without profits is not sustainable.
  - moneywoes 4y ago
    Right, most SaaS are bought by other SaaS many of which are unprofitable What do you predict is the resolution to this dillema?
  - tqi 4y ago
    The most frustrating part of all of these layoffs is that it seems more or less understood that if the fed lowers rates, we'll be back to irresponsible hiring. This belief that there is a sing "right strategy" for the given economic conditions completely ignores switching costs, both for individuals (whose lives are upended) but also for companies (imo the coordination overheard of hypergrowth likely means that companies are less productive in the short term).
- strangattractor 4y ago
  Cover - layoffs make the company look bad. Laying off when you are the only company doing so makes you look even worse both to the public and investors.
hn_throwaway_99 4y ago
I don't think anyone really ever thought they were. I've posted a similar sentiment a bunch of times, but both of the following can easily be true: 1. There are companies that are run inefficiently, especially ones that grew spectacularly quickly during the pandemic due largely to FOMO concerns from execs. 2. Large companies have a huge number of responsibilities and needs for staff that are rarely grasped by the "It's just a website! I could build this in a weekend!" crowd.
MuffinFlavored 4y ago
The explanation I keep seeing is "the United States Federal Reserve raised the Federal Funds Rate from 0.25% to 4.75% in the past 6-18 months, therefore, these companies are reacting to that and having to cut back on costs" where it falls apart in my mind is (and I might be missing something) why is that having such a massive impact so quickly on these companies to the point where, the cost to service NEW debt (not existing) rises? i thought a lot of these companies had so much cash due to high tech margins that, they didn't really finance growth through cheap debt?
- lkrubner 4y ago
  The stimulus in 2020 and 2021 was historic and caused rapid economic growth, therefore companies hired in response to that growth. The rise in interest rates from 0.25% to 4.75% is meant to slow economic growth, therefore companies need to adjust to a period of slower growth. The higher interest rates work primarily through the real estate market, slowing construction, but this means less consumers, and therefore less income for companies. Keep in mind, the banks raised rates rapidly as soon as they knew the Fed was going to raise rates. The Fed took many months to get to 4.75% but the banks jumped ahead and raised rates almost instantly. In 2020 many CEOs needed to plan for hypergrowth, in 2023 many CEOs need to plan for a possible recession. The money I spend becomes income for a company, and when that company pays you a salary, and you buy something from my company, then they money you spend becomes my salary. Everything goes around in a circle. Therefore, it doesn't matter how much debt a company has, but it does matter how much debt other people have. If other people suddenly need to pay more interest on their debts, then they have less money to spend whatever it is that your company is selling (unless you work at a bank).
  - dboreham 4y ago
    > hired in response to that growth I think it's more direct than that. Rich people weren't getting any return on their money from fixed income instruments so instead they gave it to funds that invested in tech startups that then used it to hire people. Now interest rates are higher, rich people don't need to do that any more.

Even a broken clock is right twice per day. The question that I have is: why are all these big corporations doing synchronized layoffs? Is it about having more people than needed or is it pure greed and expectations that they can easily get away with it because "everyone is doing it"?

tnzk 4y ago
More layoffs -> more supplies in job market -> able to reduce labor cost per person on average
cfeduke 4y ago
It's a good time to do it; copycat layoffs (The Board: "everyone is doing layoffs, why aren't we?") and it's a way to give a short term boost to the stock price - at least for publicly traded companies - when technology earnings are mixed or poor.
qqtt 4y ago
I don't think it's really a mystery as to why most tech companies are doing layoffs (also import to note that other industries still have tight labor markets, like oil and gas which happens to be rapidly growing during this downturn). Tech company growth rates were high during the pandemic so they hired to fuel that growth. Now that growth rates are lower, they have to re-balance their cost structure to match their new forecasted growth. This is happening at every company currently doing layoffs. In Twilio's case, they went from almost 70% year over year growth during the pandemic to currently about 20-30% year over year growth. The same evaporating growth rates is true across the tech industry - Meta is actually seeing revenue decline year over year, Google has seen growth shrink to just 1%. Even more telling are operating margins which are evaporating very quickly as growth stalls - Google's operating margins are down 17% year over year. No one has a crystal ball, so companies hire during high growth periods to capitalize on growth, and lay off during low growth periods to re-balance their cost structure towards profit. This is true of many industries - you see the same effects play out in the boom and bust cycle of industries like O&G - which are currently hiring and not too long ago were laying off as well. People want to frame lay offs as de facto failure, but really it is just companies responding to market conditions - no different then companies hiring when growth is high.
- deleted 4y ago
  [deleted]
time_to_smile 4y ago
It's because the fundamental economics of nearly the entire sector don't make sense. I predicted there would be mass layoffs in tech right like this last year, and more specifically predicted 6 months ago that we'd be seeing basically what we're seeing as far as layoffs. With rising rates investors are asking companies to show a clear path towards profitability. Most of these companies are losing more money each quarter and industry wide this has to stop. For the larger profitable companies it's likely because they realize a huge amount of their revenue is coming from these companies that don't make money. While I'll be the first to criticize companies for working to remove power from workers, what we're seeing is simply investors waking up to the economic reality that growth without profits is not sustainable.
- moneywoes 4y ago
  Right, most SaaS are bought by other SaaS many of which are unprofitable What do you predict is the resolution to this dillema?
- tqi 4y ago
  The most frustrating part of all of these layoffs is that it seems more or less understood that if the fed lowers rates, we'll be back to irresponsible hiring. This belief that there is a sing "right strategy" for the given economic conditions completely ignores switching costs, both for individuals (whose lives are upended) but also for companies (imo the coordination overheard of hypergrowth likely means that companies are less productive in the short term).
strangattractor 4y ago
Cover - layoffs make the company look bad. Laying off when you are the only company doing so makes you look even worse both to the public and investors.

hn_throwaway_99 4y ago

I don't think anyone really ever thought they were. I've posted a similar sentiment a bunch of times, but both of the following can easily be true: 1. There are companies that are run inefficiently, especially ones that grew spectacularly quickly during the pandemic due largely to FOMO concerns from execs. 2. Large companies have a huge number of responsibilities and needs for staff that are rarely grasped by the "It's just a website! I could build this in a weekend!" crowd.

MuffinFlavored 4y ago

The explanation I keep seeing is "the United States Federal Reserve raised the Federal Funds Rate from 0.25% to 4.75% in the past 6-18 months, therefore, these companies are reacting to that and having to cut back on costs" where it falls apart in my mind is (and I might be missing something) why is that having such a massive impact so quickly on these companies to the point where, the cost to service NEW debt (not existing) rises? i thought a lot of these companies had so much cash due to high tech margins that, they didn't really finance growth through cheap debt?

lkrubner 4y ago
The stimulus in 2020 and 2021 was historic and caused rapid economic growth, therefore companies hired in response to that growth. The rise in interest rates from 0.25% to 4.75% is meant to slow economic growth, therefore companies need to adjust to a period of slower growth. The higher interest rates work primarily through the real estate market, slowing construction, but this means less consumers, and therefore less income for companies. Keep in mind, the banks raised rates rapidly as soon as they knew the Fed was going to raise rates. The Fed took many months to get to 4.75% but the banks jumped ahead and raised rates almost instantly. In 2020 many CEOs needed to plan for hypergrowth, in 2023 many CEOs need to plan for a possible recession. The money I spend becomes income for a company, and when that company pays you a salary, and you buy something from my company, then they money you spend becomes my salary. Everything goes around in a circle. Therefore, it doesn't matter how much debt a company has, but it does matter how much debt other people have. If other people suddenly need to pay more interest on their debts, then they have less money to spend whatever it is that your company is selling (unless you work at a bank).
- dboreham 4y ago
  > hired in response to that growth I think it's more direct than that. Rich people weren't getting any return on their money from fixed income instruments so instead they gave it to funds that invested in tech startups that then used it to hire people. Now interest rates are higher, rich people don't need to do that any more.