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> Research has consistently shown he was right about layoffs: They’re damaging to companies... The research is probably misleading. The damage was done to comp

by roenxi 2y ago

> Research has consistently shown he was right about layoffs: They’re damaging to companies... The research is probably misleading. The damage was done to companies when the over-hired people who couldn't add enough value to justify keeping them employed. The layoffs are just when the damage is recognised. It is like borrowing a huge amount of money, using 90% of it it to buy prawns and leaving them out to rot for a few days. The damage is now done, the borrowed money is lost. It won't be recognised for a while though. There is even enough left over to pay an interest payment or two to string everything along. But the damage is done. A lot of people treat economics as though damage didn't happen unless someone acknowledges it. That isn't how it works. Not acknowledging that something is value-destructive just means more value is destroyed by the time people are forced by market forces to confront the truth.

fzeroracer 2y ago
'The research is wrong because I said so' isn't exactly a compelling argument, and certainly not a strong enough one when you've been in the modern workforce long enough to recognize how badly layoffs are conducted at just about every company. I've seen enough 10x engineers get laid off to know that the idea that companies have any idea as to who is actually productive or not is just false.
- roenxi 2y ago
  1) But I included an actual argument and, furthermore, it assumed that the research is correct. > I've seen enough 10x engineers get laid off... 2) That is sensible for the company. They have no idea how to use a 10x engineer, as can be detected by the fact that they're having layoffs. They don't know how to create value in the market and they're being forced into a position where they have to squeeze what they can out of what assets they have. It isn't economically rational for them to employ 10x engineers in that sort of environment. The global and local optimum is to let those engineers go so they can do something valuable somewhere and keep some more 1x style engineers on the cheap. If a company is having layoffs, that is the invisible hand of the market writing on the wall "THIS MANAGEMENT TEAM DOESN"T KNOW HOW TO MAKE MONEY AT THE MOMENT, STOP GIVING THEM IMPORTANT RESOURCES". That includes 10x engineers.
  - Avicebron 2y ago
    Unfortunately as I've seen countless times, it's also writing on the wall to the management team "TIME TO MOVE ON CAUSE DAMAGE TO ANOTHER COMPANY", I don't know why we don't expect management's head on the chopping block. If a captain orders a course into an iceberg, idk why we can't just hang the captain and course correct.
    - Muromec 2y ago
      Because nobody orders hanging themselves.
    - Eextra953 2y ago
      That's how I feel about it too, the times I've been around layoffs management and the executives all talk about a difficult economic environment and making the organization leaner by firing a bunch of IC's. Never once have I seen a C level say hey we steered the company in the wrong direction its time for new management or hey our CFO failed to communicate the economic environment and caused us to overspend so we're going to look for a new one. I know it's ridiculous to expect them to blame themselves but the fact that we just accept this lack of accountability from executives/management in the corporate world is insane to me.
      - ghaff 2y ago
        Execs go on to "pursue new interests" or "spend more time with family" all the time. They may get pretty good packages to do so but it absolutely happens.
    - SJC_Hacker 2y ago
      Because the captain owns the ship. Or is the best buddy of the person that owns the ship, and can blame subordinates in closed-door conversations.
  - fzeroracer 2y ago
    > 2) That is sensible for the company. They have no idea how to use a 10x engineer, as can be detected by the fact that they're having layoffs. They don't know how to create value in the market and they're being forced into a position where they have to squeeze what they can out of what assets they have. Okay, now explain why every company is encountering these issues where they're frequently laying off people and are unable to create value. The frequency of layoffs is diametrically opposed to your thesis because otherwise companies would behave in a way to reduce layoffs. Such as hiring fewer employees and encouraging longer term retention. > If a company is having layoffs, that is the invisible hand of the market writing on the wall "THIS MANAGEMENT TEAM DOESN"T KNOW HOW TO MAKE MONEY AT THE MOMENT, STOP GIVING THEM IMPORTANT RESOURCES". That includes 10x engineers. This is basically the Just World fallacy but applied to the free market. If something occurs then it's justified as a perfectly rational action of the invisible free hand of the market. In reality layoffs are rarely conducted by the people most equipped to do them, but via a mandate from heaven that you must cut your team for the sake of Number even if you're one of the most efficient teams in the company.
trescenzi 2y ago
This isn’t how all layoffs work though. Some, yes they are due to over hiring and a failure of management to plan. They are likely necessary for survival of the firm and generally last course of action. Although even those come with a cost to current and departing employees which harms the business. But the ones being discussed in the article are the consistent ones. The ones you do while you’re ahead to make your balance sheet look better. Those come with a temporary balance sheet boost and all of the negative effects of any layoffs.
- roenxi 2y ago
  > But the ones being discussed in the article are the consistent ones. The ones you do while you’re ahead to make your balance sheet look better. That has to be matched with a strategy of intentional overhiring though, and the damage is being done there. That is the insight that should be drawn from the research - intentionally doing something silly (in this case, overhiring) is a classic form of waste and economically destructive. Layoff or no layoff, the problem is the management team has set up a situation where they believe a big chunk of their workforce is unproductive. This does raising the question of why boards and shareholders tolerate these clowns. To me the obvious answer being that the major central banks have a history of printing money and handing it out to asset owners, so hiring competent managers for said assets is a lot of trouble for limited gains - even weak managers are enough to drink from the money hose. But who knows, maybe the analysts think that a small amount of sillyness averts a greater problem.
  - cutemonster 2y ago
    > That has to be matched with a strategy of intentional overhiring though, and the damage is being done there No, doesn't have to. Looking at the article, sometimes they had hired the right number of people, but (new?) management decided to let people go because that looked better short term (saved money, higher profits), but was bad long term.
- gruez 2y ago
  >But the ones being discussed in the article are the consistent ones. The ones you do while you’re ahead to make your balance sheet look better. Those come with a temporary balance sheet boost and all of the negative effects of any layoffs. This feels like a "no true scotsman" argument. The headline of the article is literally "Why layoffs don’t work", not "why consistent layoffs don't work". The only mention of "consistent" layoffs were when referencing Jack Welch's management style, but that was more of an attempt to argue that layoffs are bad by citing the worst possible example, than trying to introduce nuance between the types of layoffs. The studies cited also did not distinguish between the type of layoffs.
steveBK123 2y ago
This would be more true of management did not play BS with the numbers constantly. I worked at a firm that for 2-3 years straight would report great Q1,Q2,Q3 numbers.. tell employees it's looking like a good year. And then Q4 report a total wipeout loss that negated the quarterly earnings and swung the company to flat or a loss. Whoops, sorry, no raises, cutting bonuses.. and need to do some layoffs. Behavior like this reminds us that the numbers are not real real in a scientific sense, but only in a relativistic accounting sense.
- no_wizard 2y ago
  And to top it all off executives never have to eat the shit they caused in the same way the rest of the workforce at the company ends up having to
- hommelix 2y ago
  Similarly when goals are linked to earnings and the company reports adjusted earnings... So changing the earnings by disregarding some expenses or some sales out of the calculation. The one in charge of this adjustment can play to allow or dismiss bonus for the year.
  - steveBK123 2y ago
    I worked at one place that would frequently do "hiring freeze, consultants only!" thing followed by "fire all the consultants, FTEs only!" thing every other year. Clearly some OpEx/CapEx budget arb. Also would do incredible things like mandate firm wide sending all consultants home for rest of year in early/mid December to save 3-4% lol. Did this at least twice in 5 years. One year there was a fairly large failed projects with a dozen senior devs and they had nothing to do but also weren't fired because "we don't have budget for severance". This was in July. Guys started showing up to work in sandals and baseball caps. This was all at a bank with over 100k employees.
marto1 2y ago
> A lot of people treat economics as though damage didn't happen unless someone acknowledges it. This is what I call the TV effect. People are trained from an early age, by consuming media, to only construct what is "real" by what is announced. And it's not just economics, but all sorts of aspects of life.
woopsn 2y ago
You don't know what you're talking about. People are fired when they can't add enough value to justify being employed. Sweeping industry-wide layoffs are different. Eg the "damage was done" to the aviation industry in 2001 due to plummeting demand, due (obviously) to new fears and hassle inhibiting travel; the damage currently being done to companies in the economy is from interest rates, inflation, trade uncertainty, stock manipulation, ...
- austin-cheney 2y ago
  > You don't know what you're talking about. People are fired when they can't add enough value to justify being employed. That depends upon the employer. Layoffs occur for a plurality of reasons and the persons selected for termination are selected by various different criteria that may include quotas or random selection.
- slackernews9 2y ago
  [flagged]
nativeit 2y ago
Is it not incumbent on the company who hired the employees to ensure they are utilized sufficiently? Why imply it’s the worker’s fault for their own mismanagement?
- nativeit 2y ago
  This all sounds like the post-mortem justifications of a sclerotic executive suite.
- deleted 2y ago
  [deleted]
- gruez 2y ago
  >Why imply it’s the worker’s fault for their own mismanagement? I'm not sure how you got the impression that OP implied it's the worker's fault. If during the 2021-2022 boom, some startup hired a bunch of junior programmers for $200k/yr, I think describing those people as "people who couldn't add enough value to justify keeping them employed" is a fair assessment of the situation. It doesn't imply that it's the junior programmer's fault, any more than it's not my "fault" if I'm asked to play a musical instrument with no prior experience, it sounding terrible, and people asking me to stop.
  - slackernews9 2y ago
    [flagged]
therealpygon 2y ago
Some people will really do a lot of mental gymnastics in order to consistently blame workers instead of laying the real blame on poor leadership for company failures. If your company is failing because Tammy isn’t a “rockstar” at her job, you have a terrible company.
rainsford 2y ago
I don't see much reason to think mass layoffs are typically the result of over-hiring rather than a reaction to changing circumstances that are different than when the hiring originally happened. The article opens with a perfect example, the constriction of the US air travel market following 9/11. The people most airlines fired as a result weren't "over-hired". Their hiring made sense at the time and they were fired when circumstances changed. I'd argue this is likely more often be the case than actual over-hiring, since it's easier for a company to see if they can actually utilize new employees now than it is for them to predict the future. In cases like that, the layoffs really do seem likely to be damaging to the companies. If circumstances change for a company and they can no longer effectively use all their employees, the most obvious solution is to get rid of employees, but it then makes it far more difficult to recover when positive opportunities present themselves. I think companies trick themselves into believing that since hiring and firing employees is relatively quick, it's a good tool to adapt to changing circumstances in either direction. But that ignores the time it takes for a new employee to become fully productive and the increased difficulty/cost in hiring new employees if your company has a reputation as an unreliable employer. It also ignores the potential boost to productivity that can come from employee loyalty and job satisfaction and security.
- ghaff 2y ago
  The latter points are true. But it's also the case that radical reskilling for very different job roles (with possibly rather different market salaries and, honestly, different from many people's job preferences) is tough too. Probably hard to come up with reliable rules.
slackernews9 2y ago
Mmm maybe they shouldn't have hired them in the first place then. Ever think of that, you miserable waste?
Fargren 2y ago
I have tried and failed to understand what is meant by "layoff due to overhiring", in the context of Software Engineering. When an engineer is employed in a successful project, they are incredibly profitable. A handful of engineers can write and maintain products worth millions of dollars. Big companies, which are the ones we discuss when talking about "overhiring" should be capable to find or create projects where an engineer will be at least modestly profitable. And having an employee creating a small amount of profit, who might eventually be moved to something that's better, is certainly more profitable than firing him and paying severance. Note that here I'm talking about firing good performers because you have "too many" of them. Firing bad performers because the estimated cost of training them is not justified, I can understand. The only explanation I found satisfying is that investors heuristically care about profit per capita(ppc) as well as total profit, and employees who don't produce _enough_ profit reduce ppc and thus investment to point the opportunity cost of firing them aligns. You'll make investors happy, which will raise valuation, more than what you are losing from the lost profit. But this is not "rational" in a full information economic sense. It's essentially the company virtue signaling that they are capable to fire if they had to, even at the cost of actual dollars.

by roenxi 2y ago

fzeroracer 2y ago

'The research is wrong because I said so' isn't exactly a compelling argument, and certainly not a strong enough one when you've been in the modern workforce long enough to recognize how badly layoffs are conducted at just about every company. I've seen enough 10x engineers get laid off to know that the idea that companies have any idea as to who is actually productive or not is just false.

roenxi 2y ago
1) But I included an actual argument and, furthermore, it assumed that the research is correct. > I've seen enough 10x engineers get laid off... 2) That is sensible for the company. They have no idea how to use a 10x engineer, as can be detected by the fact that they're having layoffs. They don't know how to create value in the market and they're being forced into a position where they have to squeeze what they can out of what assets they have. It isn't economically rational for them to employ 10x engineers in that sort of environment. The global and local optimum is to let those engineers go so they can do something valuable somewhere and keep some more 1x style engineers on the cheap. If a company is having layoffs, that is the invisible hand of the market writing on the wall "THIS MANAGEMENT TEAM DOESN"T KNOW HOW TO MAKE MONEY AT THE MOMENT, STOP GIVING THEM IMPORTANT RESOURCES". That includes 10x engineers.
- Avicebron 2y ago
  Unfortunately as I've seen countless times, it's also writing on the wall to the management team "TIME TO MOVE ON CAUSE DAMAGE TO ANOTHER COMPANY", I don't know why we don't expect management's head on the chopping block. If a captain orders a course into an iceberg, idk why we can't just hang the captain and course correct.
  - Muromec 2y ago
    Because nobody orders hanging themselves.
  - Eextra953 2y ago
    That's how I feel about it too, the times I've been around layoffs management and the executives all talk about a difficult economic environment and making the organization leaner by firing a bunch of IC's. Never once have I seen a C level say hey we steered the company in the wrong direction its time for new management or hey our CFO failed to communicate the economic environment and caused us to overspend so we're going to look for a new one. I know it's ridiculous to expect them to blame themselves but the fact that we just accept this lack of accountability from executives/management in the corporate world is insane to me.
    - ghaff 2y ago
      Execs go on to "pursue new interests" or "spend more time with family" all the time. They may get pretty good packages to do so but it absolutely happens.
  - SJC_Hacker 2y ago
    Because the captain owns the ship. Or is the best buddy of the person that owns the ship, and can blame subordinates in closed-door conversations.
- fzeroracer 2y ago
  > 2) That is sensible for the company. They have no idea how to use a 10x engineer, as can be detected by the fact that they're having layoffs. They don't know how to create value in the market and they're being forced into a position where they have to squeeze what they can out of what assets they have. Okay, now explain why every company is encountering these issues where they're frequently laying off people and are unable to create value. The frequency of layoffs is diametrically opposed to your thesis because otherwise companies would behave in a way to reduce layoffs. Such as hiring fewer employees and encouraging longer term retention. > If a company is having layoffs, that is the invisible hand of the market writing on the wall "THIS MANAGEMENT TEAM DOESN"T KNOW HOW TO MAKE MONEY AT THE MOMENT, STOP GIVING THEM IMPORTANT RESOURCES". That includes 10x engineers. This is basically the Just World fallacy but applied to the free market. If something occurs then it's justified as a perfectly rational action of the invisible free hand of the market. In reality layoffs are rarely conducted by the people most equipped to do them, but via a mandate from heaven that you must cut your team for the sake of Number even if you're one of the most efficient teams in the company.

trescenzi 2y ago

This isn’t how all layoffs work though. Some, yes they are due to over hiring and a failure of management to plan. They are likely necessary for survival of the firm and generally last course of action. Although even those come with a cost to current and departing employees which harms the business. But the ones being discussed in the article are the consistent ones. The ones you do while you’re ahead to make your balance sheet look better. Those come with a temporary balance sheet boost and all of the negative effects of any layoffs.

roenxi 2y ago
> But the ones being discussed in the article are the consistent ones. The ones you do while you’re ahead to make your balance sheet look better. That has to be matched with a strategy of intentional overhiring though, and the damage is being done there. That is the insight that should be drawn from the research - intentionally doing something silly (in this case, overhiring) is a classic form of waste and economically destructive. Layoff or no layoff, the problem is the management team has set up a situation where they believe a big chunk of their workforce is unproductive. This does raising the question of why boards and shareholders tolerate these clowns. To me the obvious answer being that the major central banks have a history of printing money and handing it out to asset owners, so hiring competent managers for said assets is a lot of trouble for limited gains - even weak managers are enough to drink from the money hose. But who knows, maybe the analysts think that a small amount of sillyness averts a greater problem.
- cutemonster 2y ago
  > That has to be matched with a strategy of intentional overhiring though, and the damage is being done there No, doesn't have to. Looking at the article, sometimes they had hired the right number of people, but (new?) management decided to let people go because that looked better short term (saved money, higher profits), but was bad long term.
gruez 2y ago
>But the ones being discussed in the article are the consistent ones. The ones you do while you’re ahead to make your balance sheet look better. Those come with a temporary balance sheet boost and all of the negative effects of any layoffs. This feels like a "no true scotsman" argument. The headline of the article is literally "Why layoffs don’t work", not "why consistent layoffs don't work". The only mention of "consistent" layoffs were when referencing Jack Welch's management style, but that was more of an attempt to argue that layoffs are bad by citing the worst possible example, than trying to introduce nuance between the types of layoffs. The studies cited also did not distinguish between the type of layoffs.

steveBK123 2y ago

This would be more true of management did not play BS with the numbers constantly. I worked at a firm that for 2-3 years straight would report great Q1,Q2,Q3 numbers.. tell employees it's looking like a good year. And then Q4 report a total wipeout loss that negated the quarterly earnings and swung the company to flat or a loss. Whoops, sorry, no raises, cutting bonuses.. and need to do some layoffs. Behavior like this reminds us that the numbers are not real real in a scientific sense, but only in a relativistic accounting sense.

no_wizard 2y ago
And to top it all off executives never have to eat the shit they caused in the same way the rest of the workforce at the company ends up having to
hommelix 2y ago
Similarly when goals are linked to earnings and the company reports adjusted earnings... So changing the earnings by disregarding some expenses or some sales out of the calculation. The one in charge of this adjustment can play to allow or dismiss bonus for the year.
- steveBK123 2y ago
  I worked at one place that would frequently do "hiring freeze, consultants only!" thing followed by "fire all the consultants, FTEs only!" thing every other year. Clearly some OpEx/CapEx budget arb. Also would do incredible things like mandate firm wide sending all consultants home for rest of year in early/mid December to save 3-4% lol. Did this at least twice in 5 years. One year there was a fairly large failed projects with a dozen senior devs and they had nothing to do but also weren't fired because "we don't have budget for severance". This was in July. Guys started showing up to work in sandals and baseball caps. This was all at a bank with over 100k employees.

marto1 2y ago

> A lot of people treat economics as though damage didn't happen unless someone acknowledges it. This is what I call the TV effect. People are trained from an early age, by consuming media, to only construct what is "real" by what is announced. And it's not just economics, but all sorts of aspects of life.

woopsn 2y ago

You don't know what you're talking about. People are fired when they can't add enough value to justify being employed. Sweeping industry-wide layoffs are different. Eg the "damage was done" to the aviation industry in 2001 due to plummeting demand, due (obviously) to new fears and hassle inhibiting travel; the damage currently being done to companies in the economy is from interest rates, inflation, trade uncertainty, stock manipulation, ...

austin-cheney 2y ago
> You don't know what you're talking about. People are fired when they can't add enough value to justify being employed. That depends upon the employer. Layoffs occur for a plurality of reasons and the persons selected for termination are selected by various different criteria that may include quotas or random selection.
slackernews9 2y ago
[flagged]

nativeit 2y ago

Is it not incumbent on the company who hired the employees to ensure they are utilized sufficiently? Why imply it’s the worker’s fault for their own mismanagement?

nativeit 2y ago
This all sounds like the post-mortem justifications of a sclerotic executive suite.
deleted 2y ago
[deleted]
gruez 2y ago
>Why imply it’s the worker’s fault for their own mismanagement? I'm not sure how you got the impression that OP implied it's the worker's fault. If during the 2021-2022 boom, some startup hired a bunch of junior programmers for $200k/yr, I think describing those people as "people who couldn't add enough value to justify keeping them employed" is a fair assessment of the situation. It doesn't imply that it's the junior programmer's fault, any more than it's not my "fault" if I'm asked to play a musical instrument with no prior experience, it sounding terrible, and people asking me to stop.
- slackernews9 2y ago
  [flagged]

therealpygon 2y ago

Some people will really do a lot of mental gymnastics in order to consistently blame workers instead of laying the real blame on poor leadership for company failures. If your company is failing because Tammy isn’t a “rockstar” at her job, you have a terrible company.

rainsford 2y ago

I don't see much reason to think mass layoffs are typically the result of over-hiring rather than a reaction to changing circumstances that are different than when the hiring originally happened. The article opens with a perfect example, the constriction of the US air travel market following 9/11. The people most airlines fired as a result weren't "over-hired". Their hiring made sense at the time and they were fired when circumstances changed. I'd argue this is likely more often be the case than actual over-hiring, since it's easier for a company to see if they can actually utilize new employees now than it is for them to predict the future. In cases like that, the layoffs really do seem likely to be damaging to the companies. If circumstances change for a company and they can no longer effectively use all their employees, the most obvious solution is to get rid of employees, but it then makes it far more difficult to recover when positive opportunities present themselves. I think companies trick themselves into believing that since hiring and firing employees is relatively quick, it's a good tool to adapt to changing circumstances in either direction. But that ignores the time it takes for a new employee to become fully productive and the increased difficulty/cost in hiring new employees if your company has a reputation as an unreliable employer. It also ignores the potential boost to productivity that can come from employee loyalty and job satisfaction and security.

ghaff 2y ago
The latter points are true. But it's also the case that radical reskilling for very different job roles (with possibly rather different market salaries and, honestly, different from many people's job preferences) is tough too. Probably hard to come up with reliable rules.

slackernews9 2y ago

Mmm maybe they shouldn't have hired them in the first place then. Ever think of that, you miserable waste?

Fargren 2y ago

I have tried and failed to understand what is meant by "layoff due to overhiring", in the context of Software Engineering. When an engineer is employed in a successful project, they are incredibly profitable. A handful of engineers can write and maintain products worth millions of dollars. Big companies, which are the ones we discuss when talking about "overhiring" should be capable to find or create projects where an engineer will be at least modestly profitable. And having an employee creating a small amount of profit, who might eventually be moved to something that's better, is certainly more profitable than firing him and paying severance. Note that here I'm talking about firing good performers because you have "too many" of them. Firing bad performers because the estimated cost of training them is not justified, I can understand. The only explanation I found satisfying is that investors heuristically care about profit per capita(ppc) as well as total profit, and employees who don't produce _enough_ profit reduce ppc and thus investment to point the opportunity cost of firing them aligns. You'll make investors happy, which will raise valuation, more than what you are losing from the lost profit. But this is not "rational" in a full information economic sense. It's essentially the company virtue signaling that they are capable to fire if they had to, even at the cost of actual dollars.