11 ms·

Why top firms fire good workers

• _ea1k 11mo ago
  Was this written by one of the firms trying to justify the practice?
• skirge 11mo ago
  Too expensive for customers, can't be put on project sheet
• camel_gopher 11mo ago
  Evil
• ta9000 11mo ago
  Every generation since WW2, American management gets dumber and dumber.
• mcoliver 11mo ago
  No. The reason top firms part ways with good workers is usually political. Either the manager doesn't like the person regardless of their work abilities, or the manager is not politely savvy enough to ensure their team is being recognized for work that grows or is valuable to the business. Or they get caught up in the endlessly popular reorgs (again management failure). It's a failure of management. Nothing more. Nothing less. A healthy market would encourage good workers to move around freely (through compensation, opportunity, benefits, location, etc..), not force their hand. And healthy organizations would recognize talent and retain/retrain as needed. I think the other thing that's perhaps missing is that some companies have so much momentum (with thousands of people) that it probably doesn't matter when they lose people. The company will continue to thrive because there is demand for the product.
  • austin-cheney 11mo ago
    That has never been the case in my career. Perhaps things are different in the C suite or a startup but at the director level and below of an established company it’s always about money and headcount.
  • ameliaquining 11mo ago
    You're thinking of a different kind of company than the paper is talking about. (The headline, presumably written by the university's PR team, is a bit misleading about this.) The paper is about a certain kind of firm (e.g., the Big Four accounting firms, management consultancies like McKinsey, some elite law firms) that explicitly uses an "up or out" model, and explains why this kind of firm's business model (in particular, renting out the services of a particular employee to each customer) leads to this. The findings don't apply to other kinds of firms; e.g., in a typical big tech company, most engineers don't work primarily with a single customer, so the preconditions don't hold.
    • mlrtime 11mo ago
      I don't think anyone here is actually reading the paper. The conversation is all about Tech workers and unions. At least thats the way I'm reading these comments as of now.
      • majewsky 11mo ago
        https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html > Please don't comment on whether someone read an article. "Did you even read the article? It mentions that" can be shortened to "The article mentions that".
    • port11 11mo ago
      We don't editorialise titles but this is a good case for renaming the post to that of the paper or something like it. “Why the top consulting firms fire consultants” is a very different topic.
  • diogenescynic 11mo ago
    >Either the manager doesn't like the person regardless of their work abilities, or the manager is not politely savvy enough to ensure their team is being recognized for work that grows or is valuable to the business. Or they get caught up in the endlessly popular reorgs (again management failure). This strikes me as 1000% accurate from my work experience. I see people who do amazing work but get unrecognized and then move on while other people do mediocre work but put a huge effort into self-promotion and end up being promoted despite the work not being great... The reorgs also seem like a way to kneecap the employees and lower expectations.
  • kamaal 11mo ago
    >>the manager is not politely savvy enough to ensure their team is being recognized for work that grows or is valuable to the business. Actually in most companies, no ones watching whats happening, no ones watching who performs, who slacks, or anything for that matter. Companies are basically a kind of a loosely assembled random crowd, where no one cares a thing about anything. In this kind of a set up both hardwork and laziness go unnoticed, which is why a persistent level of mediocrity is all pervasive. People do the bare minimum needed to keep lights on. Getting rewards, or not getting punished in this kind of set up, largely depends on who you know, how they view you and what they are willing to do for you.
    • anal_reactor 11mo ago
      The problem is that as you go further up in hierarchy, people by definition have less specialized, and more general knowledge. This means that there are things that lower-level employee understands but their manager doesn't. This in turn means that it's impossible for the manager to tell whether the employee is doing a good or a bad job because the manager simply doesn't understand the details of the job. This is open door for slackers and low-performers, because from certain perspectives, they're indistinguishable from hard workers. I used to be a hard-working high-performer, but then I understood that because of numerous management problems that are beyond my control, the reward is very loosely correlated with my efforts, and given an existing job contract, the best way to maximize the reward/effort ratio is not to put more effort hoping for disproportionately higher rewards, but to put significantly less effort because the reward will drop just slightly. Do you want to up your hourly salary 5 times? Simply take 5 times as much time to deliver same feature. You might not get the 0.05x salary bump but that doesn't actually impact the calculation that much.
      • tasuki 11mo ago
        Cynical! (and probably true too) I work for a small company (~10 people), solving reasonably interesting problems, earn peanuts, and am happier than I was at big tech.
        • 11mo ago
  • jimbokun 11mo ago
    The article is basically describing stack ranking, where regular terminations are part of the company's operating philosophy.
  • iwishiknewlisp 11mo ago
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• chid 11mo ago
  Interesting though one would think this is also an obvious finding. Quantifying this would be interesting though.
• inetknght 11mo ago
  How to tell that some "researchers" spent too much time in economics classes and not enough time in ethics classes: they publish stuff like this (source [0]). [0]: https://www.aeaweb.org/articles?id=10.1257/aer.20200169 https://www.aeaweb.org/articles?id=10.1257/aer.20200169
  • Calamityjanitor 11mo ago
    The article makes them look psychopathic. Underpaying staff, layoffs, constant churn and providing poor services is 'not a flaw' and 'makes sense' because they boost profits.
  • komali2 11mo ago
    Exactly. > In short, the “up-or-out” path of professional life may not just be a cultural phenomenon among top professional service firms but also an efficient response to how reputation is maintained and information flows. What looks like a ruthless system of constant turnover, the researchers argue, is in reality a finely tuned mechanism that helps the market discover and reward true talent. For people who are fans of this system, I genuinely want to understand how one overcomes the common sense, humanitarian centric rejection of corpo speak like this. Is it about just drinking the koolaid? Actually there was a discussion about cults yesterday and now that I think about it, I'm seeing all sorts of parallels here: inventing new words and using that to complete redefine reality and transform your fundamental understanding of how the universe works or should work, supplanting with your made up fantasy world and rules that rewards the best play actor.
    • imtringued 11mo ago
      >For people who are fans of this system, I genuinely want to understand how one overcomes the common sense, humanitarian centric rejection of corpo speak like this. Is it about just drinking the koolaid? Economists don't work in the real world economy so they have no clue or idea what these things even mean. They work for the Fed, a central bank or in academia. Sometimes and only sometimes do they work for banks or as quants, but then they usually make enough money to never have to question the system. Bankers usually have MBAs that specialize in banking and finance. They don't need to understand economics, they need to understand how the businesses they allocate capital towards function. Economists are insulated from the real economy, because economists are redundant to the real economy and I'm not saying that to denigrate economists, it's what economists tell each other all day in their research. Purely theoretically speaking, they say free markets are self regulating and stabilizing and efficient. You don't need economists to steward or study the economy according to economics itself. Weirdly enough, economists aren't historians either. They don't teach how economies have been run in the past, they just presume some sort of proto-market economy and that market economies have existed since the dawn of time.
• deleted 11mo ago
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• awesome_dude 11mo ago
  It looks (to me) like they're saying that the margin (amount that firms can charge clients less the cost of the employee's compensation package) is what's at stake. As employees rise up the corporate ladder, their compensation packages increase, but the amount that the company can charge for that employee's work is limited (clients will be wanting to keep a certain margin for themselves too)
• amitav1 11mo ago
  TL;DR When workers start out, the firms know a lot more about their abilities than the clients do (they have an "information advantage") as the worker has very few ways through which to prove their abilites. Over time, though, as the employee's public performance increases (through successful cases, good investments, etc.) the information advantage the firm has becomes lower. Eventually, the firm lets the employee go in order because the worker now has proof of their competencies that they can show to clients to demand higher wages directly.
  • sparin9 11mo ago
    I completely agree. I’ve actually had to let someone go in the past for this exact reason.
    • amitav1 11mo ago
      I was just summarizing the article. Your comment would probably work better as a top-level comment.
• deleted 11mo ago
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• alexpotato 11mo ago
  My favorite example of why managers fire good workers: - You are a manager of a team of 4 - You hear layoffs are coming - You have one amazing direct report, 2 just ok and 1 awful Who do you fire? Most people say "Of course, fire the awful person" I say: "When this actually happened, the manager fired their best person" Other: "But, but why? That's not fair!" Me: "You know layoffs are coming. You are the most expensive person on the team. If you fire the awful person there may be questions about why you even hired them. They then fire you and keep your amazing person as the manager (probably for less money). You fire your best person, well then now you as the manager are the best person AND you can make the argument that that awful person needs 'more managing to be effective'" It's not pretty or noble or heartwarming but this is how the logic goes in a lot of big firms (especially around layoff season).
  • blibble 11mo ago
    the line manager is never gonna get that logic past their manager
    • campbel 11mo ago
      This is why an org should have skip-levels. You can't put anyone on an island with that kind of unchecked authority and expect good results.
  • 3eb7988a1663 11mo ago
    I have never seen someone fired over hiring a dud. Reasonable people know that hiring has smoke and mirrors - everyone is putting on their best fake persona to get in the door. Maybe in some toxic, cut-throat environments, but this seems very particular. Firing the best person because they outshine the master is plausible. One of the 48 Laws of Power.
• jppope 11mo ago
  As I understand it, the process is known as up or out (https://en.wikipedia.org/wiki/Up_or_out https://en.wikipedia.org/wiki/Up_or_out) and exists due to a the known corporate structure required to do consulting work. I have no clue about its effectiveness, but all the work I've ever seen done by Deloitte, McKinsey, or PWC was mediocre at best which to me would signal that the process probably rewards a different incentive set than they intend it to. For the rest of us its likely a lesson in the power of branding. To quote Matt Damon: "(they are charging you for) an education you coulda got for $1.50 in late fees at the public library" The only other thing I have to say about it is I have noticed a high correlation with the reports produced and the things employees have been telling management to do for a long time - that is to say, there is some utility to having an outsider provide the information... even if that information isn't novel at all.
  • notepad0x90 11mo ago
    > there is some utility to having an outsider provide the information That shouldn't be happening. This is managerial incompetence normalized. Why does the management of a company not trust its own people? They should have hired their people from "the outside" already. The correlation you're seeing is people who are not leaders but bosses in charge of teams. Good leaders don't need external validation, they either trust their team or make the problem fully outsourced to an external team like a consultant firm. > all the work I've ever seen done by Deloitte, McKinsey, or PWC was mediocre at best That tracks with my experience. Everyone I've met whom I know are competent at what they do have had similar remarks on these firms. From my observation, they are part of a larger endemic issue of metric-chasing. They come up with a list of check boxes where if you follow them like a formula you'll achieve measurable results. Everything they do revolves around measurements and meeting measurement targets. The problem is, when targets aren't met, then their method and advice is put into question. Therefore there is a perverse incentive at play where on one hand they do really want you to succeed, but on the other hand getting into the weeds and figuring out why you can't meet the targets deviates from their check-list approach. It will look like they advised you to do something, and now they're telling you you should do something else, it will look like they don't know what they're doing, and the one cardinal rule of consulting is you never say you don't know (or appear like it). The result is they water down what needs to be done, and they'll be flexible with interpretations of what counts as measurable. In summary, I would like to say there is a place for these firms, but I won't, because I don't know if that is even true. I'll say that an outside firm will never have your company/team as their #1 priority; there will absolutely and without exception be scenarios where it will be a conflict of interest for them to do something that will benefit your team/org. And using these companies to justify decisions, or back up decisions.. that again is part of the leadership endemic. People who do that are not leaders. They're bosses covering their own you-know-what. My opinion is that they facilitate poor/weak management culture. Talent-wise, there is no doubt they hire the most talented and experienced people. But it almost feels like hiring a navy seal to be your personal trainer, but if you do what they say and you're not seeing results, they're not allowed to figure out what really is happening and correct their own advice. And to start with, they won't even aim to make you look like a navy seal, but work out some formula most people can work with, so the whole navy seal thing is just for show anyways. Sorry for rambling on, maybe I'm too biased with my own experience here. EDIT: I just wanted to add: If any company is firing the bottom performers, their management don't understand the problem of perverse incentives. Actual performance no longer matters, performance that can fool the measurement system sufficiently enough is what matters. The metrics will look good, revenue will be mediocre and long term sustainability will degrade. Good or bad, metrics and measurements shouldn't be used to make decisions, they can only be used to ask questions! An employee can have bad metrics if they're spending all their time helping other team members or solving yet-to-be-measured problems. Matter of fact, I would even dare say that metrics/measurements/KPOs shouldn't even be considered at all unless goals aren't being met. If your golden goose is laying bigger and bigger eggs, don't perform explorative surgery on it.
• deleted 11mo ago
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• windex 11mo ago
  The method used in all the big4s in India is this: You join and do well as usual. Your credit is shared by those above you. You continue to do well, your manager gets promoted or you get a manager who needs a promotion and needs the credit you generate. He gets promoted, aggregates your good work and shows it as his. You then get sidelined, PIPed, or leave in disgust. It's political and I have begun to strongly believe that the best leave or are schemed against by the mediocre cabal. You cannot continue in a large firm in India if you are anywhere near good.
  • vosper 11mo ago
    Why would a manager who’s able to claim the credit of their reports in order to advance their own career then PIP the best ones? Wouldn’t they keep them around to keep claiming credit from? I’m not doubting your story (I’ve never worked in India) I just don’t understand the incentive to fire a good worker in this scenario.
    • dullcrisp 11mo ago
      They already got promoted and might not be managing the same team, plus it sells the lie better, and most people wouldn’t go along with this forever and might start claiming things so they have to discredit you first.
    • SanjayMehta 11mo ago
      Most CEOs and VPs in these companies are nepotistic and political. They are happy to take credit but will never allow their direct reports to become a threat to them. In general the structure looks like this CEO VP (usually a family member or a "chamcha" literally spoon, but means sycophant.) Directors (all yes-men chamchas) Worker bees Not very different from most companies, in my experience.
      • SilverElfin 11mo ago
        Is sycophancy different there? I think in many places employees often praise their managers and agree with everything because it’s a survival strategy. Or maybe a misplaced hope to get recognized that way. I assume that’s all this is too?
• marcus_holmes 11mo ago
  This ignores everyone else's agency in this decision. The top employee is probably getting noticed and headhunted by the clients. The top employee is probably getting pissed off at the mediocrity surrounding them, and annoyed at constantly having to share credit for their hard work with their bad manager who did nothing. The top employee quickly realises that this is a badly-paid gig, and plans to spend the minimum time doing it that will confer the necessary Resume points. The worst employee has no other options, is scared of losing this gig because they struggle to find other gigs, enjoys being able to hide their mediocrity in the team, and will stay as long as possible. They'll probably end up being promoted.
• throwaway2037 11mo ago
  What a ridiculous article. The author makes zero mention of politics. In many cases, you are forced to choose the least worst person to fire. Then, politics plays a huge role. If you are the manager forced to choose one (and you have no bad ones), then you choose the one who you like the least (personally). Big investment banks cut roughly 5% of their lowest performers each year. You always can see a few people that should not have been cut, but their politics was too weak to save them. I've seen this written about before... roughly, after a few years into your corporate career, your job splits into two parts: the skill part (your effort and ability to get stuff done) and the political part (navigating humans in a corporate hierarchy). Say what you like about the political part, for most people, it is unavoidable.
• Neywiny 11mo ago
  What a weird take. It's good for the employee to get fired because then the company doesn't have to pay them competitively?
  • komali2 11mo ago
    Yes, this is one of the inherent contradictions in capitalism. The quality of the work isn't as important as the margin between the cost of labor and the income earned by it. To be the best and still pass that test you need to be so good that it makes up for your higher cost, which is a more difficult bar to pass than being good enough but being cheap. Also there's an upper limit anyway where no matter how good your margin is, your cost can't be justified, since "local market rates" apply downward pressure, as well as an upper limit on how much clients are willing to pay or the size of the market you're selling to or temporal factors e.g only a certain amount of widgets a country can consume in a month. There is no labor under capitalism without significant profit margin, and always the profit extractor (employer) is trying to get the most profit for the least cost from the profit generator (employee), who is in the opposite position, but at a disadvantage since they are a human who is influenced by things like social pressure, a desire for recognition, and the natural human tendency to be good at something and do it well. The employer isn't human, it's just a profit generating algorithm, and so only cares about such things insomuch as it can leverage them to increase profits. There's other factors in play as well though that corporations can't include in their algorithm since they're purely selfish actors which results in macroeconomic catastrophes, so for example if wages get too low then people don't buy things anymore which drives down profits from selling which forces wages down lower and so on until economic collapse.
• deleted 11mo ago
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• rukuu001 11mo ago
  Up or out. Yes, re the gamesmanship on pay, but if you don’t have the specific ability to bring in new business, then you’re on your way out, no matter how good a lawyer (or whatever) you are
• falcor84 11mo ago
  In the case of consulting companies like McKinsey, there's another very rational factor: a top performer with a strong ability to climb the corporate ladder might actually be worth less as a consultant than as a director at an external company who would then hire McKinsey. And of course, the partners there have industry connections, to get these to performers hired where they would be likely to generate the best future deals.
• mellosouls 11mo ago
  McKinsey a top firm? The report seems to focus on consultancies which are notorious for leeching huge amounts of money from non-specialist organisations by selling "expertise" to low-calibre execs in their clients in what is essentially an entrenched political merry-go-round. The premise here might have some insights, but is hardly paradoxical (missing from the title posted here); you'd expect low-quality firms to have low-quality practices.
• diogenescynic 11mo ago
  Every job I've ever had started great with a small team who was actually interested in the company and its goals. Then eventually the company scales up, gets acquired, or IPOs or some other sign of maturity and a new group of leadership is brought in from a legacy/Fortune 500 type of company. That new group of leadership brings their own cabal/clique and they only promote themselves and start slowly pushing out the original employees and workers who got the company to where it is... the smart people see what's going on and move on to other companies as it slowly becomes hijacked from within and at the same time 'matures' and becomes a slug and incapable of improving or adapting.
  • tormeh 11mo ago
    Are you sure you're not just seeing the transition of a company from a growth company to a value company? I.e. "there is no growth potential left. Let's dump it on the public", and then a new leadership team comes in slashing costs to juice profits, because there's no way to increase revenue. Because that's certainly a phenomenon as well.
    • diogenescynic 11mo ago
      That's definitely part of it, but I've noticed there's almost always a shift when companies get to a certain size and start bringing in leadership in waves from other companies and it really changes the culture and dynamics of how the company functions--usually not for the better.
• RobGR 11mo ago
  This article didn't make complete sense to me. However I think what it describes overlaps somewhat with the "Cravath System" https://en.wikipedia.org/wiki/Cravath_System https://en.wikipedia.org/wiki/Cravath_System The wiki page doesn't do it full justice, as I understood it it is: * A firm can easily end up in a situation where weak performers stay as long as they can, and strong performers leave because they can operate independently. This can have a very strong effect because the partners or permanent management starts seeking out work to keep the bulk of their remnant people busy, which is not the high end work that builds the firms reputation. * Instead, make offers every year to the top 3 people from each Ivy League law school, but the offers are for 18 months only. * If the new people aren't going to make partner ever, don't keep them around. Let them know well before the 18 months are up, and have them pick the corporate clients they like and work with them so they can jump over to working for the client directly, and they will then always come back to the mothership when the giant, interesting, complex case comes along. * Out of each "class" you make partner offer to only the best, maybe none, each year. This differs from the article because the firm is keeping the best and sending out the rest. But maybe most firms aren't like the Cravath, they prefer to over charge clients for a weak performer then charge and pay a strong performer ? Maybe this makes sense if you have a very short term view of the life of your firm and it's reputation ?
• autoexec 11mo ago
  > The firm starts to underpay those better workers who kept their jobs, akin to making them pay for being “chosen.” Consequently, profits do not decline and may even increase. > “Firms now essentially can threaten the remaining employees: ‘Look, I can let you go, and everybody’s going to think that you’re the worst in the pool. If you want me not to let you go, you need to accept below market wages,’” This is exactly what unions are for. Any time there are enough skilled workers avilable that a company can let good employees go as a warning to others not to complain about substandard wages it's clear that the imbalance of power has resulted in exploitation. There is strength in numbers though which is why companies go to great lengths to convince people that you all alone negotiating with a huge corporation of people who have more money and resources than you'll ever see in your lifetime and who can replace you with someone else easily is somehow totally fair. No matter how special they might make you feel, you are almost always disposable to them and they will drop you at any time and for any reason, even if it's just to make an example out of you to keep your ex-coworkers in fear. For the very few employees out there who actually are totally indispensable, any sane company would be looking for your replacement immediately because there's no telling what might happen to you or when. No company should fail because one employee dies in a car cash or gets a cancer diagnosis. Until you are also replaceable the company isn't safe. They'll pay you handsomely to keep you, right up until the moment they don't have to.
  • idiotsecant 11mo ago
    For whatever reason collective bargaining is wildly unpopular on HN, which is ironic because tech workers are exactly who should be organizing their labor.
    • Denote6737 11mo ago
      Tech attracts the radical independent types.
      • palmotea 11mo ago
        > Tech attracts the radical independent types. No. I think it's a combination of: 1) HN being associated with a startup incubator, and thus attracting a large contingent of people who see themselves as the boss doing this, not the workers affected; 2) tech attracts a certain kind of gullible person who's easily seduced by tidy little systems like the pop-capitalism of libertarian tracts; and 3) tech workers (until recently) had more economic bargaining power than a typical worker, so could delude themselves into thinking they do better by going it alone.
• jholdn 11mo ago
  My experience with consulting firms is there are two paths for high performers. Either you move into a sales/relationship focused role (which there are fairly limited slots for) or you move client side and probably buy from your old employer. The good workers do well either way (when I say move client side, I mean to high level positions - importantly one with control over a budget to afford consultants) and the consultancy makes money both ways.
  • ta12653421 11mo ago
    This: If you want to climb the ladder, the no1 way to becoming a partner is .. SALES .. SALES .. SALES, regardless what you selll: As long as you bring in money to justify your business unit/cluster, everybody is fine. Just sell more hours - thats the only goal.
• tamimio 11mo ago
  Either fired or just leaving by themselves. My theory: it has to do with middle managers, who mostly are less capable in technicalities, not smart enough, and aren't born leaders otherwise they would have been doing their own business, so they prey on those good ones since they have nothing to do all day except politics and scheming around compared to the others who spend most of their day building or doing actual work.
• shoo 11mo ago
  A version of the paper can be downloaded from SSRN: Kaniel, Ron and Orlov, Dmitry, Intermediated Asymmetric Information, Compensation, and Career Prospects (February 4, 2020). Available at SSRN: https://ssrn.com/abstract=3532128 https://ssrn.com/abstract=3532128 see also: discussion of the consulting business model from David Maister’s book Managing the Professional Service Firm https://commoncog.com/the-consulting-business-model/ https://commoncog.com/the-consulting-business-model/
• danavar 11mo ago
  Thanks for the article - that was an interesting read. A creative take that I see some merit in
• 331c8c71 11mo ago
  > ... in professions where skill is essential and performance is both visible and attributable to a specific person, particularly in fields such ... fund asset management ... Laughing out loud)))
• Havoc 11mo ago
  Was at a firm with a up-or-out policy. It doesn't sound like author has much real world experience with what they're studying... The really good people have leverage so the can stay or go as they please. Meaning the people that get hit are average-ish (in the context of firm, not wider market). People good enough to make it to middle management but no further. You don't need to fire them either - they catch the drift when they don't get promoted, and those too stupid to notice were never "good". >“Firms now essentially can threaten the remaining employees: ‘Look, I can let you go, and everybody’s going to think that you’re the worst in the pool. If you want me not to let you go, you need to accept below market wages,’” says Kaniel. The below market rates are primarily an effect of CV-prestige rather some intricate machiavellian mind game. People tolerate it because "I was a senior role at X" has value long after you left.
• constantcrying 11mo ago
  German (and Japanese) industry has the exact opposite attitude and it makes me very curious what "top employees" means here, the only example given are managers, which is a group of people where performance is very difficult to measure and often based around person networking abilities and entirely divorced of performance. That said any developer and engineering should be extremely careful when it comes to unions. In Germany they typically agitate against the interests of the engineers, especially in large companies. This comes naturally as unions get power according to democratic principles, so in most cases they agitate for benefits for unskilled workers at the cost of the engineers. At companies I worked for the Betriebsrat, which is staffed by the elected union, actively advocated for outsourcing engineering activities, so that manufacturing workers can get increased benefits.
• mnemotronic 11mo ago
  I'm sorry, this article reads like something a low-level HR drone was ordered to write with the help of AI. "Come up with an excuse we can feed to the board of directors about why we fired all the high-paid productive SMEs, lost our most profitable customers and tanked our profits this year".
  • djmips 11mo ago
    it definitely sounds like AI
• hellercolby8 11mo ago
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• arthurlouiss3 11mo ago
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