At this point it's beginning to look like tech companies are doing this because it's the trendy thing to do, along with inserting a few words about AI in their websites and pitch decks.
"What explains why so many companies are laying large numbers of their workforce off? The answer is simple: copycat behavior, according to Jeffrey Pfeffer, a professor at the Stanford Graduate School of Business."
A few weeks ago I was opining that companies were laying off staff because "that's what everybody else was doing." I'm glad to see to few folks concur.
Copycat behaviour is not uncommon, I think, and is swayed by market sentiment. If the (equities) market ( mean in a general sense) feels bullish, then Microsoft, Google, etc. start piling on employees. Because hey, we're tech companies, we have to justify our market ratings by pursuing (or at least looking like we are pursuing) growth, so that's what they do.
Then, when things sour, the mood becomes one of conservatism. Then it looks good to shed employees. This is all despite the fact that it may have little to do with the actual state of the companies.
Microsoft in particular is hardly a heavily cyclical company, so there is little need to behave like one. Not really. They could adopt a more even approach to hiring. If they tried.
Companies bleat on about how difficult and expensive it is to hire staff. And yet, here we are.
We are a SaaS tool and we've has to justify our value to customers as everyone is looking to cut expenses. We also did cut our own spending on SaaS tools. So I think that this is sort of percolating through the industry. There is a real contraction in SaaS spending.
I would be very willing to believe this if it wasn't for the fact that so many tech companies have fundamentals that just don't make sense.
We've just gotten so used to the idea that "tech companies don't need to make profit" that we don't even question it any more. I still hear people shocked when a companies revenue goes up but their stock price drops while completely ignoring the reality that costs also went up.
The truth is all companies need to have profit and many of these tech companies have never showed that they're even capable of turning a profit.
What's happening is that investors are going to boards and telling them you need to make serious progress towards profitability. If sales are growing slowly or even declining there is no other option but to do layoffs.
IMHO this is still just the beginning, there's a lot of feedback in the tech ecosystem that are going to start playing out as more and more companies start scrambling to show profitability.
It's less that it's the trendy thing to do, but more that the bar has been lowered.
If this is an option you're considering, then it's a much easier message to sell if everyone is doing it. Otherwise you look like the bad performer and it'll hurt morale and stock price even more.
I don't know how this has gone over everyone's heads here, because what's happening is extremely obvious.
If you're a big FAANG-like company, you've seen workers make big gains in wages over the past year, and turnover rates have been increasing significantly during the great resignation. This isn't enough to sink you, but you don't like it, because it does eat into your margins a little. Of course you're still making massive profits, but workers getting any measure of power scares you. Imagine if this trend continues? Workers are only getting harder to find!
So what do you do? You can't walk up to all your CEO friends and say "Hey how can we go about paying everyone less? What if we all agree to lay off our expensive people at the same time? That way, we'll have a massive pool of workers to hire from that are all looking for jobs, and since they'll all be scared from having been laid off they'll happily take pay cuts. Additionally, it'll scare the hell out of the rest of the employees to see all their friends get blown up with no warning right in front of them. They'll want desperately to keep the jobs they have and won't leave!"
You can't say that because coordinated wage suppression is highly illegal (remember Apple and Google?). But wink/nod based wage suppression? Totally fine! If everyone just happens to fire their expensive workers at the same time but leaves no record of getting anyone to agree to it, it's perfectly allowed. This is not "copycat" behavior. This is all the CEOs recognizing what the game is and cashing in on it.
And better yet, there's nothing the tech workers can do about it! There are no real tech worker unions to speak of, and these companies know their workers have a highly libertarian bent who believe in the meritocracy myth, so there's no real risk of unionization no matter how bad things get. It's a pure win for them, with no real downsides, and the general consensus is that if they're smart they'll do this every so often to bring workers to heel. And given the pervasive attitudes about labor that I see among tech workers I don't see any reason to think that's wrong.
Indeed. I remain shocked at how many people who work in this industry are still making excuses for the companies that are performing these completely unnecessary layoffs. (They'll never be laid off of course, of course – only the other people who are old and bad at their jobs.)
These companies overhired and now they are realizing that the positive cash flow to justify all of these new employees isn't existing. None of these layoffs are focused on laying off their most expensive people. The severance packages have been very good meaning that the laid off employees have a long time to find another well paying job.
> These companies overhired and now they are realizing that the positive cash flow to justify all of these new employees isn't existing.
This is false in a broad sense - the majority of CEOs plan to increase headcount this year in spite of layoffs. You can find examples here and there where it is true, but in general it is not. There's tons of literature of this readily available, but here is an example from as recently as yesterday: https://finance.yahoo.com/news/ceo-outlook-report-optimism-r...
> None of these layoffs are focused on laying off their most expensive people.
The people you see laid off tend to be newly hired at higher recent market rates or people who have been there a very long time, both of whom are either expensive in a relative sense or an absolute one.
But even that is besides the point. Even if you fire randomly you still see this benefit if you're a CEO.
>the majority of CEOs plan to increase headcount this year in spite of layoffs.
This just means that companies are continuing to hirer. It doesn't mean that they plan on increasing headcount to above where it was before the layoff.
It's so weird to post the first thing that feels like a thought, just to carry water for CEOs who are never going to see you write this, and will never like you, without getting paid for it. 1300s feudal serfdom mindset. And it's everywhere.
If you're continuing to hire past these layoffs, and expanding plans to do so, it's to take advantage of the environment created by the layoffs. If there really was a fiscal crisis you'd also see mass hiring freezes, but we're not seeing that.
> “We expect to end 2023 as either roughly the same size or even a slightly smaller organization than we are today,” said Meta CEO Mark Zuckerberg.
I don't really see it. Gitlab isn't a Google-style megacorporation; its CEO is co-founder, and it still has a reputation for having fairly horizontal management.
The idea that its execs just decided to lay off a bunch of people for no reason just to wage some plausibly deniable class warfare doesn't really make sense to me.
I dunno, maybe look at more than one company doing layoffs and think about whether the group as a whole is in dire fiscal straits, whether they're continuing to hire through the layoffs, and who the winners and losers will be through the whole ordeal. Those details are elsewhere on the thread and are easily googleable if you have a real interest.
If you have a hard time believing capitalists wouldn't literally do capitalism when they see a chance for it, I don't know what I can tell you really.
"I don't really see it" is a pretty... well it's something, that's for sure.
In my view they see a few benefits. If the "market climate" is layoffs, then they can be much less competitive with offers to any candidates they do want to hire. It's an opportunity to let go a contingent of lower-performing workers, and lastly, it's a way for the CFO to send a message to all the managers that they aren't getting the incremental headcount they are always asking for to inflate their team sizes.
I don't necessarily think this is a good thing, but I think dismissing it as copy-cat behavior is not digging deeper than the surface layer.
Instead of the group of managers making the case they are doing a good job because their team has grown over time, there is a shift in power to the managers saying they have saved the company x number of doll-hairs because they cut xyz budget and team.
It's a coordinated attack on the companies, and anybody that is going to hold shares long term. Focused specifically on the ones that will buy shares after one or two announcements of larger than usual profits but will hold for more than a couple of months.
The people doing this do not lose time thinking about workers.
(About Gitlab specifically, they are not profitable, so a layoff is a normal survival strategy if their cash is running low.)
It's not purely about the recession. If it was, they would halt hiring, keep talent, trim executive bonuses, and be precise about where dead weight exists. Not 5%+ layoffs of major teams and roles.
You see other industries, they're laying people off sure, but we're not talking 5%+. They're doing the above, being more precise about their spending. Like Blackrock, huge losses, and still "only" let go of 500/16000, ~3%.
You will not see tech companies balloon to the same number of employees ever again, if anything they will continue to shrink astronomically. No matter what happens to the economy, as these decisions are not because of the recession or the pandemic, both of those reasons are amplifiers not sources.
Well, I am glad top see so many people deluded and thinking we are not in a recession. The only reason it doe snot look like a recession yet is because inflation is still higher then the Fed Rate. This is why the Industrials are not layoff as many people yet.
> You will not see tech companies balloon to the same number of employees ever again
I feel that people do not understand Macro economics and the complexities of this market with inflated asset prices from years of near zero interest rates. You cannot compare numbers
Economic indicators may look solid, but why? I assert it is because the Fed rate is STILL below the inflation rate. This is why the housing market has not totally seized up yet. The next inflation numbers will be high and then you will see people scrambling again.
Nowhere was that stated. Hopefully you understand that both we are in a recession, and you are being misled as to why these layoffs are happening are both true. As stated, if it was purely because of the recession, the likes of Blackrock would also be hitting 5%+ layoff numbers.
What corporations, consider recession, and what the Fed considers a recession or two different things.
Now, Yahoo is letting off all these people. That does not happen during recession. If you follow what the Fed says about recessions, you’ll be left behind.
