Why is everybody copying layoffs?

When everyone is doing it, companies see it as an opportunity to trim down the fat they have accumulated during the good times.

There's no stigma for them doing it if everyone else is.

If they lay people off in good times, then that is a serious indication of trouble at the company.

If they lay people off in bad times then that is an indication of wisdom and prudence.

I've seen it in multiple recessions.

Growth stage startup CEO here. At the end of last year our board meeting was a pitch from outside investor director to founders recommending a 50-75% layoff, despite several years of runway. The capital class is despondent that the stock market has melted, and the solution is to pull the ladder up and nurse wounds. In my opinion, companies are all responding with their own values informed version of what their financial stakeholders have been urging them increasingly to do.

It's interest rates. Capital is becoming more expensive.

If you are a good CFO, you say:

"Hey remember how we want 5 years of cash, well i just looked at selling bonds and getting cash now is expensive." For tech companies the biggest expense is salaries, so saving cash means firing people.

For the smaller companies they aren't getting investments as easily or at all. They will also need to save cash.

The next few years are going to be different.

Interest rates: https://fred.stlouisfed.org/graph/?g=Z12V.

Imagine you have a money printing machine. And the more people you have to turn the cranks on that money printing machine, the more money you'll make.

Then imagine the Federal Reserve comes along and says, "How would you like a bunch of almost free money?"

The logical thing to do would be to get a bunch of that almost free money and then hire people to crank the heck out of that money printing machine. So that's what they did.

And then the Federal Reserve says, "Party's Over!" and stops giving out the almost-free money. You lay off the bottom performing x% of your entire workforce.

Almost Free Money Party Starts

https://www.cnbc.com/2020/06/29/the-fed-is-buying-some-of-th...

Almost Free Money Party Ends

https://www.bloomberg.com/news/articles/2022-03-09/fed-s-big...

It's rather memetic in a way, everyone thinks everyone else knows best when it happens. Then the mimeses becomes a self fulfilling prophecy and private liquidity starts to tighten up even further than the tightening because of interest rates.

I'm guessing the decision makers here are sometimes aware of the irrationality of the snowball effect, but bet on it being irrational not to copy it before the market reality hits them and they have to make even deeper cuts in future.

Many tech companies made the same assumptions in the last two years (e.g. online transactions/ecommerce will stay at COVID levels). Those assumptions turned out to not be true, so they are course correcting to match the current economic climate.

The size of these layoffs are minimal in comparison with the hires they have done during the pandemic. I see this as normalization more than anything else.

Because they are all owned by the same rich people with the same world view.

Another user said it best in the M$ thread. They're coordinating to lower salaries.

Most employees will be hired back into the industry, probably swapped between these companies... at a lower salary.

That... and culling, getting ready for the economic shitstorm.

Some companies are really in financial trouble, but the others are stack ranking in their shadows: https://en.wikipedia.org/wiki/Vitality_curve

The theory by a certain Jack Welch being that the bottom 10% are "non-producers". Since they don't produce, they can simply be fired without affecting the output of the company.

And since some startups had legit trouble and laid off people because they really couldn't survive otherwise (but then typically laid off >10% or had multiple rounds of layoffs), the others can now do it without taking a reputation hit (again, in theory).

VCs seem to be pushing this heavily.

Personally, not a fan. Yes, it's legally not as easy to fire someone for low performance like it is to fire 10% because "the economy!!1", but it's also not impossible. No need to use scorched earth tactics...

Let’s see 5.5 million workers in tech and 200k get laid off that makes less than 4% of jobs lost. Considering securities took a way bigger haircut, I don’t see what the concern is about.

But the number of H1B visas is NOT decreasing and the big tech companies that own the advertising platforms continue to whine about talent shortage. It’s a farce to reduce their costs by flooding the market with cheap labor.

A lot of different explanations here and they're probably all true as it is a combination:

1. Interests going up means less economic activity (at least how our current financial system is setup) 2. Everyone else does it, so you can trim down without stigma. 3. We are hitting an economic recession and the companies remember how bad times can go so they want to prepare.

A more cynical thing is, as we are hitting this economic troubles ahead, things will most likely get cheaper. If Google have more money they can buy more of their competitors and ensure to bigger marketshare for cheaper.

The most famous tech companies are constantly trying to outdo each other so when one is forced to do cuts, the others try to have a bigger cut. Midsize companies see this and realize that, while they can't play at the same scale, they can look cool too by following suit. Small companies look at this and realize it's an opportunity to finally get the staff that wasn't available before. And while the process is disruptive to lives and productivity, those small companies grow just a bit more competitive with their bigger brethren.

So it's some grand conspiracy that companies are doing mass layoffs as their stock prices drop, but not when they do mass hiring as their stock prices artificially inflated?

What happened to basic logic here?

A) To optimize the company’s stock price, earnings, and/or C-suite bonuses.

B) To liberate the workers from wage slavery.

C) It feels good to do this in your soul.

D) There’s no such thing as bad publicity.

I’m leaning towards A?

I think the Salesforce number is the number from 2023 and excludes the 1000 from 2022

https://www.cnbc.com/2022/11/08/salesforce-cut-hundreds-of-e...

Increased shareholder pressure.

Chance to reset salaries within the company without losing out much on the market (doing layoffs in a similar time frame with others will pretty much leave you with options when you all start hiring again)

Showing the whip to their remaining work force, as the power dynamic becoming even slightly more equal is unthinkable.

"Conpanies overhired during the pandemic."

Where did all those people come from? Was there huge unemployment before?

I suspect that it's an attempt to spread panic and get the "good employees" to accept a salary / benefits reduction in fear of going jobless. VCs demand more profit so a new way to reduce salaries must be found.

I think the better question is

if you look at pre-2020 mass hiring spree headcounts

how many more layoffs approximately need to be done until we’re normalized?

1 mass 10k layoff at 5-7% of workforce: not terrible

1 mass 10k layoff every quarter for the next 4 quarters: probable or not?

Because they added too many people. From end of 2019 they added

Google (through September 2022): 68k

Microsoft (through June 2022): 77k

Amazon (through December 2021): 310k

Meta (through September 2022): 52k

Salesforce (through January 2022): 39k

Most of the layoffs in these places is coming in HR and sales.

This layoff in my opinion will create one of the biggest startup revolutions (similar to 2008) in history. This number is just huge and we will see the effect in 2024 IMO.

One is because they can. Personally I think many are using the economic downturn to fix over zealous hiring during and after COVID.

The Street expects companies to cut costs in a bear economy and there is no greater saving to this than a RIF.

Cause recession? Money is suddenly tight?

There's comfort in the crowd. There's little to no reputation hit for a company to do layoffs now.

Who is everyone?

Why do companies that are known for being overly bloated mean anything for the rest of the economy?

senior management being replaced by ChatGpt?

Beginning of 2022 or 2023?

Because of the global economic meltdown, which we're in the early stage of.

Why don't you know this?

the white collar labor market is being shorted in real time

senior management gonna hire ChatGpt?

Mimetic desire

At this moment central banks worldwide are increasing interest rates to slow down economies and fight inflation caused by money printing during COVID (different countries might be in different parts of their tightening cycles tho).

As a company, if you believe there will be less economic activity in the future, you must cut costs to ensure survival.

Of course one could bet central banks will fail, but historically this sort of bet has held nothing but pain and suffering.

Love him or hate him (I'm more the latter at this point) Elon showed you could trim 70% of the workforce from Twitter and it's still up and running. So with that logic, that being on the extreme side, trimming some smaller % is a no brainer to the boards of most companies now.