The downside is that the worst performers get the best severance benefits - each round of layoffs reduces the benefits and gets rid of the less expendable folks.
I don't know if the way this works really correlate to worst / best performers in this case or in my experience. I once worked for a company that after some great successes slowly went bankrupt. Naturally there were many episodes of layoffs and in general I would say people were let go based on changing priorities. You could have been a great employee in an area they were going to pursue and you were gone.
After the first or second round of layoffs that I avoided, I mentioned to an older employee that I was really glad to dodge that bullet. "I don't know," he said. "The earlier ones usually get the better deal." This was so true! I stayed until the doors were closed for good and didn't even get vacation paid I was owed. I don't regret it though because as the company imploded I got to try my hand at new roles, and worked with a really clever team that tried heroically to turn the company around.
You assume that the folks receiving severance are actually "bad performers"; layoffs are not the kind of mechanism that cleanly separate "good" from "bad" performers.
Well, when a company starts considering who to lay off, they're not gonna start with people who they think are rockstars. At worst those folks would get reassigned.
Only the first time and even then not really true. Reassignment assumes that reqs haven't previously been canceled as part of belt tightening in those other groups.
Also, by layoff N, you're cutting meat unless you are a massively bloated company, which is somewhat rare this time around (unlike HP, Cisco, Sun, etc. in 2001).
I work at a series B startup, and even we are bloated. It would be next to impossible not to be given the prevailing funding environment of the last 10 years.
Well considering that a large chunk of the layoffs were in recruiting and that you basically have a hiring freeze I am sure plenty of rockstar recruiters were nonetheless laid off.
After the first or second round of layoffs that I avoided, I mentioned to an older employee that I was really glad to dodge that bullet. "I don't know," he said. "The earlier ones usually get the better deal." This was so true! I stayed until the doors were closed for good and didn't even get vacation paid I was owed. I don't regret it though because as the company imploded I got to try my hand at new roles, and worked with a really clever team that tried heroically to turn the company around.