[phamilton4]

I get needing to keep a company lean and that businesses operate to make money... But most of these recent layoffs really make me feel uneasy. Spotify is a little different because AFAIK they are still operating at a negative net income, but still let's take a look at this. They're going to let go 600 people.. that's maybe an annual 90 million in savings (150k salary). The company's revenue is about 9 billion with -39 million in net income. So while this move might take them into the positive net income, it's still only going to save them what? 0.1% of their revenue.

I realize it's much more complex than this, but I have been looking at it this way for nearly every recent headline/company and the savings are never really that significant. I'm not saying that people who don't contribute or people who are bad employees should be kept around forever because the company is healthy. I'm just observing the financial "cost" of these laid off employees compared against the companies revenue/net income.

Having been at a company that's doing layoffs and surviving multiple rounds of layoffs myself, the impact (in my opinion) on the remaining employees is quite significant. I have seen people constantly frustrated with losing team members, managers leaving once a few of their employees have left, good employees finding other employment, etc. I'm not sure what I would do in these companies positions, but it seems strange to just cut your workforce when the trend has been going up financially for your company. These types of layoffs just create negative, especially with the current state of the world. Are any of the board members taking a salary cut? Are any of the C level's taking a cut?

end rant, I need to get back to work so this doesn't happen to me.

[bastardoperator]

I don't think it is that complex. Who benefits from these mass layoffs? Everyone at the top benefits, and everyone at the bottom suffers.

You are spot on when it comes to impact of layoffs. If you want to destroy productivity, firing people is a sure proof way of doing that. To your point, I can't take any executive seriously if they're not self reflecting on their own failure. Mass layoffs should equal a new board in my opinion.

[alldayeveryday]

Who benefitted from the mass hirings? Stock holders, and also workers. Did the workers complain when the job market (esp in tech) was on fire and wages were increasing? No. Did they blame the people at the top for their new job and wages? No.

But, now they want to blame leaders when there are mass layoffs. I think the blame is misplaced. The root cause was the stock market, and better yet blame the fed. The incentive was to show growth at all costs, even at the expense of burning cash. Leaders who did not optimize to growth were fired in many cases. But the game changed when stimulus and endless money printing stopped.

[dbingham]

All of these companies laying people off are claiming that they "over hired" or "over extended" themselves during the pandemic and now they need to tighten their belts.

Who made the decision to hire more workers than the company needed? Leadership. Who made the decisions to put the company in a position where it would need to lay people off? Leadership.

Who bears the consequences of those decisions? It's not the people who made them.

It's not like the workers forced the companies to hire them.

This is the problem I have with these layoffs. The leadership who made the strategic decisions that put the company in a position to need to lay people off should face significant economic consequences before anyone else. But that is not happening. That never happens.

And this also is where I push back on people who say that investors are the ones taking the risk (and should therefor reap the rewards of business). It's the workers who take a greater risk - because they have less information, less power, and less of a buffer if something goes wrong.

[willcipriano]

> people who say that investors are the ones taking the risk

Those same people will tell you how the "free money era" is over. Take a look a labors share of the economy, if capitals share is so large due to capital risk, and capital is easier to get, why didn't investors share of the pie shrink?

[alldayeveryday]

Another point that is missed, is that many of these tech companies are now still net positive when comparing new headcount added during pandemic VS the 2013 layoffs.

You can see the data here for MSFT, Google, Amazon, Meta and Spotify. Yes, other companies did not exhibit the same pattern, but the point remains.

[IMTDb]

A working agreement is a contract between two parties.

Who made the decision to join a company that was seeing sudden, unsustainable growth ? Workers. Who made the decisions to place themselves in a position they maybe aren't that needed? Workers.

Who enjoyed significant salary increase due to higher demand for their skills, increasing the cost of their labours while asking for increased benefits such as flexibility, work from home, etc ? Again; workers

There are two sides to the coin here.

[dbingham]

No there are not. There's a massive information imbalance. Most companies do not make enough information public for workers to truly assess whether their growth is sustainable or not. Public companies have to file a certain amount of financial information, but they are very good at playing games with that information to mask their true financial health.

Workers have no choice when it comes to positions where they might not be needed. That could be true of literally any job someone might take. And workers pretty much never have the information to accurately assess for themselves whether or not they think they are needed until they are in the job. Every job a worker takes is a risk in which they are asked to trust the company hiring them not to turn around and immediately fire them.

> Who enjoyed significant salary increase due to higher demand for their skills, increasing the cost of their labours while asking for increased benefits such as flexibility, work from home, etc ? Again; workers

Work from home and flexibility are mutually beneficial. Knowledge workers perform better when they are able to do their work in the way that best fits them. This is not some benefit the company pays to hand out, it's the company structuring itself in a way that most benefits it.

As for salary, tech workers are still underpaid. Tech work is not factory work. The companies revenues are entirely generated by the knowledge, skills, and work of the workers. There's no physical machine the company is adding that allows the workers to do their work which they couldn't themselves easily acquire. The very fact that profit exists in tech companies tells you that workers are being underpaid.

The only thing capital brings to the table in a tech company is the ability to operate in the negative - to scale head count (and thus to some degree productivity) faster than revenue. That is not something any tech worker needs, and most tech companies almost certainly could have grown far more sustainably by growing along with their revenue. That is something capital pushes, hoping for outsized returns on the grown on its investment.

So, again, who should be suffering the consequences when the economy turns down? Keep in mind, paper losses of a falling stock market are not true losses for investors. As long as they hold through the fall - assuming the company doesn't go under completely - they'll most likely recover everything and more, but losing a job and therefor income can be life changing for a worker.

[CHY872]

I think there's probably a few things here that are worth a comment:

- Information imbalance: from people I've talked to in decently senior roles at even very large companies, it might be surprising to learn that information can be poor at every level, because generally the people who are responsible for hiring at even fairly senior levels are not directly also responsible for expenditure, especially when macro-economic conditions are responsible for those financial decision. Essentially, the person who is responsible for setting the hiring targets to enable 20% growth is likely not responsible for modelling what happens if the cost of short term debt goes from 2% to 10%. Probably this is most likely in the superscalers, and it's likely hardest in the companies from 2-5k people - with a tech org of about 1k, you're likely acutely aware of the impact hiring strong people can have on your product while lacking the numbers to approach the problem analytically and with a sophisticated finance org. Basically, the number of people who could reasonably be expected to consider 'if we hire too many people, we'll have to fire them' as a significant part of their brief is smaller than you might think.

- 'There's no physical machine the company is adding that allows the workers to do their job which they couldn't themselves easily acquire'. Ignoring the focus on the physical machine bit and focusing more on the creative part of 'what does the company add, what do the people add', your claim may be true in some parts of industry and if you're in that side of industry I lament your situation, but for large parts of industry it's unequivocally false. There's a huge amount of value add that the machinery of an engineering organisation adds. In the more creative spaces, anyone who's operated in a truly high performing culture will have observed that a lot of the culture of building comes from the grouping of people who've been very, very carefully hired for, who've been carefully placed on team together, where memetic techniques have been used to proliferate certain positive behaviours, raising people up. We succeed as a team and fail as a team. You can see this over and over in so many testimonials - the stories from those who worked at Xerox PARC, stories from the MIT LISP hackers, back 50 years, all the way through hearing about the work the M1 team was doing, seeing the companies that spawn hundreds of startups from their alumni. And that's not to talk about the companies who specifically use process and ritual to ensure that engineers are consistently at the bar across massive orgs, from Google's exacting bars for code quality all the way to the consulting arms of Oracle, CapGemini etc who can approach repeated problems and get the most out of their engineers in a space where it's arguably harder to hire talent. And this is totally forgetting the huge non-SWE parts of orgs required to enable success - sales, finance, marketing, etc etc.

- Tech workers are still underpaid - think there'll be a rude awakening coming for you I guess. People across the world get paid based on how much they can get in the market (and if you're already at the company, the switching cost). There's room for places that do it differently, but not much room. If a large number of qualified people join the labour pool, you can bet that the practical market comp goes down.

- Paper losses are not true losses and you can just wait for the price to go back up: Honestly, that's wrong on like every level. Firstly, at the company level, there's a very real risk for many of these companies that they go bankrupt. Spotify has something like $2.8B in cash equivalents, has revenue of $9B and expenditure of about $9B. If their revenue dips by 20% due to e.g. a global recession, that cash supply will last them about 18 months. Before they get there, they have to raise more money. If raising via equity, they're going to be raising at their new and lower valuation, so their investors take a huge haircut. If they raise via debt, they'll be getting charged a lot on interest (because their risk of default is nontrivial). My brief but non-zero insider knowledge of some of these debt deals make it very much sound like a sellers market. A smaller company might expect to see 15% interest demanded - if you need $150M, you're in trouble. The staff who Spotify are dropping today likely represent $300M over that same 18 month period. You can bet that they'll be making this cut after scraping the barrel everywhere else.

Now, for the actual investors - if you take a massive paper loss, you're basically not getting that money back on a reasonable timeframe. https://danluu.com/norstad/risk-time/ is a good article on this topic. The simple way to think about it is that if in the good years you get 4% a year ROI across your portfolio and then you take a 50% haircut once, it will take you 18 years to make that difference back. The people who invest in tech companies are in large part not rich billionaires looking to pay for their next yacht - they're institutional investors, mutuals, pension funds who are looking to maximise returns for their members.

[iancmceachern]

These details are not often not apparent to workers, and many times the folks doing the hiring actively hide this kind of thing from applicants. So it is not the workers fault.

[pwinnski]

Recruiters have reached out to you from two different companies. Company A and Company B are both offering compensation greater than you're currently making (which is almost always true for most workers), and you ask questions about the viability of the company (hugely profitable) and the job (very much needed).

On what basis are you to know that despite being hugely profitable, Company A is going to get rid of 28,000 employees, while Company B is instead going to cut CEO compensation by 40%? How can you be sure whether you're joining Alphabet or Apple?

There is nobody to blame for any of this but the leadership making poor decisions for which they won't face any consequences.

[vineyardmike]

> Company A is going to get rid of 28,000 employees, while Company B is instead going to cut CEO compensation by 40%? How can you be sure whether you're joining Alphabet or Apple?

As a recently ex-alphabet employee: apple never went on a hiring spree.

They had restraint the last few years, with a significantly smaller workforce, and the result is (hopefully) no layoffs.

Fast money moves quickly and it might move away from you.

We should also be talking about Yelp at the start of the pandemic, who was predictably in a precarious situation. They offered to employ people part time (and still do) instead of mass layoffs. You can work as an SDE at 80% time instead, which gives you a stable (but smaller) income in a scary time, and it gives the employer a discount to save without layoffs.

Personally, I would take 80% or maybe even 60% time at my old Google job over a layoff. Everyone comments about “rest and vest” anyways, so 75% may be perceived as appropriate anyways.

[pwinnski]

I'm sorry for you losing your job, since it sounds like it wasn't voluntary.

I understand why Apple hasn't done mass layoffs, but I'm still stuck on how you know that during the recruiting process. If Apple tries to hire you in January 2020, how do you know they are going to be more circumspect about hiring over the next three years? Apple hired a large number of people during the last three years, just as Google did. NOW we know it was a MUCH SMALLER "large number of people," but it was still quite a few. If you're talking to recruiters from each, how do you know?

I don't blame anyone for taking a job with Amazon, Google, or Facebook. I mean, I wouldn't personally work for any of the three for my own reasons, but I don't think it's fair to blame people taking jobs there for their own layoffs.

[vineyardmike]

> I understand why Apple hasn't done mass layoffs, but I'm still stuck on how you know that during the recruiting process.

You can't truly know. But you can vaguely see how many employees there are from news/earnings reports/etc. There's a lot of data in the moment, but you can never know how to process it until after-the-fact.

That said, it may not matter. Like you said, you can't blame anyone for taking a job, and they pay well, and part of that money is "boom/bust" cycles. Its part of the industry IMO.

[sausagefeet]

I've been thinking about this question as well. Is it better to have not given these people a job at all rather than to have given a job and then fired? I don't know. There are a lot of ways to look at it that all could be right.

[f6v]

> Did they blame the people at the top for their new job and wages?

Companies aren’t very upfront about over-hiring.

[alldayeveryday]

It wasn't over-hiring given the environment at the time. It was over hiring given current environment. It seems clear that companies who took a more conservative approach to hiring have come out better for it. Not all companies could be so lucky. Some had activist investors who aggressively pushed for growth or else pushed out leaders. Messy world we live in.

[iancmceachern]

It was. It's naive to think that a boom economy will last forever.

[moonchrome]

This - basically both decisions are driven by stock market charades - growth at all costs when interest was low - cost cutting when revenue drops.

[ss48]

In this respect, I think that they're hoping that if they get enough experienced and higher income people laid off, that can compensate for the loss in productivity and the reduced workload with whoever remains.

[chitowneats]

> If you want to destroy productivity, firing people is a sure proof way of doing that.

Not as sure proof as paying people to do nothing. Or worse, paying people who are actively working against the interests of the company, intentionally or otherwise.

[bastardoperator]

If I pay someone to do nothing, who is at fault? The person who shows up ready to work everyday or the person who made a bad hiring decision and doesn't have the work for that person? I'm not arguing against layoffs, I'm arguing that the people making the hiring mistakes are not accountable. If I as a CFO give the green light to increase the company's workforce by 10% and two years later make a full reverse, that CFO/Board should be let go too or since they're all about taking "personal responsibility" should step down.

Most companies employ a board of narcissists that only care about themselves and their wallet and they get paid the most so I'm not sure your analogy is hitting with me.

[alldayeveryday]

> Most companies employ a board of narcissists that only care about themselves and their wallet

My read is a bit different, in that the board optimizes to the stock price above all, which yes they benefit from but that just means their personal interests are in alignment with the interests of stock holders. I do not blame the leaders so much as I blame the model. Leaders who do not optimize the stock price are quickly expelled. When the stock market was flush with covid stimulus cash, and even before that whilst the market was hot, the name of the game was showing growth. Companies were incentivized to show growth even at the cost of burning cash. Companies took on massive debt and in many cases, either did stock buybacks and/or hired rapidly in an effort to scale their organization for growth. When the market fundamentals changed, and money started swinging back towards safer bets (cash flow positive companies), suddenly the game had changed and leaders needed to react accordingly.

I guess in summary, hate the game not the player.

[bastardoperator]

I think you can dislike the behaviors being exhibited and the game simultaneously. I hear you, it's the reality of the situation we live in now, but it's not a good system for the vast majority of people.

[deltree7]

This is extremely naive take. No one can predict the future.

If I hire a bunch of construction workers expecting to sell 100 homes and suddenly the housing market collapse and I need to only build 50 homes that I have contract for, I need to fire some construction workers.

It is as simple as that.

No one can predict business cycles and that is the fundamental driver of sales and input costs. If one can successfully predict business cycles, they can be a superior macro investor and make billions.

The entire HN crowd talks about as though they never made any bad future decisions.

How many of you invested in stocks in 2021 that is down 50%? Did you cut down on subscriptions? Why don't you fire yourself for making stupid decisions?

[bluedino]

> I need to only build 50 homes that I have contract for, I need to fire some construction workers.

Just like during a boom when a carpenter can charge 3x his hourly rate, pick and choose his jobs, and anyone with a pulse can walk onto a construction site and get a paycheck.

[buffington]

Since people predict the future all the time, I'll assume you mean that it's a lot more difficult to make predictions in complicated systems like housing markets.

Assuming that's what you meant, let's consider the "I" in "If I hire..."

If you're hiring someone, whether it's for your home building business, or your tech company, you're not doing it unaware of the market you're operating in.

No real estate developer is ignoring potential futures. Those that do fail fast. That someone is hiring is evidence of that someone is making predictions. They're predicting at least one potential future where the person they hire helps the company achieve their goals.

Speaking from experience, when I hire people, I am most definitely thinking of the potential future that person helps steer a company towards. I'm also very aware of what will happen if I can't afford to hire someone. Sometimes it's worth risking potential market effects that'd make it so I can't afford to pay that person, but usually it's not.

> No one can predict business cycles

Happens all the time, and people frequently make accurate predictions.

> they can be a superior macro investor and make billions.

Tell me, how did the current crop of billionaires become billionaires? Certainly not by deciding that no one can predict the future.

[deltree7]

Have you built a Billion $$$ company? If so your comment about your own hiring is worthless. Anyone can run a small business. There are literally millions of SMBs

For large companies with public investors, there is a risk of not scaling at the right time.

History is filled with failed companies that didn't scale during 2012-2022 and were conservative.

History is also filled with idiots who claimed bubble and predicting crash every year.

If I have limited ambition of staying a $10 Million company, I can absolutely play it safe and hire very conservatively.

Scaling is a Risk/Reward play and that's what the investors pay the premium and expect rewards

[lotsofpulp]

> If you want to destroy productivity, firing people is a sure proof way of doing that.

In Spotify’s case, the business not making money, and hence not having a stock price that keeps up with the market, is also a way to destroy productivity. Higher productivity people are probably not going to want to work at a charity.

[bastardoperator]

So I guess you really dislike people in the OSS space who are considered the most productive of us all and essentially give all their work away for free, kind of like a charity.

Spotify is a jukebox. You put money in and music plays. It's not a new concept in the slightest capacity. If they haven't figured out how to turn a profit now will they ever?

[lotsofpulp]

No, it was badly phrased. Rephrase it to mean that the proportion of people that are at Spotify who care a decent amount about competitive compensation is probably pretty high, and so they will be paying more attention to the business’s prospects when evaluating their options.

[floor2]

> If they haven't figured out how to turn a profit now will they ever?

The corporate entity Spotify will never turn a major profit, but that's by design.

Spotify made a deal with the devil to come to terms with the record labels, and is now fully baked into a "Hollywood Accounting" set of terms (https://en.wikipedia.org/wiki/Hollywood_accounting) which ensure the real money goes to the power players of RIAA cartel.

It turns out, if you have good lawyers, you can structure a set of entities such that neither the artists nor the public shareholders of the streaming service get the money, but rather, the opaque production company or record label that sits in between it all.

[lotsofpulp]

There is no reason for conspiracy theories. Spotify simply made a bet in being able to be more than a commodified middleman, which has not yet (and may not) pan out.

Warner/Sony/Universal music groups are also not opaque, they are all publicly traded companies, just like Spotify. It just so happens that they have more negotiating power than Spotify, so they can dictate more favorable terms.

Also, artists are free to make deals directly with Spotify/Google/Amazon/Apple if they want to bypass the record labels.

[mikhael28]

OSS is amazing. But needs to figure out how to make money, otherwise it's not sustainable.

You ever hear the phrase 'theres no such thing as a free lunch'?

[qikInNdOutReply]

Have you ever seen some of the heavy hitters, programing game engines for open source? These guys do that, cause they want to recover some sanity after programing crap for companies all day. Sorry to say it, but great works will never flourish in some monpolistic mega cooperation with tribal infighting.

[WeylandYutani]

Spotify problem is that they are not a monopoly. Competition is brutal in music streaming.

I have no idea if Apple or Google are more profitable? Maybe someone can give an insight.

[bobkazamakis]

>Higher productivity people are probably not going to want to work at a charity.

Have you seen the things people create in minecraft entirely for free?

[lotsofpulp]

Replace with "higher productivity people in an organization like Spotify", which I doubt many people are "passionate" about like they would be Minecraft.

[shmatt]

It's very naive to think these huge orgs don't have dead weight which is much bigger than 6%. If you start figuring some of your moonshot ideas aren't hitting their OKR's, you have a few options:

* Just let them keep doing whatever without delivering what they claim they can

* Create new moonshots for them just because

* Move them to other products, but that doesn't mean they'll create more value as an org with (now) double the people

So what ends up happening is re-orgs which actually mean shutting down some failed ideas, moving the high performers to other products, moving low performers out of those products, then firing people who were left without a team.

Plus you need to take into the equation an assumption that because of how things look right now, natural attrition will be almost 0 in the next year or 2. If you're used to 5% of people leaving on their own per year, assume its closer to 0% for 2023 and 2024

This is way beyond the cynical claim that this keeps the stock up for another 2 months before it goes down again. There are teams delivering nothing. There are teams delivering 90% of the companies income. You can't just decide not to fire anyone, move 100% of the employees to the 90% income team, and think that income will grow just because more people work there now

Now, do these companies do it right? really finding the good people and keeping them, and removing the weaker people, thats up to debate

[bananapub]

>It's very naive to think these huge orgs don't have dead weight which is much bigger than 6%. If you start figuring some of your moonshot ideas aren't hitting their OKR's, you have a few options:

there's been so many versions of this low quality comment on every tech-company-mass-firing article. why is so little thought put into it? if the company feels it can save on salaries then:

1. close down projects that aren't effective/profitable/whatever

1. fire people who aren't effective/profitable/whatever

mass broad spectrum layoffs like these are not that, they're "oh, let's just randomly put holes in the org chart to save X% of salary and see how it goes". would you suggest saving data storage costs by deleting 6% of files? would you suggest reducing compute by turning off 6% of jobs?

edit: and presumably a counter argument to the above is "firing people in an optimal way is hard", to which I say lol of course it is? work harder, then, before firing people. "it's hard" isn't an excuse to do some random unrelated and useless thing instead.

[SpicyLemonZest]

Why do you think that mass broad spectrum layoffs are random holes? From what I've seen they follow exactly the structure you're describing - there's a company-wide search for projects that aren't pulling their weight, those projects are shut down, and the employees whose roles no longer make sense without the projects that will be shut down get laid off.

> would you suggest saving data storage costs by deleting 6% of files? would you suggest reducing compute by turning off 6% of jobs?

I would, and I've seen mandates like this achieve good results multiple times in my career. It's very rare to have a team that can't make do with 94% of their data storage footprint, but it's very common to have a team who would find it temporarily inconvenient or would rather prioritize other work over reducing it.

[elijaht]

> Why do you think that mass broad spectrum layoffs are random holes? From what I've seen they follow exactly the structure you're describing - there's a company-wide search for projects that aren't pulling their weight, those projects are shut down, and the employees whose roles no longer make sense without the projects that will be shut down get laid off.

I’ve been through 2 companies with layoffs in the past year. What you describe is not how either worked. There were some targeted shutdowns, but many teams also just lost a member or two. In both cases my teams lost important people which have a really bad impact on the rest of the team.

[bananapub]

> Why do you think that mass broad spectrum layoffs are random holes? From what I've seen they follow exactly the structure you're describing - there's a company-wide search for projects that aren't pulling their weight, those projects are shut down, and the employees whose roles no longer make sense without the projects that will be shut down get laid off.

? what are you talking about? The Google layoffs weren't like that, nor the Meta ones nor the Amazon, and I'm pretty sure the Spotify ones this article is about aren't either, though the post is very short.

[deelowe]

I know quite a few people who were laid off at this point. I'm not seeing what you are. It's quite random.

[oxfordmale]

It is also naive to think layoffs effectively target dead weight. As more extensive layoffs are often decided by senior management rather than team leaders, such releases have a high signal-to-noise ratio.

Natural attrition will also not be close to 0 in the next year or 2. Even if the markets stay stagnant, there will be the usual musical chairs turnover (a Facebook employee joining Google replacing a Google employee who joined Facebook).

[qikInNdOutReply]

Layoffs are usually family within company graphs, with this family then naming the "guys" necessary for the departments to do there job. Means, you have dead weight forced to identify the vital organs, allowing to fire the "medium" weight. Yes, connections or talent are everything. No, its not fair.

[cgio]

As I mature in this industry I find it hard to agree, even though I draw my experience from organisations outside the FAANG if it’s still a thing. Dead weight, is in my experience no more than 2%, where I qualify dead weight as someone who cannot add value or is actively detrimental. Most people can add more value than they currently do. Many more people do not match their capacity, but that is mostly out of bad allocation of work etc. That bad allocation could be improved with restructuring but crowded and rigid management hierarchies are often the reason organisations don’t grow at the risk of diluting the self perceived value of upper-middle management. I think this round of layoffs will see a rebalance across sectors with banking etc. looking at huge resourcing demands that are inelastic (e.g. regulation) pulling in some of the talent. Similar to Covid layoffs outside tech, my prediction is the inversion will start soon.

[whstl]

I agree. But IME the number of "dead weight" varies heavily depending on some factors. I've definitely seen teams with >10% dead weight, because of a combo of bad hiring process, coupled with management not caring to check on them. Of course that might be a biased view: in the cases I know, the managers couldn't manage to get them back to speed, but those were managers that had failed on the hiring/day-to-day already.

[twawaaay]

> It's very naive to think these huge orgs don't have dead weight which is much bigger than 6%.

Pretty much my experience that when a company keeps growing, at some point most corporate employees will not actually be contributing anything.

Paradoxically, constraining teams with resources (but allowing them to make their own decisions) makes teams more efficient than if they had resources. Necessity is the mother of invention -- when people are forced to deal with the problem they will find a solution.

Corporations are worst possible places to be efficient -- not only you have the resources (and most people get lazy when they don't have to be inventive) but you are also typically not even allowed to be inventive as companies typically work towards centralising decisionmaking rather than allowing teams to steer themselves.

Same goes for hiring. I worked with teams which hired anybody because the manager was forced to hire quickly or loose budget. Or managers hired people just to enlarge their estates because headcount was how they decided who is more important.

So I completely understand why companies are laying off people. The only question is whether they are too optimistic about being able to identify who to lay off, exactly.

In my experience it is pretty difficult even for managers to understand who are best contributors in their teams. Get removed 2-3 levels from a line manager (2-3 levels is where the decisions would typically be made) and you can pretty much dream about understanding who to lay off, individually.

[eigen-vector]

Presumably they already have performance processes that eliminate "dead weight". Be assured that layoffs never really mean that usual performance bases firings are paused. It's pretty much always happening on top of existing performance processes.

[LanceH]

Layoffs like this mean you can blame external forces like the economy rather than saying, "our projects failed".

Some of these layoffs may have been coming anyway, but not the corporate statement about them is different.

[tootie]

I've seen this play out the consulting world which puts a much finer point on the process. There, work is all project-based. We build something for a customer and then maybe build another thing or otherwise move on to something else. There's basically no long-term value for our own business beyond unquantifiable things like reputation. When the pipeline dries up and there's not enough work to keep everyone staffed, layoffs happen. And as much as we tried to be meritocratic, being good at your job was less visible than being ok at your job while working on a valuable project. It was incumbent on managers to do emergency shuffling if they wanted to stash top performers on good projects or vice-versa, but it wasn't easy.

[lumost]

After 1-3 years of tenure things start to look different imo. Sure you get bad hires, and you also get people who become lazy. But on any given project you tend to have some split of people who work on the wrong things, don’t work on anything, or fail to deliver. People who consistently hit one of these categories usually move on on their own - either because of culture fit or comp growth. It’s much easier and healthier to focus on retaining your best people. As long as someone is doing something, and isn’t a net drag on the team - firing seems to be more pain then the alternative in software.

Assuming that the industry returns to its standard 30-50% attrition year on year.

[ROTMetro]

And those people become lazy because they put A LOT into the company those first 1-3 years. And after they coast a bit, they usual come back strong because 1. They are intimately familiar with the corporate culture and the internal software paradigm and 2. They have emotional investment. It's like getting divorced in your early 40s because things are not the same as a few years before, and not getting to the good part of a relationship.

[lumost]

Absolutely! I also didn’t quite see it when I moved around earlier in my career - but many of the more tenured folks simply know how to work efficiently in the organization.

They tend not to pick up meaningless fights, or invest time in work that the org doesn’t care about, when their are debates - they can usually settle them.

In hindsight I spent too much time early in my career on work no one cared about. I spend less time on that stuff now and have better wlb and feedback to boot.

[conor_f]

> Create new moonshots for them just because

This seems disingenuous? They're "moonshots" as they've low chance of succeeding. You could pick the most proficient engineers and out-of-the-box thinkers and put them working on a "moonshot" and they'd still fail. Giving that team a new lofty goal seems like a great idea since they have experience working on large problems and can likely prune good/bad approaches much sooner than a fresh team.

[jupp0r]

You also transform a good percentage of your high performers into low performers (until they leave and high perform somewhere else). I've seen it happen every time.

[jobs_throwaway]

> If you're used to 5% of people leaving on their own per year, assume its closer to 0% for 2023 and 2024

Strongly doubt this claim. Especially for employees of a sought-after firm like Spotify, there will always be people jumping ship either to other big co's or to join startups/start their own thing

[karl11]

Revenue is irrelevant when looking at savings, you have to look at net revenue or gross margin. Majority of Spotify’s revenue goes to record labels. If you are making -40mm / yr then a $90mm swing is a huge deal.

Also, can’t just look at salary - employees cost a lot more than their salary. 10% employer tax, health care, other ancillary benefits, IT equipment / space, etc. A $150k salary probably costs the company $250k all in.

[oxfordmale]

The cost picture is as follows:

money saved on staff reduction - money spent on layoff packages - (temporary reduction in productivity, because of lower staff morale)

Research shows there is no long-term benefit of layoffs other than the short-term gain in cash flow. Layoffs are only beneficial if they are needed for survival of the company

[thehappypm]

Lower productivity is highly questionable.

I’ve really only seen layoffs boost productivity. Suddenly there is less overhead and fewer cooks-in-the-kitchen.

Morale hits are real, but tend to fade if people feel confident that they’ve survived another day.

[oxfordmale]

Research shows layoffs result in a lowering of productivity:

https://www.boardoptions.com/Learning%20from%20the%20past%20...

https://pavestep.com/post/the-effects-of-downsizing-on-remai...

https://knowledge.wharton.upenn.edu/article/how-layoffs-cost...

https://garfinkleexecutivecoaching.com/articles/career-advic...

https://www.forbes.com/sites/radhikaphilip/2020/07/23/the-pa...

[bastardoperator]

You arrived at this conclusion anecdotally. You can't do your best work with a constant cloud hanging over you, doesn't matter who you are.

[thehappypm]

Morale hits are real, but tend to fade if people feel confident that they’ve survived another day.

[oxfordmale]

Layoffs result in a 30% increase in staff turnover. As markets tend to be more challenging, it can take some months before people actually leave. This can have a knock on effect, especially if senior and respected staff leave.

[ulfw]

No they don't, because you never know if you're next. I have a bunch of friends at Google (you know, one of the richest companies on the planet and 94% 'survived' another day). Many are scared. You don't know if there'll be another round and if you're in it. People aren't now magically more productive because they survived and their peers didn't.

[nibbleshifter]

Almost every round of layoffs I've seen has resulted in people doing pointless bullshit to "look busy" while not actually doing anything.

[austinpena]

Can you link that research?

[oxfordmale]

It is in the thread below.

[notyourwork]

My vague recollection from an HR person was employees are 1.5x or 2.5x (something like that) their salary as a cost to the company. So $250k sounds about in the middle.

[MuffinFlavored]

What does laying off 600 people do to their net revenue/gross margins?

[ROTMetro]

Do Swedish companies pay a lot into health care? Can you recover the cost of the IT equipment already paid for since these are existing employees?

[napoleongl]

Health care is paid through taxes in Sweden and your access to it is not dependent on your employment. You can have a private insurance (and I assume a company like Spotify does) but it’s mostly for getting access to some private doctors offices with shorter queues to some things. We don’t really have privately run hospitals as the US.

[nytesky]

The layoffs aren’t about actually saving the cost of those specific employees.

Instead, the threat of being laid off is being used as a stick to bring the remaining employees in line — productivity has been lower the last few years, and leadership has no real way to measure on an individual level or how to improve it, so putting the pressure on employees is a tried and true tactics.

Further, they can make lower TC offers to future employees, and give lower raises, pointing to the “need” to do so as demonstrated by earlier layoffs.

So you lay off 6% but freeze the wages of the remaining 94% (who are grateful to have a job rather than carping about wages not tracking inflation) — big savings.

[disruptiveink]

Pretty sure layoffs decrease productivity of the remaining employees, unless you're a H-1B visa worker, no one "works harder" after layoffs. Morale is low, resentment over "now I have to do X as well" grows and productivity gets hit.

[nsxwolf]

I don't stay after a big round of layoffs for the same reason I'd rather buy stocks when they look like they're going up, not down.

The company is signaling that it is not doing well - why shouldn't I leave for a company that is doing well?

The only way I'll stay is if you want me to be part of a real plan to turn things around. And my involvement in that has to be rewarded - not just at the successful end of that process, but immediately.

[myth_drannon]

The thing is there is no important signal about a specific company here, everyone is doing layoffs, the same as in previous years that everyone was in a hiring spree ignoring the actual company fundamentals. You can't just leave a company which is laying off people because everyone around you is also doing layoffs!

[type-r]

Nearly all major tech companies have announced layoffs in the last few months. Which companies would you say are "doing well" right now?

[pm90]

I’m assuming that with the major tech companies all laying off it becomes difficult to find another gig.

[nsxwolf]

I'm hoping I don't have to find that out any time soon, but I prefer staying in the space of unknown enterprisey, line-of-business backend orgs. FAANG/MAANG and adjacents seem to be allergic to these roles and I never see their resumes.

[nibbleshifter]

Mid size companies in the b2b space are still hiring. Companies that consumers will never have heard of.

[nytesky]

Are they paying FAANG salaries at $300k+?

[phamilton4]

This is my main point from personal experience. I worked at a company that had almost yearly layoffs (caused by a late transition to the online world and competition). I knew whole teams that were reduced to a single person. Now that person has to do support 24x7, new feature requests, general information requests etc. Thank god I did not have to deal with that. Also it's very difficult to hire when people know the company is/has been doing layoffs.

[anon84873628]

I always assumed the rationale was this:

That employee now doing extra work accepts it because they are either scared of being laid off themselves, know they can't find a better job elsewhere, have irrational loyalty to the company, whatever. In any case the company benefits by exploiting the person.

If instead the person leaves, then the process fails and the issue rolls up the org hierarchy. Now the leadership evaluates if this process was actually necessary anyway. If not, let it die or let the shit roll downhill elsewhere. If it was important, invest in the refactor that everyone knew was probably necessary anyway.

For corporate leadership it's an easy way to either squeeze more out of the peasants, or force a reevaluation of priorities.

[abeppu]

A bunch of the recent layoffs aren't considering individual performance as a primary factor. Whole teams get cut if that project is no longer a priority. Roles get cut as part of a reorg.

When this happens, this doesn't push employees to do anything better; it sends the message that even if you're great at your job, you may be cut because the company changed its mind about what's worth pursuing.

[MuffinFlavored]

> productivity has been lower the last few years

Any statistics to back that up? I've read both narratives (this one and the one that conflicts it) countless times over the Internet the past few years. I have no idea what is true.

A lot of people defend work from home and say it makes people more productive/work more overall. If that were the case, why are some of the brightest companies like Google/Apple against it?

[nytesky]

Not sure about stats, but it’s definitely the impression of companies leadership.

https://www.washingtonpost.com/business/2022/10/31/productiv...

[mattgreenrocks]

It's hard to be surprised by this.

The pandemic may have acted like a reset on how work could fit into one's life. There's no going back from a perspective like that. I suspect that the idea of a career ladder simply doesn't work as well on younger generations as it may once have, for it may assume that growth occurs (making room for people).

It also assumes that people trust institutions to take care of them.

[deltree7]

Bingo! Not many people realize some firings actually increase productivity.

[esel2k]

Source? Because there is actually research beeing put into these results, that it decreases productivity:

https://www.gsb.stanford.edu/insights/why-copycat-layoffs-wo...

[ReflectedImage]

Perhaps but not at any of the companies currently doing the layoffs.

[baby-yoda]

Broadly speaking, my opinion is alot of businesses are getting the feeling that the next 6-12 months are going to be bad. Layoffs, decreased consumer spending, rates continuing to rise, banks tightening with lending, ad spending dries up. A vicious cycle is starting to accelerate. Some companies are just going to follow the trend, sure, but I just think there is probably alot of internal data suggesting a slowdown and its too much to ignore.

Spotify in particular, their revenue is Ads and subscriptions. Consumers can very easily cut a streaming subscription if money starts to dry up, same with companies purchasing ad space. They do have lots of cash on hand so I don't think they are anywhere near risk of going bankrupt. I'm curious to see their earnings release next week and any changes in cash flow.

Another thing to consider is the opportunity cost of spending 90 million, there might be other internal priorities in the short term like acquisitions or paying down debt that supersede any potential "brain drain". Not to downplay the layoffs of course but the dynamic of competing priorities and larger headwinds is just difficult to navigate.

[achiang]

You need to use the fully loaded cost of an employee when estimating opex savings, which includes health care costs, retirement funding, etc.

Rule of thumb is that fully loaded cost for US employees is approximately 2x yearly salary (although people who've actually run a company can correct my potentially stale or incorrect understanding).

[phamilton4]

Understand 2x, I was also looking across all the jobs at spotify. There are some that go as low as 70k salary, a majority seem to be 170k+. It was just for ease of calculation. even if we take 500k that's still 0.033% of revenue -_-

[DeRock]

You aren't using percentages correctly, I think you mean 3.3% (and 1% in your original comment). Also, as pointed elsewhere, revenue is not really relevant, majority of that cash flows directly to artists/labels.

[thehappypm]

Again, revenue is not really all that relevant for this kind of business. They’re a low margin business because they must pay huge bills to record labels. R&D doesn’t cut record label costs.

[pc86]

I'm having trouble understanding why 'revenue is not really all that relevant.'

If you're burning $40M a year, and you press a button to save $90M a year, yes your label costs are the same but how are you not now at +$50M a year?

[thehappypm]

Payroll is a cost, so it’s more relevant to think about a layoff in terms of its impact to profit (your example) than revenue. Lots of companies sell at a tight margin, so tiny cost savings as a percent of revenue can be a big difference in profit.

[CydeWeys]

2X is my understanding as well. Whatever you think an employee costs based on TC, double it to get the rough cost to the employer. Some other big employer costs related to employees you forgot include employment taxes, hardware/software expenses and licenses, and office space and related perks.

Also I suspect that $150k as the mean TC of those being let go is low. Spotify might be saving up to $500k all-in per employee let go.

[hello_moto]

> Whatever you think an employee costs based on TC, double it to get the rough cost to the employer.

Hardware/Software expenses, office spaces, health insurance are fixed cost.

$150k employee vs 200k employee will have the same amount of fixed cost (assuming both are in the same function).

[WastingMyTime89]

> Also I suspect that $150k as the mean TC of those being let go is low.

Probably not low. It's an enormous salary for a developer outside of the Valley and Spotify has plenty of employees which are not in the USA.

[pc86]

I applied for an "entry-level" EM role with Spotify in 2021 and the base was 260-275, plus a generous bonus target and stock. TC would have been pushing $400k, for a fully remote USCAN-based role. I say that strictly as a calibration point - it's unlikely engineers are pushing half a million (maybe at the Staff+ level) but there's also not likely any engineers before $150k TC. I'd expect even mid-levels to be in the $200-225 ballpark but could be wrong.

I think $150k median is probably on the lower side of correct, but not enough to meaningfully impact any of the numbers anyone is discussing here. It's close enough.

[lotsofpulp]

The stock price has more then halved since 2021, and based on their business model and history of profit, as an employee, I would not value the stock portion of compensation much.

As far as I can tell, Apple/Google/Amazon will always provide the ceiling price for how much Spotify can charge its customers, hence capping revenue, and the 3 record labels will always extract just enough to keep Spotify operating.

In a similar situation to Netflix, Spotify’s play would have to be to create their own content to lower their costs, but that is much easier said than done.

[sarchertech]

That’s what they attempted with podcasts.

[phamilton4]

TBH I think the average Sr. Developer is ~130k in the US. Of course this varies so much depending on the role and company.

[bumby]

The average software developer (not sure that it's pertinent to constrain it to "senior" devs) is $120k in the US. In San Francisco, the median is $161k [1]

[1] https://www.onetonline.org/link/summary/15-1252.00

[CydeWeys]

Spotify pays significantly above the average, though. Not as high as the top-tier FANGs, but still high.

[CydeWeys]

Levels.fyi supports me at least: https://www.levels.fyi/companies/spotify/salaries

[phamilton4]

I commented above, whether the salary is 150k, 250k, 500k... the impact doesn't change 0.1%, 0.2%, 0.33%. Not sure it really matters. Again I'm not defending lazy employees or saying employers are bad for doing this. I feel there is a hidden cost of layoffs from my own experience of being at a company doing round after round of layoffs.

[CydeWeys]

Agreed it doesn't matter much in this case, but it is a common misconception that employees don't cost nearly as much to employers as they actually do, so I wanted to step in and correct that.

[michaelbuckbee]

My presumption is that it's both signaling to wall st to keep the stock price up (and for the C levels to keep their jobs) and also that companies did over hire in all sorts of weird ways in the last couple of years.

[apercu]

If the end game is suppress salaries and increase control (by forcing people back to offices), maybe the morale hit is worth it over a couple years.

[eloisant]

The saving isn't that obvious because they might need to hire contracters (sometimes even the same worker) to make up for the lost workforce.

Also severance packages are expensive! In addition to all the costs associated with a big layoff plan like this one.

[marginalia_nu]

Probably more about sending a message to anxious tech-shareholders than anything else. 2023 is not the right year for a tech investment to appear to hemorrhage money.

[nibbleshifter]

> Probably more about sending a message to anxious tech-shareholders than anything else.

That's basically the whole deal.

You have to be seen to be cutting costs, to assuage the board and shareholders that you are performing your duty.

Layoffs are an incredibly easy way to do that.

[overgard]

Considering how generous the severance is (a good thing), I wonder if it will even save them much money this year (granted, there will probably be some resignations from people that disagree with the direction).

[mason55]

> I wonder if it will even save them much money this year

They also get to account for it differently. The severance payments can be written off as a one-time charge, so from that perspective they get to take the GAAP benefits this year.

Even though the cash flow is ~the same between letting people work for a year and then laying them off with no severance, doing it this way makes the business immediately look better.

[phamilton4]

Edit: I'm wrong looks like they can write it off.

[guelo]

Hey those 90 million will help pay for Joe Rogan's 200 million.

[nebula8804]

I thought the Joe Rogan deal was 100 million. Many people have been stating he was seriously underpaid but I think he was one of the first major deals so maybe there wasn't any strong metric to gauge what he is worth.

Furthermore, they play multiple ads during his podcast regardless of if you are a paying customer or not. This one really grinds my gears. If they haven't made back their money yet then I'd be shocked.

[guelo]

"two people familiar with the details of the transaction" told NYT that it was at least $200 million for three and a half years. https://www.nytimes.com/2022/02/17/arts/music/spotify-joe-ro...

[nebula8804]

oh I guess I was mistaken. I constantly heard 100 million but it was just a guess since the number was never disclosed officially.

[mattbrewsbytes]

I think what we don't see talked about is the avoidance of continuing to take on debt when interest rates are much higher than in recent past. Companies can issue bonds to raise money instead of loans but both are based on interest rates.

Companies pulling back on growth investments will help their bottom line sooner. For tech companies their greatest cost is employees which also is where they invest for more growth in new products/services.

Cash flow is king when interest rates are high.

[hef19898]

Cash flow is always king, as positive cash flow is what keeps a company default alive like forever, or rather as long as cash flow is positive.

And yes, I think high interest rates play role. Either because credit lines become more expensive or because investor and VC money is harder to come by.

[leokennis]

While I can’t speak to the numbers, in general I think companies that so casually abandon employees by immediately announcing layoffs when times are tough cannot expect any loyalty or flex from the people that remain in times the economy picks up again.

Maybe they’re fine with that, and it’s all good. But if you sack people on a whim don’t be surprised if they walk out on you on a whim if some better opportunity comes along.

[berniedurfee]

There’s also a micro-environment at play. Those 600 former employees likely worked across a bunch of different orgs for different product and management lines.

At that level, it probably represents some groups losing 25, 50 or even 100% of their team members.

So that 600 might not be consequential at the business level, but was probably devastating at the team level.

[voisin]

I think companies are doing it to tilt the balance of power back toward companies so they can force people back into the office. WFH is going to shrink back to a minority of the workforce.

[xnx]

There's another side too. If those fired were overpaid underperformers, there can be an improvement in morale for those who weren't fired.

[ren_engineer]

if you expect a multi year recession it makes sense, especially when you aren't profitable and interest rates are rising

[schnitzelstoat]

Aren't most of the employees based in Europe? In that case it's more like $100k or less.

[estomagordo]

Even in Sweden, where engineers earn way less than in the US, it's going to be over $100k.

On any salary you would have to add 30% payroll tax, and then maybe 15% or so in pension contributions.

[iovrthoughtthis]

this is partially about wage depression

[srcreigh]

The savings are 1%, not 0.1%.