[deviantbit]

This is a terrible opinion piece. Layoffs do work. Cutting hours does not work. I am always amazed how few people understand how a business operates. They think its a community organized event where there is unlimited revenue.

There are a few basic accounting principles employees need to understand. It all revolves around Assets = Liabilities + Owner’s Equity. If you think otherwise, take a "Cost Accounting" course. This is a pure numbers game. Everyone wants to wrap a psycho analysis into something that has ZERO relevancy.

If a company is bleeding revenue, it cannot sustain the overhead of employees. They have to go. Cutting hours does nothing for those on a salary, and those that are hourly, benefit costs are far more expensive than their wage. If a company has stagnant growth, that means leadership has made bad decisions, and things have to change.

Employees feelings don't matter on a Balance Sheet, Income Statement and Cash Flow Statement. There is not a "Employee's Feelings" column on the ledger. Everyone can be replaced. No one is special, unless you're a majority shareholder.

[eikenberry]

> If a company is bleeding revenue, it cannot sustain the overhead of employees. They have to go.

No, they don't. During the dotcom bubble my company gave us 2 choices, layoffs or 20% pay cut. We took the latter. Everyone stayed and we had our pay back to previous levels in a couple years and the company remained profitable.

You can, in fact, treat people as people and still run a company.

> Employees feelings don't matter on a Balance Sheet, Income Statement and Cash Flow Statement.

This is only true of companies of a certain (large) size, when all semblance of employees being people have been abstracted away. In companies of more reasonable sizes you must take employee moral into account or you will lose critical employees which could kill the company.

[wilg]

Surely there are some situations where a pay cut is insufficient because you would like to reorganize the company, for example to wind down an unprofitable initiative or division and there's not a reasonable way to maintain the same headcount?

[eikenberry]

I wasn't saying that there are never needs for layoffs, but these aren't the sorts of layoffs being discussed. Where that line is drawn can be a bit fuzzy in a few cases, but the for majority it is clear cut.

[Xen9]

My grandparent used consider global bubbles as the norm, likely because his own parents never told him that local, company-limited bubble are actually the norm. Fortunately my own parents are more agreeable with how I manage my finances, and my whole family – including the 380-minutes old grand-grandparents – is still alive & well. We still see each other, despite the occasional confusion my use of the English plurals causes us (not to mention everyone's own ups & downs, and the weird reproductive mechanisms of our larger genus within the world).

[UncleMeat]

There are some situations where layoffs are unavoidable. That's fine.

What's infuriating is a business culture that includes layoffs for outrageously profitable companies. I work at Google, which made 100 billion dollars in profit last year. More than $500,000 in profit per employee. Google is still conducting layoffs.

Layoffs are used as a tool of capital against labor. Amongst other things, it generates unemployment and people who are willing to accept lower pay due to the precarity of their situation (everybody needs to pay rent and eat), pushing down pay for the entire industry.

[deviantbit]

Which dot com was that?

[eikenberry]

The first one.

https://en.wikipedia.org/wiki/Dot-com_bubble

[deviantbit]

Don't you love people make claims and the can't substantiate the claim? They just down vote your comment.

[deviantbit]

Which company?

[yodsanklai]

> If a company is bleeding revenue

Not what happened with some of the recent layoffs. Some big tech companies generate huge revenues, laid off 5-10% of people (sometimes with false pretext of performance), and do keep hiring at the same time or soon after. This happens not to reduce cost but to stress out remaining employees.

[notadoomer236]

They have way, way more employees than they need.

[TZubiri]

>This happens not to reduce cost but to stress out remaining employees.

Or to cull the low performers.

I personally am less stressed when the competition I outperform gets fired.

[yodsanklai]

In my team, two people who got laid off as "low performers" weren't. One was very good but had a bad luck with a very bad project / manager the previous half. The other picked the wrong topic to work on and they weren't well rewarded.

The low performers are usually managed out anyway. The last lay off phase was quite arbitrary.

Also note that high performers often do get promoted, and may become low performers at the next level.

[hn_throwaway_99]

> The low performers are usually managed out anyway.

That may be your experience, and kudos to companies that do this, but particularly in tech I've seen that not be the norm. Egregiously low performers are managed out, but performers who are basically just "low mediocre" can hang on for a long, long time in my experience, and tech companies often use layoffs as an opportunity to get rid of them. To be clear, not everyone who is let go in a layoff is a low performer (a lot of time it's just the luck of whatever business unit you're working in), but companies certainly take advantage of layoffs to get rid of low performers without needing reams and reams of documentation.

[TZubiri]

Collateral damage. I'm fine with that.

If there's an interview for a position and the candidate is 30 minutes late or no shows, maybe there is a legitimate excuse and it's a rare event, but the system is that both parties give up on that relationship to damage candidates that do that constantly.

Just look for another job and in the long run you'll be successful. Variance is part of life.

[YZF]

It is still to reduce cost. Hiring would often be in cheaper geographies. The reason to reduce cost is not to e.g. save a business from collapsing but it is to improve the financial results with the hope of making the stock price go up.

[tdb7893]

A good friend of mine has a PhD in labor economics and is now a senior management consultant for a big firm and I've been told that in general just cutting people is bad for businesses and most businesses will be worse off by just cutting people, especially without changing any of the underlying systems that got the company to the position it's in. Next time I'll have to ask him about the studies on it but there definitely isn't a consensus that general layoffs help businesses in the medium/long term. He was saying the times they seem to work best is in the context of a broader restructuring, (which in my experience is not common for companies).

[theptip]

Unsurprisingly, both the OP and this are oversimplified statements.

The more nuanced point is to note that simply reducing the world to accounting equations omits all of the human detail. Morale is a meaningful thing, or if you prefer, knowledge, expertise, Metis; these are damaged in layoffs, especially repeated rounds. And furthermore, the recent tech layoffs were not generally about fixing unsustainable businesses, they were about juicing profit margins for already profitable ones.

On the other hand, of course the OP title is wrong and layoffs can work. There are many examples even within tech where cutting deep is the only way of surviving.

Complex systems are complex.

[davidw]

Math wise, yes, you're correct, but layoffs can also hurt morale, especially if not done well. And in a competitive environment, the most talented people might be next to leave after a layoff, as they see things aren't going well and have the easiest time finding alternatives. I've seen that happen myself.

And some of those people you're laying off did revenue generating activities, so, as above, yes, it may be necessary to reduce costs, but it has to be done carefully.

[danans]

> If a company has stagnant growth, that means leadership has made bad decisions, and things have to change.

There is a bigger picture.

Developed economies across the globe are experiencing stagnant growth, and the trickle down economics they have engaged in has failed to fix that.

Knowing this, the wealthiest, through their proxies in corporate leadership and government, are cutting back their biggest cost - employees - to maximize their near term returns, which will then be put into relatively fixed-supply assets, rather than risking capital on new ventures, and the employees that traditionally requires.

Corporations are betting that "growth" going forward is going to come from AI-enabled efficiency and productivity gains, not more employees making more product or innovating on product/service development and delivery. While it's too early to say whether they are right, many signs point in that direction.

[callc]

> Employees feelings don't matter on a Balance Sheet, Income Statement and Cash Flow Statement. There is not a "Employee's Feelings" column on the ledger.

Sure they do. Just in the sense that employees feelings need to be controlled and made to fear any collective action or sense of agency.

[kypro]

Also I'd argue that a lack of layoffs at a company probably causes stagnation and inefficiency. I don't thin the only good argument for layoffs is that a company has no choice because of cash flows.

I see this in the public sector where you often find people who have been working at the same dept for a decade or more. These people feel very safe and know they don't really need to try that hard. They also know nothing about how things function elsewhere so they'll put up with using spreadsheets and fax machines because that's just how they've always done things.

It seems rather obvious to me that a good economy is one where employers feel some nervousness about losing good employees, so offer pay rises and perks; And where employees feel some nervousness about layoffs so work hard and try to be as productive as they reasonably can be.

If a company is not cutting a few percentage of their least productive workers each year they're probably doing something wrong imo. I think it's far to argue big tech companies built up a lot of these under productive workers over the years.

[culi]

The article cited actual statistics and data comparing companies that enacted layoffs vs those that didn't. It showed very clear evidence, even within the same industry, that those that enacted layoffs fared MUCH worse

Also many of these layoffs are NOT coming when companies are "bleeding revenue". E.g. Meta and Twitter enacted massive layoffs after posting their most profitable quarters yet

[conductr]

That’s what should be expected. A company in a stronger position can more confidently avoid laying off people and “ride out” the painful market conditions. Not every company’s revenue is composed of similar risk items even within similar industries. Some companies are already knee deep in some new strategy and need everyone on board to roll it out. The other company is just a bunch of variable labor that can be culled when volume shrinks. It also means they’re not investing in the future and going to get beat by a more strategic competitor. So many other riffs to take on this, but short term minded financials are absolutely improved by layoffs and that’s usually all the action is trying to effect.

[culi]

Okay but you are saying the exact opposite of what the comment I replied to is saying.

[onlyrealcuzzo]

At least for public companies, accounting is FAR from the end all be all.

Most of the time, company valuations are completely divorced from valuations. And much of what public companies do these days is try to game their stock price.

Government employment is 95% the time completely divorced from reality.

That being said, private companies employee a lot of people and this is very relevant.

[no_wizard]

> Government employment is 95% the time completely divorced from reality

This is a pretty big claim to make without any evidence to support it.

The government, whether it be state, local, county federal etc. does in have a different pace and certainly like with any big organizations can have issues such as waste, but to say it’s completely divorced from reality, especially in context of somehow private (as in not government or NGO) companies don’t also act completely divorced from reality is a really big claim

[onlyrealcuzzo]

Private companies generally need to be efficient and make money or go out of business.

VC funded startups are a VERY small percentage of jobs compared to ALL private company employees. But, sure, there is much shenanigans there.

Public companies can play tons of games as well - but the vast majority of people employed at public companies are at relatively efficient and profitable companies.

Government services are under no obligation to be efficient.

Often people vote for them to be LESS efficient, hoping that they'll get similar benefits from their private employers.

Though, hope is a bad strategy, and it rarely works for non-government employees.

But there's enough state employees that you don't have to win over that many private employees to win votes for things that make the services less efficient (like ever juicier retirement benefits).

[moregrist]

> Private companies generally need to be efficient and make money or go out of business.

Half of this statement is true. A private company definitely can’t run at a loss forever. Although in the era of ZIRP a few definitely made a solid go of it.

However nothing requires an any company, and especially a private one, to be efficient. If an otherwise profitable and privately-held company wants to swell its middle management ranks or spend lots of cash employing the owners’ dubiously capable relatives, there’s nothing to stop it.

Incidentally that’s mostly true of public companies with diverse shareholders, too.

The idea that private enterprise is always efficient is a myth, as is evident to anyone who’s worked for a large enough corporation, or even a small one where management weirdly shields some obviously incompetent people for internal political reasons.

The only correcting factor is that companies can fail, and smaller competitors can sometimes find ways to undercut large, inefficient firms. But often the small company gets acquired or out-marketed. So there’s nothing inevitable about any of this.

[no_wizard]

> Private companies generally need to be efficient and make money or go out of business

They sure need to make money or they’ll go out of business, but efficient is not required. I think nearly anyone who reads HN regularly could tell you multiple stories through their own careers about waste in the private sector, bizarre politically motivated decisions etc. and that’s just this community as a sample size. I’m certain this holds if you cast a wide net

The fact is most businesses are not the paragons of efficiency that is being postulated.

[guappa]

> Private companies generally need to be efficient and make money or go out of business.

It seems you've never worked at a private company and just believe the invisible hand fairy tale?

[BobbyTables2]

Many larger do companies behave as if revenue is unlimited.

Too many times, I’ve seen layoffs followed by acquisitions of 10x the cost reduction from the layoffs — often even in the same quarter. And when parent company has a track record of driving acquisitions into the ground from mismanagement, where is the profit?

[voxl]

Your horribly simplistic take has already received a lot of backlash, but whatever I'm angry enough to add onto the pile:

1. Big tech companies doing layoffs are not hurting on revenue, so your basic assumption is wrong. 2. "Cutting hours" needs to be steelmaned if you're not going to anything but a charlatan. That means you have to interpret it as taking a paycut, as in a salary cut. This has actually been done before in worker-focused companies to survive covid, and in one instance I'm aware of the company gave workers back pay after surviving covid.

You also ignore all the intangibles that are no easy to measure, because of course the business acumen of "make number go up this quarter" is too short sighted to care about institutional knowledge or long term strategy.

[sgustard]

Layoffs are like closing factories that don't produce, cutting products that don't sell, closing deserted retail locations, and so on. Likely bad business decisions got you there in the first place. Maybe market conditions changed. Maybe your whole company is going to fail no matter what you do. But blanket statements about what does or doesn't "work" are not very instructive.

[stalfosknight]

Why can’t the outrageously overpaid leadership who made the mistakes be the ones who are punished instead of the individual contributors who are just trying to survive?

[TZubiri]

Also cutting hours sounds terribly out of touch with the gig economy dilemma, I'd rather be let go than put on half my salary?

[pickledoyster]

>take a "Cost Accounting" course

do you (or anyone else) have a good course to recommend?

[ryandrake]

I mean, everything you said is true, but only because we have deliberately set up the system as such. Shareholder Primacy is a choice we have made as a society. It's not some natural law or something carved by god into stone tablets. It's not hard to imagine alternatives, but obviously the shareholding class is going to work hard to ensure that only their preferred rules have traction. Whether or not alternatives are workable given human nature is another thread altogether.

[astrange]

Shareholders don't have "primacy", eg they're last in bankruptcy. If you're asking for them to never get anything, then they're not going to participate, and this is supposedly a forum about startups.

In tech the employees also tend to be shareholders which I think is healthier.

[wilg]

Nobody is stopping anyone from running a non-profit tech company, or a PBC or co-op or various other structures. It's not even true that a US company has to prioritize "shareholder value" or whatever over anything else. You can kinda just do whatever you want. So the interesting question to me is, why don't more people try to operate companies/workplaces in the way they think would be more ethical and better for business?

[Out_of_Characte]

>only because we have deliberately set up the system as such. No one can sell at a loss all the time. That's just stupidity. Either I get a return on money invested later or I get a return on my balance sheet now in the form of profit. Shareholders primacy is because they can only be cut trough a buyout.

[deviantbit]

No, it's not a choice we made as a society. It was a choice the shareholders made. You didn't make that choice, you were not part of it.

[ryandrake]

That's a good point! I never got the chance to vote on whether or not shareholders should get all the votes.

[throwaway3572]

Why should you get a vote? You don’t get a vote on what groceries I buy. What entitles you to a vote on this purchase decision? (In this case “all the votes” means when making decisions on actions a particular corporation is considering, not any vote on anything)

[heeen2]

Lots of places take vote on what you can buy, eg weed, alcohol, which additives are allowed and so on

[throwaway3572]

The creation and transacting of corporate shares is also highly regulated. But it doesn’t address the question of why a third party should get a vote that helps decide a particular corporate action. Votes that limit the possible actions of all corporations equally are a different thing.

[elliotto]

Because societies in which not everyone gets a vote end up collapsing as those with the vote are eaten by those without

[grandempire]

Why do you feel entitled to something someone else built?

[int_19h]

Shareholders don't build anything. Employees do.

[grandempire]

I didn’t build my car or house, but I own them.

Working on things owned by others is the basic idea of employment - and is a relationship that has existed forever.