10% Employee Layoffs Make Little Sense to Me
Bad for employees and do little to help the business
A number of companies have announced layoff plans for 10% of employees
Layoffs are painful for those fired and bad for the morale of those that stay
A 10% reduction in staff doesn’t cut business spending by enough to be meaningful
It seems bad for employees and does little to help the business
The 2022 market downturn
With the recent public market downturn, many companies have moved to focus on profitability.
Many have slowed or paused hiring: Meta and Twitter, both social media.
Some have made ~10% layoffs: Robinhood (payments/crypto), Tesla (cars), Klarna (payments)
Some have made ~20% layoffs: Coinbase (crypto), Peleton (home cycling machines)
The pain of layoffs
Laying off staff - which I have done myself in the past - is painful on many fronts, including:
Personally for the employees that are laid off
Hurting morale for those who are not laid off
What’s worse than one round of layoffs is two rounds of layoffs (or more, if the company even stays around that long).
A 10% cut in staff doesn’t do much to cut business costs
Regarding the motivation for firing staff:
If the motivation is performance or conduct, then why wait for a down-market (which is what’s happening here)? Psychologically I see why management would gloss over bad performance or conduct in a frothy market, but this reflects is poor management.
If the motivation is financial, then laying off 10% of staff is - at best - going to extend how long the company can pay salaries (runway) by 10% (assuming the company has no other fixed costs).
Perhaps it’s more worrying to see a company lay off 10% of staff than 50% of staff
If a company lays off 10% of staff, it makes me worried they really need to lay off many more people some time in the near future. It’s a risky situation for the staff that haven’t yet been fired.
If a company lays off 50% of staff, at least that implies a meaningful reduction in spending, which hopefully re-shores finances and gives the company and the staff prospects for a brighter future. Of course, a company slashing staff by that much may also be in dire straights - which deters companies from doing so because of the negative signalling.
10% staffing cuts doesn’t make Marxist or Capitalist Sense
In a Marxist sense, firing 10% of employees doesn’t make sense because - why should any person (CEO) or small group (company board) have the authority to fire any worker from their job?
Firing 10% of workers doesn’t make (long-term thinking) capitalist sense either. It’s bad for employees and does little to help the business
Where am I wrong?
These companies doing layoffs have CEOs with much more experience than me so I may be missing their rationale. Perhaps some day I’ll do layoffs at the 10% level and have eat my words here. For now, I don’t see how 10% layoffs are good for anyone.
Recommendation: Regarding Marxism, I recommend this recent podcast from Lex Fridman with Richard Wolff. I still don’t understand how Marxism could work well in practise, but - after listening to this podcast - I realise there isn’t enough attention given to properly understanding Karl Marx’ ideas (including by me).