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Layoffs Don't Work

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Re: Layoffs Don't Work

#81

Post by altcognito »

mattmaroon wrote: post #59

"After the early-2000s dotcom bust, Bain researchers found that stock prices for S&P 500 companies that had no layoffs or laid off less than 3% of their workforce increased an average of 9% in the next year." Do non-science journalists just not know about correlation vs causation? Does it really not occur to them that maybe the companies that didn't do layoffs were healthier and that's why they overperformed? Wouldn'…

How would you correct for it? As someone who works with ten year olds, they would ask you what causation and correlation is.

Re: Layoffs Don't Work

#82

Post by ihsw »

fzeroracer wrote: post #18
DebtDeflation wrote: post #5

They used to be a once a decade "save the company during a recession" move. Now they seem to be a quarterly "manage earnings per share" move.

Running a business is less and less about actual business outcomes and more about juicing stock. And the stock market itself is divorced from reality as companies whose output has gone down over time sees higher valuations because the owner has cult appeal. So everything gets worse and more expensive year over year while feckless suits get sloshed over company dinners.

[dead]

Re: Layoffs Don't Work

#83

Post by eschneider »

sejje wrote: post #49
pclmulqdq wrote: post #41

I remember hearing a take on layoffs that I think is pretty true: When you fire the bottom 10%, you lose another 10% who are from the top performers. The destruction of psychological safety for everyone at the company is irreparable, and you start to bleed your most productive talent, too.

Why do you lose 10% of your top performers?

Because people will often see people who they don't perceive as low performers getting lumped in with 'low performers' and laid off. At that point, you start looking for management that seem to know what they're doing.

Re: Layoffs Don't Work

#84

Post by pclmulqdq »

llm_nerd wrote: post #64
pclmulqdq wrote: post #41

I remember hearing a take on layoffs that I think is pretty true: When you fire the bottom 10%, you lose another 10% who are from the top performers. The destruction of psychological safety for everyone at the company is irreparable, and you start to bleed your most productive talent, too.

Companies churn through people constantly. Google famously has an employee tenure of like a year[1]. Most companies that subscribe to the Jack Welch "fire your bottom 10% yearly" philosophy don't usually declare a media stock-pump "layoff" but are just letting go of purported non-performers constantly. And there are a lot of "top 10%" performers who are very happy that the so-called deadweight isn't kept around just…

I think if you look at companies like Citadel, which routinely fire the bottom 10% as part of the job description, it attracts a certain set of people who actually do feel "safe" in that environment. The trouble comes when you break your norms about layoffs.

Also, Google's median tenure of <1 year was due to hiring, not employees leaving. In other words, that number included people who hadn't left yet. I think if you look at people leaving Google, average is about 3 years.

Re: Layoffs Don't Work

#85

Post by _benj »

steveBK123 wrote: post #39
kgwgk wrote: post #34

Earlier quoted context omitted.

> It's only the employees that suffer for every mis-step. They benefit for the overhiring mis-step.

Not necessarily. If you give up a good job to join a firm that has over-hired, its only obvious in retrospect that you took a bad risk.

This hits home. I wish there was a way to gauge “retrospect” before actually suffering from it. I’m now usually quite weary of “we’ve had to get yet another loan of 60 mil, after 6 years in business because we don’t know how to make a profitable business” also known as a series C or whatever.

Re: Layoffs Don't Work

#86

Post by ghaff »

andrenotgiant wrote: post #44

> After the early-2000s dotcom bust, Bain researchers found that stock prices for S&P 500 companies that had no layoffs or laid off less than 3% of their workforce increased an average of 9% in the next year. Meanwhile, stock prices were flat in companies that laid off between 3%-10% of their workers, and prices plummeted 38% for companies that laid off more than 10%. Failing companies go through layoffs. Companies l…

There's a big tendency to look for culprits whether layoffs, PE, MBAs, or whatever. But a lot of companies just made wrong bets or were in the wrong place at the wrong time. Kodak was never going to survive in anything like its pre-digital form.

Re: Layoffs Don't Work

#87

Post by dv_dt »

dustingetz wrote: post #8
DebtDeflation wrote: post #5

They used to be a once a decade "save the company during a recession" move. Now they seem to be a quarterly "manage earnings per share" move.

software development costs are out of control the whole industry is one big grift, there’s no accountability anywhere, 20% of the devs are doing 80% of the work, the business would instantly terminate the 80% for cause if they could only discern the difference, but they can’t, because the business side is also a big grift with the exact same problem all the way up to the founders recursively

The big tech companies paying the largest salaries are raking in billions in profits. How does this square with the view that software development costs are out of control?

Layoffs today seem more like execs following management fads for easy visible actions and this data would suggest that the actions are actually detrimental to company profits. Juice the numbers for a quarter but add another long term drag to the company

Re: Layoffs Don't Work

#88

Post by dietr1ch »

dv_dt wrote: post #66
andrenotgiant wrote: post #44

> After the early-2000s dotcom bust, Bain researchers found that stock prices for S&P 500 companies that had no layoffs or laid off less than 3% of their workforce increased an average of 9% in the next year. Meanwhile, stock prices were flat in companies that laid off between 3%-10% of their workers, and prices plummeted 38% for companies that laid off more than 10%. Failing companies go through layoffs. Companies l…

There is the question of if layoffs saved the company enough to save itself or improve? And with that data you could say layoffs by themselves don't. Today the question is why companies making good profits are making layoffs. And looking at the damage they cause is relevant in trying to predict company performance

> There is the question of if layoffs saved the company enough to save itself or improve?

They at least secured management a final big bonus for dealing with that, so management and shareholders cash in a bit on the way down.

Re: Layoffs Don't Work

#89

Post by gruez »

trescenzi wrote: post #22
roenxi wrote: post #17

> Research has consistently shown he was right about layoffs: They’re damaging to companies... The research is probably misleading. The damage was done to companies when the over-hired people who couldn't add enough value to justify keeping them employed. The layoffs are just when the damage is recognised. It is like borrowing a huge amount of money, using 90% of it it to buy prawns and leaving them out to rot for a…

This isn’t how all layoffs work though. Some, yes they are due to over hiring and a failure of management to plan. They are likely necessary for survival of the firm and generally last course of action. Although even those come with a cost to current and departing employees which harms the business. But the ones being discussed in the article are the consistent ones. The ones you do while you’re ahead to make your ba…

>But the ones being discussed in the article are the consistent ones. The ones you do while you’re ahead to make your balance sheet look better. Those come with a temporary balance sheet boost and all of the negative effects of any layoffs.

This feels like a "no true scotsman" argument. The headline of the article is literally "Why layoffs don’t work", not "why consistent layoffs don't work". The only mention of "consistent" layoffs were when referencing Jack Welch's management style, but that was more of an attempt to argue that layoffs are bad by citing the worst possible example, than trying to introduce nuance between the types of layoffs. The studies cited also did not distinguish between the type of layoffs.

Re: Layoffs Don't Work

#90

Post by [deleted] »

nativeit wrote: post #75
roenxi wrote: post #17

> Research has consistently shown he was right about layoffs: They’re damaging to companies... The research is probably misleading. The damage was done to companies when the over-hired people who couldn't add enough value to justify keeping them employed. The layoffs are just when the damage is recognised. It is like borrowing a huge amount of money, using 90% of it it to buy prawns and leaving them out to rot for a…

Is it not incumbent on the company who hired the employees to ensure they are utilized sufficiently? Why imply it’s the worker’s fault for their own mismanagement?

[deleted]
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