Layoffs Don't Work

I worked at GE when Jack Welch was there. First of all we never had a systematic firing of the bottom 10%. That is a myth. We ranked everyone each year and clearly identified the bottom 10% but they were not always fired. The manager did have to have a development plan for these individuals.

More importantly, GE did have consistent layoffs. I assert this was a good thing. I vividly remember asking an EVP at GE Capital when I first joined GE why we did this. It seemed inhumane. Wasn’t it better to try and fix the so-called ‘C’ players? His response fundamentally changed my view on hiring, leadership, and firing. He told me two things. 1) Hiring people is always a gamble. The best interview/onboarding processes will not produce 100% success. There will people that do not have the skills that are needed. There will also be people for whom GE is simply not a good cultural fit. 2) In good times, when a GE business unit is doing well, they always over hire. People working 50 hours a week want to work 40, process problems that have built up need to be addressed (similar to tech debt), etc. Over time this leads to bloat and inefficiency.

For these reasons, consistent layoffs make sense for the company. They also make sense for the employee. By not waiting for an economic downturn and then making dramatic cuts, the exiting employees would have an easier time finding the next job as odds are the economy would doing well. Particularly in the case where the person was not a good fit for the GE culture, they learned this and could find a better fitting role elsewhere. And GE was great on the resume back in those days (sadly not so today). If we waited for the downturn, then the exiting employees would be looking for a new job in a bad economy with everyone else who had just been laid off. Not a good situation.

Finally, an additional point I learned later by observing when and where we made headcount reductions. GE made many bets on new markets, new products, etc. We had to if we were to grow by 10% each year (GE Capital’s rigorous requirement for business and strategic plans). The successful GE leaders understood is was easier to grow revenue to achieve 10% net income growth than to cut expenses. Unfortunately, not all new business ventures worked out. In those cases, we had to make a decision to shut them down (all new ventures had off-ramps). As a result, some people were repurposed, but others had to be let go. I posit that is consistent with the tech approach of “fail early, fail often.” In industries with significant people required to try a new approach, the consequence of failing will be layoffs.

Might as well put a suitcase with $200k and a copper clock ticking away on the table next to them.

- Detail-oriented nerds with a rich mental framework around things like optimization, making decisions based on data, perhaps statistical approaches to uncertainty get frustrated when they see their organization making big, irreversible choices without the benefit of all available information. From the IC or line-manager level there may be a bunch of information which you can tell was not taken into consideration.

- Process-oriented people who have put a bunch of effort into planning, goal-setting and measurement based on seemingly reasonable assumptions like "this team that provides service X will continue to exist for the duration of project Y which depends on X" get frustrated when execs throw everything into disarray ... and then 3 weeks later want to know why Y is off track.

As the article describes, often lay-offs end up being bad for the company, not just the employees who get terminated. Even if you're not let go, or even if you just care about the value of your vested equity, it can be quite frustrating to see this happen. And often, because layoffs are generally planned in secret, leadership explicitly precludes the possibility of getting input from the experts in their organization.

While perhaps some layoffs ultimately turn out ok, I think generally the people who go through them can tick off a list of parts of it that were ill-considered and needlessly disruptive, in part b/c of this lack of trust and communication.