"The carpets are so clean, we don't need janitors"

I'm not really sure how you're implementing scrum. Our scrum standups are always just the programmers, once a day in the mornings, and are used to keep all the programmers on the same page and talk to each other to find out if features might have a codependency, or if other blockers can be solved by something else another dev is working on. There's no "watching" of people or "intimidation".

You might want to speak to your manager next time something like that is happening, because there's no way it can be good for your productivity or the other people on your team. It's certainly not a normal practice. At the very worst, if someone isn't pulling their weight they should be dealt with in private.

The exact quote is:

"Of course, it all went to shit. New employees would go a week before they had machines, phones, passwords, and ACLs. Printers ran out of paper, projectors ran out of lightbulbs, servers ran out of storage, networks got misconfigured, and so forth. The total time lost and wasted across the whole company was most certainly greater than the savings of laying off the expensive and skilled IT staff."

The guy might be a bit biased but it's completely clear from his article that even though he might not have exact numbers the company was much better off(not only in terms of total profit) with the old IT department.

Are you a manager?

In this case, the downside to saving money by laying off expensive experience is clear. Unfortunately, the downsides are rarely clear before the upsides, and by the time the mistake is obvious, returning to the previous state is difficult, and an incentive has been created for short term savings at the expense of long term ones.

By way of example, several years ago I sold tools at Sears. Sears had spent decades building consumer confidence, particularly in their Craftsman brand. If you bought a Craftsman tool, and it broke for any reason, they replaced it, sans receipt. As a result, this warranty was transferable - there were no questions asked. While this policy certainly did not extend to every product sold at Sears, it did exemplify a commitment to service and quality: in the words of one older person I talked to once "if you bought it at Sears, you didn't have to worry."

As time went on, Sears was able to increase profit margins by slowly restricting the tool warranty, and using crappier parts. The obvious problem was that once Sears lost its reputation as a "you don't have to worry about it" store, it had to compete with stores like Wal-Mart on price[0].

The interesting problem here is not the Sears strategy, but the fact that it takes years for the effect of reduced quality to become obvious: in the short term, consumer confidence in the brand is still high, so the worse products are bought for the same prices, under the assumption that the quality is still high. By the time consumers on the average figure this out (when your drill wears down in 3 years instead of 10), someone that made the change has been able to demonstrate clear savings to the company and move on.

Several people have suggested solutions. The first one I hear thrown around is "get rid of executives." I think this is shortsighted in the same way that getting rid of a good IT department is. Certainly some executives are useless, but "get rid of the bad executives" is vacuous. A more compelling solution is to create incentive structures that encourage "bad executives" to be good ones, such as incentives which outweigh the short-term gains gotten by reducing, say, IT spending. For instance, I've heard it suggested that companies use long-term equity, say 15 years out. I'm not sure how that squares with moving from company to company, but it's interesting.

[0]This is not to say that the Sears quality-first business model was sustainable, merely that there was certainly a tradeoff, the effects of which take a long time to see in total.

It's not that. Good executives are worth far more than the compensation that they get; but as a class, their net impact is neutral at best and probably negative. As with stock traders (where a lot of them just lose money) most of them aren't very competent. That doesn't invalidate every single one of them or what they're trying to do.

It's the CEO-pay debate all over again. No one who actually understands large companies would argue against the notion that it's worth $10 million per year (several times that, actually) for a company to have a good CEO over a bad one. On the other hand, shitty CEOs are paid highly just for belonging to the class of people considered eligible to be CEOs, and increasing executive compensation has paradoxically reduced quality of service: http://michaelochurch.wordpress.com/2010/11/22/pay-more-get-...

Also, I think lightweight management is generally better and I don't see why people find my insinuation that most executives should be working 2 hours per day to be an insult to what they do. If I were at a point in my career where I could legitimately justify the kind of compensation that I make now with a 2-hour workday, that would be awesome. I could go back to school, or volunteer, or take another job. I don't know why people in our culture equate working long hours with being productive. I equate it with being so unproductive that people have to make monstrous sacrifices just to reach par (although the reality is that most people are plenty capable of being productive, and the long hours come from social expectations).

I doubt many YC founders would cut IT because things are working well.

Startup founders are in a different class because there's actually 8+ (sometimes 14+) hours of work to be done in a day in a company that's fighting its way into existence.