The Expendables - The story behind layoffs...

Google, Microsoft, Amazon, Meta, Twitter and Snap have recently let go off 50,000+ people worldwide. This has dominated my social media and I see some shocked responses from employees who have been with their company for 10+ years and 20+ years. Some said that they thought they were going to retire from the company and others said that they lost a part of themselves in the shocking turn of events. In this article, I will try to demystify why layoffs happen, why you should be prepared for it, what you should and shouldn't do to weather a layoff.

Business runs on capital and labor. In manufacturing, the primary cost is capital and hence when things don’t go as per the plan, they undertake debt restructuring. In services where the primary cost is labor, companies undertake organization restructuring.

FD vs. Equity Mindset

In services, there are 2 kinds of companies – those that treat labor like fixed deposit (FD) and those that view labor like equity. In the former, employees are offered relatively higher stability in employment in exchange for a lower-than-market compensation. In equity companies, employees are offered higher-than-market compensation and fast growth prospect though they are considered expendable should things do south. Traditional Indian business houses and vast majority of European companies tend to espouse the FD philosophy partly aided by the regulatory scenario while American MNCs and modern day tech startups take the equity approach. This is especially true in Big Tech that attracts the best talent in the world with market-leading compensation and growth prospects.

What happened to Big Tech?

We live in a volatile, uncertain, complex and ambiguous business environment where demand is unpredictable. When the covid pandemic hit the world in 2020, people stayed indoors and starting ordering everything online. This triggered a worldwide digital commerce (Amazon, Shopify) and digital advertising (Google, Meta) boom. In response to the pandemic, the big tech companies had a choice to make on whether they want to invest and cater to booming demand or risk losing demand while being cautious with their investments. Most companies took the call to go all in with investments to cater to the booming demand. When the pandemic was contained and this was followed by an unforeseen war that spurred inflation and interest rates, consumer demand scaled down and Big Tech companies took a hit.

Who is not laid off during a downturn?

There are 4 primary criteria that leaders use to take this high judgment call:

1. Employees who run the cash cow business (that funds all the new experiments and innovation) are seldom impacted while those in new experimental ventures are more likely to be impacted.
2. Employees who have exceptional track record of performance and considered high potential leaders of the future are offered alternate roles and accommodated to the extent feasible.
3. Employees who are considered as critical talent by virtue of specialized knowledge or skills that is difficult to replace.
4. Employees who are at a low compensation baseline with respect to the impact they are delivering. As an example, if a company has off-shore employees in a low-cost location who can do similar work, the onsite folks are more likely to be laid off.

What should you do to increase your "indispensability quotient"?

#1. Cultivate behaviors that demonstrate high potential Most employees are conscious about delivering results and demonstrating high performance which is great but this is often a function of external factors and dependencies. However, you have a higher control over demonstrating high potential by displaying the following behaviors:

• Embrace ambiguity and seek guidance without trading off speed
• Seek new challenges and be proactive in learning and growing
• Generate unique ideas that demonstrate depth of thinking
• Display judgment on when to move fast and when to go slow
• Think through lateral impact of decisions and avoid unintentional consequences?

#2. Punch above your weight to deliver value higher than your compensation

Seek additional opportunities and scope such that you are always doing more than what your role was scoped for. In other cases, this could also mean that you accept a role at lower end of the salary band. To illustrate this example, in Dubai, there is an unstated practice of offering higher salaries to Europeans and lower salaries to Indians who are in equivalent roles. While this practice was fostered by legacy reasons, many Indians used to resent this until the covid crises hit the market and Europeans faced disproportionate layoffs compared to Indians due to the fact that they were being overpaid. You have to punch above your weight to be considered as a high ROI resource.

#3. Embrace complexity to build unique skills that your peers and leaders do not have

An example of this is a business leader who understand how to query data directly from a data warehouse. In a world where a single skill, however niche, is rarely considered as specialized, multi-disciplinary skills across business, tech and operations can be a real differentiator to set you apart from others. In today’s world, there are quality learning resources available to those who want to pick up a skill as long as you have the clarity and sense of purpose on why you want to invest time in building the skill.

#4. Be a skeptic and pick up roles where you feel that your company has a right to win

Having excess cash or resources is not a right to win. Right to win can arise from a novel customer insight, differentiated solution or a more cost-effective way to serve customers. Do not just pick up a role because it is projected as the next big thing unless you are convinced on why it is positioned for success. I would never advocate sticking to only core roles as variety is the spice of life and the more you stretch your boundaries, the more you grow professionally and personally.

#5. Take breaks to recharge and ensure you have enough gas in your tank

This might appear trivial until you realize that there is a high correlation between your energy and your performance. If you feel drained at work, it is a sure-shot sign that you need to take time off either to recharge or to revisit your purpose.

#6. Last but not the least, invest in building a network

You should not get caught in the trap of thinking that your company is your world. Your network should extend beyond your current company so that you have a healthy pipeline of opportunities that come your way should things not work out.

Even if you do get all these things right, statistically speaking, there is a good chance that you would be laid off at least once in a 40 year career. In my 15 years career, I have seen 3 downturns with significant layoffs. As economic cycles keep shrinking in an ever dynamic world, I would expect 10 recessions in a 40 year career. Assuming 10% workforce being laid off in each recession, the probability of you being laid off at least once in your career is 43%.

In an increasingly uncertain world where market forces reward those who look out for themselves, we will all be increasingly expendable. Make no mistake, you own your career. However much you like what you do and however well you do what you do, you should never associate your identity solely with the work you do. You are much more than your work and recession is a great reminder that work is just one aspect of your life. Don’t be a missionary in a mercenary world!

Views expressed here are personal and does not reflect the views or opinions of my employer.