Why did Elon Musk burn down half of Twitter?
It's the year of the tech layoffs. So Harvard Business Review published its conventional wisdom about them.?TLDR?
If you’ve been through some layoffs, you know that after the dust settles, if the right people and projects are trimmed, the survivors are fine, happy to be working for management that keeps the ship in fighting shape.?
HBR didn’t say what companies get right about layoffs. In a typical year companies layoff ~1% of their workers, as layoffs are the fastest, easiest and cheapest way to remove unwanted employees, either because of changes in priorities or underperformance. Layoffs for explicit underperformance are forbidden, but common and easily justified as underperforming employees won’t be in highly valued roles. “It’s not them, it’s their role or project.” Unfortunately the tinge of underperformance makes layoffs feel bad, but since it’s impossible to always pick the right projects and people, they are unavoidable. Not every project can be high priority.
So is this year an outlier for layoffs??
Meta has been hit by Apple’s privacy/ad policy changes, as Apple has no reason to share its user’s personal data outside Apple’s control. (Apple and Google still have a huge amount of your personal data, but they are happy to keep it for their own purposes, a use that, for some reason, isn’t covered by legislation). Simultaneously Meta over invested in VR, in part to build a platform not so dependent on Apple’s or Google’s whims.
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Software has (or should have) near zero marginal cost. Twitter has been violating this rule, growing less efficient. The new boss decided it was time to clean house, that a news and advertising feed doesn’t need 5000+ people, and reset the headcount back to pre-pandemic levels.
Other companies ramped up to handle COVID pressures, and as they return to a new normal, need to adjust accordingly.?
And other companies were too cocky or clueless to slim down when their stock was flying. For the first time since the 2008 recession, investor pressure reversed. Instead of funding speculation about the bright future of tech, they demanded cuts to increase short term profits and boost the stock price.??
Could this round of layoffs be the harbinger of a recession? Despite their high profiles, tech companies don’t employ a lot of people, so these layoffs won’t have a big impact nationally.?
Layoffs are a bit like forest management. You can do regular controlled burns, or you can wait for the forest fire.?Please be careful when you play with fire.