HBR article: companies that lay people off perform worse in the long term

There has been a lot of news about layoffs at big companies. I saw on LinkedIn that @Mr-914 posted this Harvard Business Review article on the actual effects layoffs have at companies and thought I’d share here as well. It seems they don’t usually have the financial benefit that companies think they will.

I’ve had to live through this in the past, and have been in the position of arguing strongly to not lay people off or reduce the size of a layoff. In product development and innovation it can be hard to argue the impact because we often don’t boost immediate sales, and immediate top line lift is what is needed. I tried to make the logical argument that if we cut engineers/designers, we would lose or delay the revenue their programs are associated with 12-24 months down the line. Of course there has to be a company 12-24 months down the line, I understand it’s a balance, but in the case of this layoff it just would have made us look bad to the board at the time vs making us look bad to the board in 12 months. My position was that we were robbing from the future of the company to merely look ok today.

It is nice to see a few of the positions I took in that time backed up with numbers in this article.

In case any of you are having to deal with this:

There isn’t a business consulting group, McKenzie, Bain, BSG, etc, that doesn’t say a company shouldn’t double down on R&D in bad times. If your products aren’t selling now, what makes you believe they will sell in 12-24 months? Magic?

But publicly traded companies have a fiduciary “duty” to their stock holders that is on a 3-month cycle. It isn’t like CEOs don’t understand, but their hands are tied to Wall Street.

It one of the obvious benefits to working for a medium-sized privately-held company.


My limited and admittedly cynical perspective on the tech co’s recent rounds of layoffs is “keeping up with the joneses”, i.e. Meta is doing it, so Google has to as well.

What makes sense (and is mentioned in the HBR piece) is a permanent restructuring, and a retreat from the frothy hiring of the past two years. Google boosted headcount by something like 47% between 2019 and late 2022, likely with very generous compensation. They over-hired and now don’t need all those people. And of course like iab mentioned, earnings-per-share is going to be a top priority.

What I don’t get though is that Google and other big tech have so much cash, they could just freeze hiring, retain all of the current employees, and through attrition achieve the reorg results desired on a longer time line. OTOH in that case they could be perceived as “doing nothing”.

I’ve had up-close observation to ‘right-sizing’ a publicly traded company over the past year - it involves corporate redefinition, where to invest, focusing on clearer priorities.

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From SF Chron "Pichai said the company had taken a hard look at its products and services, and the cuts reflected sections of the business that did not pass muster. The jobs being eliminated “cut across Alphabet, product areas, functions, levels and regions,” Pichai said, adding he was “deeply sorry” for the layoffs.

He noted the company’s early investments in AI, hinting that the hot industry could see increased attention. "

Bye bye UX designers, hello Machine learning scientists…

With over $3 billion in unemployment compensation contained for the States inside of the 2023 omnibus spending bill, there is no clearer guilt free signal to tech executives that layoffs will free up capital for investing in AI, stock buybacks and the boosting of stock prices during the first quarter of 2023. This is what the WEF refers to as public private partnership.

If we look at Twitter as the tech layoff canary in the coalmine, it will be a hard lesson for women, EDI hires, Millennials and GenZ which will represent the bulk of these layoffs. They will be first in line to collect on this fresh round of unemployment compensation for states after their severance runs out.

Is it because those demographics are heavily represented in recruiting, marketing, and user research roles?

Your attrition idea has strong narrative pressure against it backed by academia. Toxic male culture in tech here.

I would add LIFO (last in first out) to your query examples of recruiting, marketing, and user research.

and too many clips like this.

I remember one company I worked for paid a management consulting firm 7 figures to basically tell them that… PE owned company.