8 ms·
Why is every layoff 10-15%?
- Spooky23 4y agoDecimation is a concept going back to ancient times. The Romans would punish units by having every 10th soldier killed by his fellow legionnaires. It’s a number big enough to reduce cost and create fear but not enough to cause panic.
- dehrmann 4y agoIt pays to be a 10x legionnaire.
- cratermoon 4y agoIt's simple: There's federal law governing mass layoffs: https://www.dol.gov/agencies/eta/layoffs/warn https://www.dol.gov/agencies/eta/layoffs/warn
- wmf 4y ago10% is already a mass layoff for unicorns.
- chiefalchemist 4y agoInteresting, but I think they're over-thinking it. A lot. At any given moment, most companies can probably justify cutting 10-15% of dead weight. But when you cross that line, that's a much different smell. The most talented get a whiff, update their CVs and head for the door. The goal is to cut the bottom and leave the top. Take off too much bottom and your top will leave "voluntarily".
- madengr 4y ago
- rootusrootus 4y agoYeah, I was going to say, the average BigCorp has probably 30-40% dead weight. So cutting close to half of that is probably not a terribly heavy lift. Most managers already have a stack rank, in their head at least.
- marricks 4y agoYeah, exactly, and you only actually use 10% of your brain. Probably don’t need two hemispheres to be honest.
- rootusrootus 4y agoSince we know that to be false, I assume you're just being a smartass. If you disagree, there are more polite, constructive ways to say so.
- marricks 4y agoSorry if it seems flippant, but I provided just as much justification for my argument as you did.
- nhooyr 4y agoNo, you made a straight up false claim. He was merely estimating at an unknown.
- grassgreener 4y agoYou made up a statistic, what good does it do to spread misinformation?
- rootusrootus 4y agoYou are calling it false, yet you haven't provided any citations either.
- 4y ago
- paulddraper 4y agoExactly. Take a look around and imagine your company with 10-15% less. Most people don't find that such a terrible idea.
- verst 4y agoThat really depends on the distribution of the layoffs. The 10-15% percent aren't necessarily all bad performers but might just be people working on teams that are to be disbanded entirely.
- ilyt 4y agoYeah, if it is mandated "all teams cut 10%" it can be disaster. Team that managed to hire good people and fire bad performers already ? You're basically taking productivity out. Ops team that every other software team is dependent on and already overloaded ? Now every other team will feel delay in dealing with their stuff.
- dehrmann 4y agoI found the context interesting, but this line addresses the question nicely without much overthinking. > 10-15% seems to be the number that reflects “big enough that I can tell myself and my investors or board I am doing it, but not so big that it causes truly uncomfortable conversations for the team”
- salawat 4y agoBecause generally their workload goes up concommitantly, because there is no backfill.
- mapster 4y agoA correction to the last bull market
- jasonhansel 4y agoI think Scott Adams figured this out in 2005: https://dilbert.com/strip/2005-06-11 https://dilbert.com/strip/2005-06-11
- Kibae 4y agoThis reminds me of a story I heard about Steve Wozniak's time at HP: They were going to lay off 10% of the staff, but instead they decided to reduce everyone's pay by 10% and give them an extra day off every two weeks.
- quelltext 4y agoYeah, let's ignore the extra day but why isn't anybody doing that today instead of the 10-15% layoffs? I guess the fear seems to be that it will lead to uncontrolled attrition of good people. But I would assume hiring freezes in the industry would still prevent this. Also, you will retain the truly "loyal" employees that are willing to suffer a bit for future growth. It also addresses the wasteful folks in a fair way. I've definitely observed shifts in company cultures of new hires not being attached to the overall mission, demanding more and more benefits (e.g. business class flights) without "giving back" in equal amounts by working hard.
- extragood 4y agoI'd heard of something like that at a city government level around 2009 when cash was tight. A friend of mine had a 4 day week every other week. I think they called it a mandatory furlough in that case
- ilyt 4y agoWell, it would result in exactly that, best people leaving > I guess the fear seems to be that it will lead to uncontrolled attrition of good people. But I would assume hiring freezes in the industry would still prevent this. The best are near-immune to that. It's the average worker that will have problems finding next job, not the best one. > Also, you will retain the truly "loyal" employees that are willing to suffer a bit for future growth. That doesn't mean productivity > It also addresses the wasteful folks in a fair way. I've definitely observed shifts in company cultures of new hires not being attached to the overall mission, demanding more and more benefits (e.g. business class flights) without "giving back" in equal amounts by working hard. It's a job for money, not charity, and you're competing with other companies. New hire have no reason to be attached to the company either. It's fine to like where you work, but people don't live with their work. They have family and hobbies, that's why they work, to fund that, not to "have a mission", in job where someone on top is earning way more than what they put in effort.
- slt2021 4y ago10% comes from the ancient Roman tradition of Decimation https://en.wikipedia.org/wiki/Decimation_(punishment) https://en.wikipedia.org/wiki/Decimation_(punishment) >> The dual purpose intended was to stiffen discipline amongst the army at large and to demoralise the enemy
- maximus-decimus 4y agoThat only creates discipline if the other 90% of Meta is forced to kill the 10% with rocks though. Also make sure to pick the 10% with the short straw method to let everybody know they're not safe.
- rightbyte 4y agoLayoffs by dice rolls is probably better than pick and choose. Way too much friendship and "office politics" involved in who to pick anyways to be better than random. Last in first out is probably good too.
- judge2020 4y agoI'm sure every executive is calling back to their days studying roman history when they decide how much of a layoff will balance the books/turn the company profitable for its stakeholders.
- slt2021 4y ago10% is just the right amount, that has been proven empirically over few millennia, to stiffen discipline and improve results
- zaphirplane 4y agoNothing like a decimation to improve performance <s>
- deleted 4y ago[deleted]
- bruce511 4y agoFortunately I've never had to invoke blanket headcount cuts. But, as an employer, I've been given the advice "cut once, cut deep" many times. The theory (which I understand) is that employees get skittish once you get to a second or third cut. The author suggests some companies could stand a 50% cut if that is what is needed. This month though we've seen twitter cull 50% and twitter users, and customers (advertisers) became equally skittish. Do twitter employees feel safe? Does the "cut once, cut deep" have the desired effect here? Are customers reassured [1]? Maybe twitter is a unique case because of other factors - Elon? The fact that people can make their opinions heard on, well, twitter? The fact that other media are reliant on twitter traffic and buzz? My guess is that employ confidence after a round of layoffs is dependant on their faith in management to begin with, and the clarity of communication between management and staff. Perhaps a transparent financial reality helps employees understand that what they do affects the bottom line, and that line pays their salaries.
- Psyonic 4y agoyeah I think Twitter isn't useful here. Having a dramatic change of management + a layoff + serious product upheaval is definitely different than just a layoff. Now Elon is ending a policy literally called "Work From Home Forever" and with no flexibility -- back to the office 5 days a week. Why would an employee feel safe when literally everything about Twitter changed overnight?
- whymauri 4y agoAnd when the firing is coordinated by an outside party with little-to-no relevant expertise. It's hilarious that they immediately tried to hire back people they fired.
- lostcolony 4y agoYeah, Twitter is basically a running case study in what not to do when it comes to acquiring a company successfully, and can't be held up as anything other than "what happens when you do everything wrong". Certainly, it's not a useful example for others, even as a warning, because you can't easily tell what bad actions led to what bad consequences; there are so many of both.
- bawolff 4y agoI think if you only need to get rid of say 3%, then you can probably just do a hiring freeze and wait for natural turn over. If you need to get rid of 40%, doing it all at once is probably too much of a shock to the company (too difficult to figure out who to transfer responsibility to). So 10-15% is just right: enough to be worth it, not too much to cause excessive turmoil.
- SQueeeeeL 4y agoYeah, this is why all the experienced people bail even if they don't get laid off
- jy1 4y agoSometimes its team specific. E.g. Recruiting team if you plan on a hiring freeze for 12 months etc.
- lll-o-lll 4y agoHiring freeze is actually a mistake as you trend towards mediocrity. Natural turnover tends to lose you more good people than bad (head hunting, opportunity).
- bawolff 4y agoSure, but i imagine layoffs are even worse for that. The company can pick who to layoff, but once they do i imagine the really talented people start to jump ship.
- roncesvalles 4y agoThe trick is to do it when everyone else is in a freeze or doing layoffs :)
- bbreier 4y ago> Remote work > Anticipate more mid-size and smaller companies will go back more fully into the office as times get tougher. This will not be one size fits all, but will be an increasing trend. Up to this point in the article, whether you agree or disagree with the points, the author offers some arguments and reasoning supporting each. Here, they simply assert that small and mid-size companies will go into the office, with no supporting argument. Why? Won't many small and mid-size companies have come up under covid and not have an office lease in the liabilities column? Why would they pay (insert large city) rents to save money? How does it help?
- pcurve 4y agoWhat happens to people who were hired as fully remote during pandemic?
- jjav 4y agoAt least at Twitter, sounds like they are in trouble.
- throwaway5959 4y agoYeah, they’re all effectively fired unless they have the flexibility to pack a back and fly to SF or another Twitter office on Monday, at least from what it sounded like on the leaked call (there was mention of special circumstances but that sounds like only for people in emergency situations). Kinda fucked up.
- chrisbolt 4y ago> Won't many small and mid-size companies have come up under covid and not have an office lease in the liabilities column? Were they started during Covid? Office leases are typically at least 5 years, so most existing companies will still have them, hence return. Edit: removed assertion assertion
- bbreier 4y ago
- throwaway0x7E6 4y agobecause that's roughly the amount of ESG dead weight. nobody's firing productive workers.
- monocasa 4y agoI would be surprised if even the execs ordering the cuts thought they weren't firing any productive workers. A percentage based layoff is a broad brush to paint with that has a lot of collateral damage.
- lostcolony 4y ago>> nobody's firing productive workers. Remind me why Twitter is trying to rehire workers they let go, within a week?
- throwaway0x7E6 4y agobecause twitter's own execs and HR had their say https://mobile.twitter.com/RichardHanania/status/1591153866397331456 https://mobile.twitter.com/RichardHanania/status/15911538663...
- lostcolony 4y agoThat has no bearing whatsoever? That link itself says "Mr. Musk's team brushed aside the suggestion", meaning that didn't effect who was let go, but -even if it did-, it still would have no bearing, since regardless of who made the decision, or for why, the fact they're being sought after to be rehired so soon means your initial statement "nobody is firing productive workers" is false. Someone fired workers who were sufficiently necessary as to realize they -need them back- within a week.
- throwaway0x7E6 4y agoit does however suggest that some people might have been fired for reasons other than merit
- bottlepalm 4y agoIt's pretty ingrained in management culture whether they know it or not - https://en.wikipedia.org/wiki/Vitality_curve https://en.wikipedia.org/wiki/Vitality_curve
- anshumankmr 4y ago10-15% is a lot to let go of in one go, but hopefully no one would do something as idiotic as laying off 50% of their workforce, though right?
- chatterhead 4y ago"Now is a time for CEOs and their teams to give themselves permission to toss out old assumptions about their company, mode of operating, growth targets, team, culture and mission. There will be few opportunities to make big changes like in the current environment." Good luck. If you think CEO's give a damn about success you really don't know what the job of executives is for.
- 29athrowaway 4y agoNo, the reason is https://en.wikipedia.org/wiki/Vitality_curve https://en.wikipedia.org/wiki/Vitality_curve > The vitality model of former General Electric chairman and CEO Jack Welch has been described as a "20-70-10" system. The "top 20" percent of the workforce is most productive, and 70% (the "vital 70") work adequately. The other 10% ("bottom 10") are nonproducers and should be fired. 10% layoff means you are being ranked.
- pcurve 4y agoA head of large company once said, "I can cut the bottom 10%, but I don't. Because new 10% will be formed to take place"
- ilyt 4y agoYeah, just cut 1% at a time so they don't notice
- 29athrowaway 4y agoThere's also the WARN act.
- 29athrowaway 4y agoWhen employees realize they are being ranked, they will hire the most mediocre people possible, so that their ranking relative to other employees goes up. This is how Ballmer almost killed Microsoft.
- dboreham 4y agoGoldilocks firing.
- phkx 4y ago> One venture firm I know is encouraging companies to assume they should cut 50% and then use financial modeling to prove otherwise. Is there any common tooling to do that kind of financial modeling other than spreadsheets?
- deleted 4y ago[deleted]
- derefr 4y ago10–15% is about the maximum amount of dead-weight employees (the kind who don't have the skills to perform the job-role they're hired for, who were hired due to favoritism, bribes, blackmail, or pure hiring-process "throw a dart" laziness) you can have on a corporate balance sheet before the aggregate lack of expected productivity per OpEx dollar starts to be suspicious. The further below this limit a company is operating at, the 'safer' hiring managers can feel in making arbitrary/capricious decisions without being called out on them. And so — presuming at least some hiring managers in each bigcorp are unethical and lazy or able to be manipulated — 10–15% dead-weight becomes an equilibrium point: the number of dead-weight employees asymptotically approaches 10–15%, where firing one means being able to hire one more, and hiring one means being unable to hire one more. (Which isn't to suggest that there's top-down awareness in all these companies of these employees being dead-weight; rather the opposite — they survive because the structure of these companies has no continuous visibility into employee productivity. But when they consider layoffs, that's the time to do a point-in-time productivity audit... and that's when they find that this dead-weight has been accruing, and set out to burn it off. And, if they're smart, to also "burn off" the people who were willing to commit malfeasance by hiring/endorsing them.)
- synu 4y agoIt seems to me unlikely that they both couldn’t tell who was performing in normal times and then find them with surgical precision while panicking.
- derefr 4y agoHow so? You just don't bother to ask these questions, until you need to know the answers. The information is there at the leaf nodes of the org-chart; it's just not normally being propagated up to anyone who can do anything actionable with it. All it takes is asking the hard question, recursively.
- synu 4y agoI guess I just don’t believe the leaf nodes in your example actually know who isn’t performing, but had decided to keep them on the team for reasons. And that if they are asked, they will suddenly name names with pinpoint accuracy. In my experience, in this situation, the managers are clueless and figuring out what is actually going on is a hard problem.
- summerlight 4y agoUsually 10~15% are considered as "for redundancy". If you go further than that, you will likely lose continuity on your core business. The risk is just too much to take. Unless there's a good evidence that the business can sustain with 50% or whatever numbers, it'd better be safe. It might true that some companies are extremely bloated and their competitors may be demonstrating a similar level of productivity with 30%~50% of people but different companies have different history and contexts; path dependency is the thing. For that level of productivity loss, the root problem is more likely deeply ingrained in the structure (especially management and decision making) so cutting more and more people usually won't help.
- lettergram 4y ago< looks over at twitters 50% layoffs > More than 15% often means a change in the business model.
- jstx1 4y agoLook at Facebook's employee curve in the article - it looks pretty much exponential. If they lay off 50% of their employees, they'll be at 2018 levels when they had essentially the same business model.
- summerlight 4y agoTheir revenue had also exponentially grown (doubled between 2018 and 2021) even though IDFA kicked in, which pours huge complexity on Facebook's business. Unlike people's typical tech stereotype, revenue growth is not something automatically granted with "the right technology"; you need product management, sales and and engineering infrastructure just to keep it.
- mclightning 4y agothey can't afford to make same mistakes they did in 2018 though. when you're as big as facebook, mistakes you make shape the regulations in the world.
- Joel_Mckay 4y agoI always assumed it was a ritual sacrifice to telegraph a message to investors that a company is reducing operating costs to pollish the annual report. This is also why employees should be nervous about firms that sync a hiring cycle with Q2/May. In the US, a CEO must make the profitable decision, or face direct legal peril. It often has nothing to do with the character of those on the board. ;)
- diffeomorphism 4y agoThat is at least in part an urban legend: https://www.nytimes.com/roomfordebate/2015/04/16/what-are-corporations-obligations-to-shareholders/corporations-dont-have-to-maximize-profits https://www.nytimes.com/roomfordebate/2015/04/16/what-are-co... The CEO might still get complaints, but legally there is no obligation.
- Joel_Mckay 4y agoReally? I thought the share dilution scams were only viable in places like the TSX, and that was why many avoided the foreign exchange in favor of US firms.
- deleted 4y ago[deleted]
- seanhunter 4y agoWhen I was running a startup there were lots of times when I felt kind of lost and it's very tempting to listen to things like this because they seem plausible. It's a huge mistake. This kind of generic armchair general "advice"[1] is everywhere when you run a company and is basically completely useless because every company is a complex and unique special case and if you're in charge you don't have to make the decision that would on average be the right decision for companies of your type, you have to make the best decision you can for your specific situation. This goes double for people decisions because they have a huge impact on those affected so it behooves you to take the time to really do your utmost to do it right. [1] By which I mean the kind of phoned-in powerpoint analysis that would be produced by someone with a career at a 2nd tier wannabe McKinsey consultancy
- ownagefool 4y agoI wouldn't hold any special reverence for McKinsey. In general with any of the management consultants, you're going to get people with very little actual experience telling you how to run your company. Whilst some of the stuff, usually more accountancy / factual based, doesn't require experience, and thus may be delivered to a high standard, you're also going to got a bunch of hot takes that don't make sense in reality. Outsourcing, the Spotify model, and not really agile Agile are all sold by the top tier consultants, even though you basically can't name successful examples.
- seanhunter 4y agoCompletely agree. We had McKinsey crawling all over one company I worked for and in the "workstream" I was the main point of contact for they had the first meeting where they "were in listening mode" and at the end of the meeting I said "look, if your plan for this workstream is to take everything I've just told you and put it on powerpoint slides and tell it back to us while charging for your time that's not going to work. So if we have a session tomorrow you actually have to bring something". They called our CEO and shut our workstream because they said they didn't think they could add enough value. All the other workstreams continued for a while with them burning our investors' money and also all ended with a big nothingburger. Basically the team we worked with had one guy who was genuinely brilliant - razor sharp, really knew his stuff etc just great - and like 8 people there whose function was to pad the billable hours, make slides, carry printouts and drink the free coffee.
- kramerger 4y ago> many companies have had their mission drift during the Trump years and COVID. Rather than founder-led customer-centric mission orientation, companies drifted into a number of other arenas often driven by a small proportion of their most vocal activist employees. What does this even mean? How would "activist" employees change the company directions and its finances?
- kortilla 4y agoThe more obviously related changes were the variations of moderation on free speech. “Fact checking”, “hate speech moderation”, “community guidelines”, etc. Apart from completely illegal stuff, all of these platforms more or less just let whatever fly until the Trump era began.
- TylerE 4y agoMostly Optics. Anything larger is desperate. Anything smaller doesn’t really move the needle that much beyond normal churn.
- davidkuennen 4y agoIs going back to the office such a huge thing in other countries? Here in Germany almost nothings changed from the main COVID time in terms of home office. It seems like our standard of working has transformed and will not revert back.
- PartiallyTyped 4y agoMicromanaging mostly. My company wants to return to the office by Dec, but I don't really see that happening.
- mortenlarsen 4y agoSame here in Denmark. Maybe it is easier due to a flat company structure, and micro-managment being less common. It is not expected or even tolerated by workers, who will just jump ship if it happens.
- csydas 4y agoYes and no. When COVID more or less "left" corporate culture, a lot of US businesses wanted to go fully back to work or to make remote work a benefit, i.e., you'd take cuts elsewhere for the privilege to work remotely/from home. While some of it is likely power-tripping on the part of managers, I suspect some of it is more complex involving expensive building leases and trying to justify costs, fear of "what happens if the culture shifts again and we need to find office space", which I do think is a reasonable concern, but not to the point that it should shut down remote work entirely. Anecdotally, I do know quite a few higher management ones who were very upset by remote work; they liked the idea of having "their" employees in a single spot so they could check it at any time for various projects; some relented when after an honest talk they conceded they never really checked in person and did everything by chat/call/email anyways, but there were a few sticklers that just honestly believed "butts in chairs or we lose all productivity", even though 2 years of data from COVID times shattered this belief entirely. Part of why I think the position was so predominant in the US was that the job market power was so vastly different there; in European countries, it was far more competitive for a company seeking candidates and this gave a lot more negotiating power for employees I think since there was certainly a job lined up for them, whereas in the US it was a bit more uncertain that you could get a position since there were so many more candidates than positions in many cases, so businesses had the ability to be far more exclusive and demanding.
- 1letterunixname 4y agoI just survived a round of layoffs at someplace mentioned. I think this is overthinking it or looking for a conspiracy theory. Layoffs aren't deeply calculated or hand-wrung over in advance. They're somewhat arbitrary and ambiguous but purposeful: to stop the hemorrhaging of cash. There's no clean or perfect way to do a layoff precisely in limited time, so they happen in discrete units of reduction in particular areas. They're rarely pleasant and never perfect.
- xtracto 4y agoI've had to do layoffs in my team (as head of Engineering, I had all visibility). It was pretty straightforward and un-conspiranoic: The CEO got us all execs together and showed us the P&L which showed that we had 10 month runway. It also showed that (as in most companies) the highest burn rate was from payroll. Then he mentioned that we had to expand our runway to 18 months. Which meant cutting in various places (including no free sodas). Finally we agreed to cut payroll in 10%-15% , which would have a strong impact on the runway. And that was it... pretty straightforward.
- tsuujin 4y ago> MAMA (Meta, Alphabet, Microsoft, Apple) This is such a lost opportunity for MAGMA (Meta, Amazon, Google, Microsoft, Apple)
- MR4D 4y agoBecause to investors, 10-16% shows you’re cutting fat. 25% or more shows you’re cutting off limbs and the firm is in distress. If I owned the second I would probably look to sell it.
- FooBarBizBazz 4y agoIf 10-15% of employees are "low performers" for their roles, you'd expect 10-15% of CEOs to themselves be low-performers for the CEO role. And so, in 10-15% of these layoffs you'd expect to see the CEO get replaced.
- egberts1 4y agoIt is 10-15% because that's how the HR do their incremental grading of their employees across performance scale. And it is easier for corporations to discharge the bottom feeders if and when they need to improve their bottom line.
- sharno 4y agoSubstack is very annoying with the modal that appears as soon as I start scrolling the page
- aliciawilliams 4y ago