Are Layoffs Even Worth It? 

This makes me understand why some companies like Epic (the ones that make medical software), Valve, and others may opt to avoid being publicly traded.

my former company did a massive layoff at the beginning of the pandemic, and after 2 months they were hiring again for the same roles... (IT sector)

A lot of the layoffs were for jobs not directly contributing to company development such as HR, Advertising, IT. Most of these companies still hire engineers & developers during layoffs!

Thanks for indirectly teaching us how we should act if some of us actually get into some of those company decisions (positions of power) at some point during our life.

Recently bought some recommended stocks and now they are just penny stocks. There seems to be more negative portfolios in this part of the year with markets tumbling, soaring inflation, and banks going out of business. My concern is how can the rapid interest-rate hike be of favor to a value investor, or is it better avoiding stocks for a while?

From what i heard somewhere else, I haven't researched it so take it with a grain of salt. A few companies have bonus teirs so you get like a 300k bonus over 5 years, they are structured so they get 10k the first year, 20k the second year, 30k the 3rd year 100k the 4th year and 140k the 5th year. This was listed as a bit of the reason why some of these companies were trying to push people out after 2/3 years.

It's always the shareholders that ruin our favourite companies

16 weeks for Facebook included the WARN period which they gave out 2 months before layoffs. Employees were still working during those 2 months so their severance was closer to 8 weeks + 2 weeks for every year.

I'm running out of ways to express how humbled I am by the depth and quality of every video this channel has produced during the past month. You make every professor (self included) look like an ignorant toddler. How do you even do this???

The reason wasn't never to save cost. They have people/departments that needed to layoff but they didn't do it due to bad press. Now with all the economy downturn they can do it and excuse to do external reasons. Also the people you already have may not have the expertise you are looking for so a hiring freeze is not an option.

imagine getting laid off, looking for jobs, sees the company that laid you off is hiring, applies, gets the same job, repeat 😂

what is up with investors like, something is making them millions and they cant even look at the thing to see why it's making that money and try to understand it? how can someone be so ungrateful

Another banger video, great work. You know maybe someday you can tell your process and how you manage to learn all this stuff. The way you break it down is great.

It's not just one cause. Pressure from shareholders is a big one but it's not the sole reason layoffs are being done. Another big reason is to workforce optimization. Over the pandemic, a lot of these companies went mad with hiring, filling positions or roles that weren't needed (or are no longer needed), not to mention picking up a lot of underperformers or bad employees in general. And the best time to do layoffs is while the company is still making a profit, with advertising revenue already taking a hit and more hints of a recession around the corner. Not to mention the pandemic being over and people spending less time online. The generous packages are to avoid lawsuits, since laid off employees sign away their right to sue as a condition for receiving the payouts. And these nonrecurring losses are used to offset income (in a year when the company is still making a yearly profit), so they're able to avoid corporate taxes that they would otherwise pay. In short there are a number of causes and contributing factors besides the one mentioned in this video.

A lot of layoffs were done to cut expenses and show profitability to share holders. Cutting head count is one of the quickest ways to show profitability.

I don't run a big company but I do run a small company and there is a really simple reason outside of investor meddling as to why you want to lay off people. Some people are just not got for a company; a few bad apples really do ruin the bunch. It's not a bad idea just to pay bad employees to go away.

Whoh😮 amazed to the depth and quality of video. Kudos to you man

A lot of the layoffs were from specific projects that were canned. Also a lot of job postings are there to “look” like a company is still growing

As an HR professional, I can tell you this is at best a half-truth. First, layoffs are rarely across the boards cuts. Most companies cut more people in certain divisions, departments etc than other areas (Ex: Sales departments tend to be lower on the list for lay-offs because that department makes you money. Another example is a division generating high value for a company than a division generating little value). Next, individual performers. If you are a top performer in an average department your less likely to get the ax then an average performer in an average department. Other factors include if your department has more highly compensated employees than a department in a department that has much lower salaries because companies can cut more cost with fewer people then in departments with people making far less. Next is on the attrition side. Companies don't lose people equally through all departments and divisions. Some departments and divisions have far less turnover than other departments. We all know this to be true because we have seen it. Crappy managers that are creepy or bully their workers lose far more people that managers who respect their employees and their employees think highly of. No one wants to work for a horrible boss. This matters because cost savings from attrition because of things like hiring freezes are going to happen faster in departments with horrible bosses who employees quit faster. I don't want to make this sound like a good thing because it is not. HR tends to scrutinize departments and divisions with higher attrition with no obvious reasons. We want to know why. However, we do this through some interesting ways using data. Come layoffs it is far easier to let go those managers in those departments with easier justification. Additionally, companies are always hiring but again not across the board. As business needs, objects, etc, change, so do which departments get more (or less) headcount or which departments get headcount increases or replacements, faster. This all means layoffs, attrition and hiring are far more complex. As for the CEO making the cuts, not quite. They sign their name. The actual determination of departments, divisions, individuals etc. Is done mostly by the HR department accounting department, with the VP of Financials, CFO, COO, VP of HR and CHRO and those that report to them making those decisions based on most likely input from various individual managers across the those divisions/departments targeted for layoffs. It is a team effort.

This information is very important. Thank you for sharing it!

If outside investors are the reason for the layoffs, why did Alphabet cave? I thought Larry Page and Sergei Brin held a majority of the voting power.

For companies that live and die by stock price performance, these layoff announcements make sense. How they actually play out is a different matter. I can't recall seeing any major projects cancelled.

My company recently went through layoffs, but we are a company that runs coding bootcamps. The layoffs in tech are hurting our industry big time. No one wants to get a tech job when all the news is about how hard the market for big tech is. So our enrollment is less than half of what it should be. No press is bad press *for them*, but that doesn't mean that there aren't far reaching consequences

😭 the video stopped so abruptly "I'll see you guys-" i usually lip sink the outro so it was noticable lol. Great vid tho!

Heads of major corporations do layoffs for 1 simple reason. The sadness it causes makes them more powerful

I'd like to elaborate on one point you made there: Rightly, or wrongly, attrition is said to get rid of the ones you want to keep. While layoffs are said to get rid of the ones you don't want to keep. Conversely, on the whole, domain knowledge is more likely to be easy to manage/keep with attrition than layoffs because of goodwill.

Great video as always, Logically Answered.

Love from Ghana keep it up and yh it’s worth it to them severance is a one time thing after you won’t be paid again

I hope Hauri never lays himself off of his great channel. Quality content is standard job performance on Logically Answered.

And things like this are why I have never worked for a publicly traded company my entire life. The "owners" mostly have no idea what is actually involved with doing the job and are in it only for the maximum amount of profit. As for the massive jump in cost of a house verse income, that is actually drastically different on a state by state and city by city basis. I live in Lafayette, Louisiana (I know I know, Louisiana...) and the average cost of a house in the city is almost exactly 4x the average household income. The issue with buying a house has less to do with some nationwide jump in the cost of a house and more to do with a few states and locations drastically throwing off the averages. If you are willing to move to a place with a reasonable cost of housing than you can afford a house. On a related note, most places with reasonable cost of housing also have reasonable cost of living (food, utilities, etc). Compared to places like California and New York, you can make half the money and still have a higher quality of life with more money to spend on things you want to because of house much cheaper housing, food, and utilities are. We are talking often on a quarter or less. Using after tax income, making $100k a year when it cost you $80k leaves you with $20k for whatever, while making $50k a year when it cost you $20k leaves you with $30 for whatever (and you are buying your home instead of renting). Those numbers look even more out of whack when you look at them before taxes, since the places where you have to make so much more money have a far higher state tax rate and you end up in a higher tax bracket so have even less take home pay. When calculating where you should live, take the "Average Cost of Living" for that area, add in how much you want for extra (fun/hobbies/savings/etc), and divide by the combined tax rate. The actual 'value to you' of a higher salary in many parts of the country is actually less than a lower salary in other parts of the country. Finding a job in an area that has a high 'value to you' and a reasonable housing market will let you live the American dream.

I wonder where you got those vidoes where code writes itself on the screen like at 8:35. Or people touching random keys just to simulate that they are typing something.

Hm, but this also depends on which departments suffer the most attricion vs what departments do they want to purge. Simplistic example: let's say you want to purge the QA and the Customer Service departments but the biggest portion of the turnover is in the dev teams. You would still need to replace/hire people for the dev teams and freeze hiring to QA but if their attricion is slow, you just lay them off to not wait the excessively long time.

Not so easy to cut bonus in Europe though ^^. For instance in Switzerland with 5k google employees, the law says that if you receive a bonus for multiple years, that becomes part of your expected salary. So technically most googlers might well ask to receive it ;)

Great video brother!! Thanks!!

You're missing the key difference. Companies can choose who to lay off, but not those who leave voluntarily. Layoffs target underperforming employees, while it's usually the high performers who leave voluntarily.

Freezing hiring instead of layoffs assumes that people are fungible and could be readily redeployed into other functions in the business.

What this teaches me is that you have to not be replaceable!! At least be somewhat having unique qualifications!!

@logicallyanswered I've noticed more and more that the beginning of your videos starts abruptly and the opening sentence is clipped. For this upload, the word "Tech" was clipped off just enough to where I could barely make it out. Just an FYI..

I mean layoffs are ways they cycle new team members in with fresh ideas in bulk/Masse

Sometimes these companies get so bloated that workflows benefit by smaller workforce

- It's Not About Money, It's About Sending A Message ( to the investors that they can buy the stock as the company has now layoff , the investors do not care if it really affect the bottom line if the message make new people consider the company as an opportunity to invest thats all that matter. )

9:03 it's the management consultants C-suite hire

But why are they paying so much while laying off. Is ut in their contact. Can't they pay the least amount of money they want ???

Just got laid off from KPMG I only got 4 weeks pay, but I have 140 hours of accrued PTO. Considering that we are not going to have much productivity over the next two weeks, I figured they are spending about 22k to let me go.

Those who often make these decisions to execute mass layoff procedures often never have to deal with the consequences , often they are incentivized to do so through thier remuneration. Often a sham review will be done by a consulting company and all they will do is offer a solution to an executive team to reduce head count so as to been seen to have delivered something. Layoffs usually di not happen because companies don't have the capacity to keep or re-distribute thier human resources but rather because some executive who has just done his MBA has an ego trip.

In one of your videos you said iphone sales plateaued and these share holders or market expects the company to produce same kind of growth. My rental income is $1500. If I have to raise 20% each year, it is not good for society and neither for me. morally. But this whole aspect of market system with quarterly results should be managed better in this advanced age to advance better

Most people fail to see another aspect of layoffs. Companies do it to frighten the remaining workforce into commiting more seriously in their work performances or risk being the next victims the future.

I don't know on what basis you are evaluating but restructuring of teams based on projects they are currently doing is also an important metric. Like when layoff happen they might reduce workforce in non IT department but increase workforce in some critical department like AI. So that logic of freezing hiring and not laying off is not correct.

One cost you forgot to include in letting someone go, even if they cost an effective $400k/year in salary/benefits/overhead, is how much it costs the company to hire and TRAIN the next person. Trying to spin up a new employee to replace the attrition alone is a losing battle. It takes up the valuable time of otherwise productive senior mentors to guide the new employee. And the new person, no matter how smart they are, will not be useful for the first N months (where N is large). So you have to offset the "cost savings" of letting someone go, with the "cost incurred" of bringing on new people in the future. It's short term vs long term. There is very little to gain in letting a fully trained person go. Unless they are truly dead weight and sand bagging their whole work day.

I love it when you break character 😂😂😂

I used to be able to get a job in about a week. Now I get a response 1/100 applications submitted, and of that I have yet to be able to get a position. Been looking about 5 months.

Being a public company with stakeholders sounds like absolute hell. Why do they do so?

This is why you should keep your unicorn private as long as you can and offer securities on the secondary market.

0:41 damn straight PTO cash outs should be written into law😊

If a few major companies announced hiring freeze (and expected that the attrition rate will take care of the rest), attrition rate in other companies would go down. In the end employees jump from one tech company to another. Very few people quit tech and go into farming.

Freezing hiring doesn't work because only the talented people who can actually find better opportunities would leave, after the freeze period you would have only the bums that can't really help the company. The layoffs target people identified as not sufficiently beneficial to the company.

LOL you think 6 months of salary is a high severance!! I worked in the HR and we were firing people all of time. Normally they would get one year of salary at least. Some would even have packages of almost 3 years of salary. And to answer your question. The company saves a lot of money. After two years there is a profit from the layoffs and that is without considering the downsizing of office space. And you are considering that the people getting fired are people they want to keep, but half of the layoffs are just employees they want to get rid of, they are not good matches for the company and this is an opportunity to replace them.... yes, they are replaced most of the time for cheaper employees or because they are going to buy another company and need to reduce the FTE upfront, and then do it all over again when they get the new employees and need to bring down the FTE after the merge.

Big problem with this logic is that the software industry as a whole needs to reduce its overall headcount. Natural attrition does not work as the employees will only leave when they can find another job in the same sector.

I have known employees where getting rid of them was a major morale and productivity boost, and well worth any compensation. I don't want to know how dysfunctional a department has to be to apply that strategy on a larger scale, though.

Worked at Twitter, wish I sniffed any of that

Most places that I have worked at don't do anything but cash out your PTO when you get laid off. The most you might be able to get is unemployment and COBRA continuation of insurance. Either these people in the tech industry are very entitled, or regular working class jobs are very under compensated.

Anyone ever notice Microsoft Google's colours are the sign just in a different order i5 from Chester UK 🇬🇧👍

Looks like Hari can read my mind. I was wondering about this question and now this dude made a video on this. 😭😭

Why in the world would you use revenue to contextualize the savings from layoffs? To be fair you need to use a profitability metric like free cash flow.

The layoff US$146,000 × 4.63 = RM$675,980 × 3.96%= RM$26,768.80÷12 months= RM$2,230.73 a month. No need to work in Malaysia. Can retire at minimum spending, you can apply another tech Co. Who give same layoff.

Somthing I think was missed was the fact the base pay is less than half of compensation. so the director example would most likely walk away with 150K not 400K

I'm sorry, OPPORTUNITY?!?!? To cash out PTO? Sorry, but VAC MUST be paid out. It's NOT an option for companies

For savings don't forget how much the tech and software costs per employee

In short layoffs are due to investors, why does it always got to be them?

Layoffs are an opportunity for them to get rid of their lowest performers. Most tech companies do this even during a good year, they will cut the bottom 10% of performers. This ensures they have the best talent.

7:35: They can't cut bonuses. First... Sometimes it's even part of the employment. So they are contractually obligated to pay in some cases. Second, in Silicon Valley, the base salary is your rent, your bread, your butter. Nothing more. Bonuses and RSU is what gives you enough to buy a car or go on vacation. If they cut the bonuses, their retention rate will become *abysmal*.

The intimidation of employees is kind of the point--reducing turnover through fear would pay off big time. They overhired in 2021 to hoard talent from competition; they may have done it to have people to lay off after taking a good look. And laying off gives you choice who to keep; attrition can lose your stars. Good severance cuts bad feeling. Cutting bonuses breeds resentment in the people you are keeping. Sure, making the stock stumble and recover is great for stagnant stock price, but the CEOs are capable of planning this. WFH works best when people are somewhat intimidated so they stick by their machines trying to prove themselves.

it feels really bad getting exclued from the job market, just because i don't have a social media presence (AKA: am not a social media zombie\addicted).

Quarterly results will be promising

Hey yo ,how do i get a FAANG job? Mind u i am an African straight outta high-school with no qualifications whatsoever.

4:35: "A lot of these people are rich enough to retire before they are thirties" That was the funniest line in the video. No. I've been working for Apple for almost 10 years now. I'm nowhere near retirement. Nobody leaves Apple to retire unless you're 65. (And I know people who've reached that age inside Apple). They accumulate stocks and decide to take the risk in a startup. If you come back within 2 years to your employer, you can resume your benefits exactly where you left them. Vacation. 401k. etc.

While calculating mean average compensation , did they considered salaries of CEOs and all top level executives , if yes ,don't you think, those stats are somewhat deviated from reality?

Severance prevents lawsuits. Enough said.

Remove other people's certainty and your own certainty is assured. When people are uncertain of reality, beneficial (to the owner) negotiations can happen.

So the thing is right now your argument is based on a calculation that takes into account severances. But what is the law that requires you to even have severance? Once layoffs start to become more regular, and tech workers start to become hired more on contract, those bonuses are going to shrink and evetually disappear altogether. At which point layoffs are going to be much more easier and affordable.

"with the exception of Amazon" Ouch

Also, if you think that companies like MS, Amazon, or Google give a damn about being seen as "the bad guys" for doing layoffs, then you don't really know as much as you think you do. The executives of those companies have enough money that they literally DGAF, and would sacrifice every last one of us if they thought it'd get them a bonus.

Can you make an video why so many ceos are indians in tech?

So it's because the people with the money don't know what they are doing. Wow, this is unheard of 😒

brad gerstner put out a letter, few weeks later meta laysoff

Why on Earth are they offering such huge severance packages?

Layoffs are just a way to cool down wages and benefits for workers to pressure them because if there is unemployment than there is cost saving.

it’s not the money. It’s the message. If you exile people from the island from time to time, it creates the illusion that they’re streamlining. Perception is reality.

Tci is activist hedge fund owning 0.27% which does these kind of things usually, highly unlikely the reason of layoffs. The simple reason is pandemic fueled growth and hiring turned out to unsustainable and the forecasting simply changed. Nothing more than that.

Bro. You send out an internal memo to 200k employees telling them they're losing their five-figure bonus that year, you're losing employees in the short-term and the long-term; you'll be remembered as the multi-billion dollar company that cut bonuses just to save money. If I'm being honest, I think people would take the lay-offs better simply because it's not _as_ unheard of and, unfortunately, somewhat normal in the business world.

Layoffs are an opportunity to get rid of maginal performers

You’re not taking into account the skills and experience. For example, Meta have been investing heavily in VR and hired a lot of people from that space. If they pivot to AI they need to reduce the number of people with VR experience and replace them with people with AI knowledge. These are cutting edge skills, you can’t just send your people on courses to be retrained.

How about giving the ad of the video on Wednesday and releasing the video on Friday?

Bonus for other ???

What a shock, wallstreet greed knows no bounds… they’re happy to put hundreds of thousands of people out of work so they can buy their 5th yacht

So rich clueless suits making decisions without full knowledge. Yeah it tracks.

You do realize that not every employee can do every work? There is nothing called a general purpose engineer. Someone who has experience in hardware engineering can't just start working on an Android app after 1 month of training. It's equally damaging for the employee's career growth as well. People should continue doing what they are good and interested in. (except Php developers😅)

I think this just goes to show that the people that got laid of really were poor performers, regardless of what the company says. The ones quitting themselves are rarely the poor performers. They are the seniors that have been in the company long enough to retire or found an even better opportunity. When it comes to FAANG - that's big. It's hard to get in and it's just as hard to find an even better offer. It kinda just goes to show how hard FAANG grills their candidates. I have say though - FAANG salaries really are insane, their average is the true peak (0.01%) in most countries. They could literally cut the salary by half and they would receive the best candidates in most locations other than silicon valley. Even for remote workers - 200k is considered excellent and attracts very strong candidates. Very importantly - 300k being the average means the best are receiving much more than 500k. That's 2.5x the remote work excellency barrier. It's undeniable that they are overpaying.

You are not into corporate finance, are you? Do not confuse revenue with net revenue or profits. $8.4 B of savings is equivalent to a third of Meta's profits for the entirety of 2022. That is huge. Enough to take the company's multiples to a point where it justifies a way higher valuation, and thus, can get an even higher benefit from the stock market. And no, it's not only big investors who benefit from the layoffs, it's also small investors, and even employees, who receive stock as compensation.

One big underlying reason that no one mentions is that this started happening around the time that AI came to proninence, with AI copilot for coding and also other tools this means that you may need far fewer employees or at least by laying them off they were hedging their risk of how much AI could impact employee output. I think low-key this was also a huge reason knowing all these companies are at the cutting edge of this technology and know how much it can help in efficiency gains.