Rackspace literally decimates workforce: One in ten staffers let go this week | Hacker News Reader

Rackspace literally decimates workforce: One in ten staffers let go this week

theregister.com

38 pointsBender20 comments

I joined the Rack in 2013 as my first professional role. It was a place full of ambition with a bright future. Looking back, the unfortunate leave of the charismatic leader Lanham was the beginning of the end from my perspective.

There was such a large plethora of projects to work on and lots of freedom to go out and build what we thought would be the next big thing. From new simple website hosting to baremetal power9 machines there was no lack of interesting projects. In my 3 years at the company I saw employee sentiment plummet, as I left before the first large layoff in early 2017.

I met so many wonderful people there that I try and keep in touch with, it was such a bittersweet experience. My outlook on Rackspace now is very bleak.

This is really disappointing to see.

I have fond memories of starting to work for them back in 2013, which for a lot of folks I've talked to was peak Rackspace. The "Castle," a mall they bought in San Antonio and converted to office space, was thriving with folks working on cloud computing, frequent tech talks, and just a great office culture. As late as the mid-2010s, they were innovating with novel products like OnMetal, on-demand full hosts with the elasticity of the cloud, that AWS didn't really have an answer for yet. They also gave me the opportunity to work on open source full time, which was a rare and fulfilling experience early in my career.

I really thought the Castle would be a tech hub for south central Texas. I do feel lucky to have worked there when I did and still work with and keep in touch with a lot of Rackers. I wish those still there the best and hope they can turn things around at some point.

Went to the highschool right next to them. We all thought the same, that the area would be a hub for Tech. Sadly nothing every came from it.

I worked for a company that was acquired by rackspace years back, they were hands down the worst company I’ve worked for.

The acquisition was a total mess, working there for the short time I did is what I imagine prison feels like. Very territorial, aggressive and pointless.

>Not that the work they do isn't needed. In an paperwork submitted to the SEC on Wednesday, Rackspace disclosed that 85 per cent of the positions being cut will be backfilled by workers in "offshore service centers."

And Kevin Jones CEO is making $6,620,458. I bet he didn't decrease his own compensation to give shareholders more value for their shares. No he didn't. But he got rid of the highly paid workforce, got cheaper workforce, in order for the CEO to increase his compensation.

We need a law saying top executives can't make more than 10x (or whatever) than the lowest paid employee. It happens in other countries.

Some may say that it won't attract the best, but it's not like they are going to not work, those type of people are driven not by money, but an internal drive.

And for those who may say my words are awful, don't worry, it will never happen, because of the bribery, aka "lobbying", will prevent that from ever happening.

I remember when Ben and Jerry's tried that CEO pay ratio scheme you mentioned, and they couldn't find a ceo until they upped the ratio twice.

In addition to upping the official ratio from 5:1 up to 17:1, they also started excluding stock compensation from that calculation

Wait, what does "couldn't find a CEO" mean?

Wasn't there a single VP- or director-level person in that industry willing to be a CEO for that pay?

Or does that mean they only consider a very small set of people who are CEO-worthy?

I'm asking for general curiosity; Will look for articles but appreciate any insight or references you might have

A mediocre CEO can cost a company many billions of dollars. Just look at Boeing. How difficult can it be to be the CEO of Boeing, back in 2015, let's say? It's a market with only 2 players, costumers are fairly sticky, the products don't change quickly. You just need to keep the cost under control, and deliver the airplanes on time. Right?

Naw. The environment changed and competition changed with Airbus, so Boeing had to meet the competition by coming up with it's own version.

Airplane designs have got to be the single most difficult manufacturing challenge by far. Being a CEO of Walmart is going to be vastly easier than Berkshire Hathaway, which has a staff of 25 people: https://i.insider.com/5311e33beab8eaf731f07865?width=1000&fo...

Costco? Just buy some big buildings and some shelves and buy some stuff, charge a membership fee and have a camera to take peoples' picture at 795 locations. I could do that in my sleep.

But an airplane???? A million parts on each airplane. An unholy mess if one fails. Highly paid aeronautical engineers. Highly precise parts made of specific materials that cannot fail.

Costco can open a brand new location for maybe $1 million? You can make a number of mistakes on that, and that's ok, existentially. But when a new airplane costs $1 billion, it is a whole different ballgame. Can't have any errors on that.

And a lot of times, even a stellar CEO cannot save a company who's time has passed. The average time on the Standard and Poors used to be 33 years, now it is 14 years. I am positive that I could keep Costco around for another 14 years if I was the CEO. "Yeah, people, keep doing what you're doing, it's all good. Keep stocking those shelves, you're doing just great." And give me the $15 million salary every year.

> You just need to keep the cost under control, and deliver the airplanes on time. Right?

And keep them in the air.

In 1994, Ben and Jerry's had a rule saying that the highest paid person should be 5x the lowest, which at that time the highest that could be paid was equal to $81,000 at the time in 1994, which is equal to $148,497 in today's dollars.

When hired, the new CEO, Robert Holland Jr. who was a partner at McKinsey, "submitted a job application in the form of a 32-line poem titled "Time, Values and Ice Cream," which summarized his life and mentioned that as a black youth he was barred from sitting in "Sullivans, the ice cream place on Main," in his childhood town of Albion, Mich." - New York Times.

"Mr. Holland will receive a basic salary of $250,000 ($458,326 in 2021 dollars), more than the socially concerned company has ever paid but not an unusually high salary for a food company of its size." - New York Times

So basically his compensation is 30x higher than the lowest salary of $16,200 ($29,699 in 2021 dollars). I did say 10x, but was not hard and fast on that number, I said "or whatever". I don't really have an issue with $460,000 in today's dollars, and being 30x the lowest paid worker. But if he was to make today's average of 300x the lowest salary, which is average amount of compensation for CEOs, then Mr. Holland would be making $4,860,000 ($8,909,868 in 2021 dollars). That's obscene and grotesque. And it sure is not in the best interests of the shareholders, as seen in the next paragraphs.

Innosight Company report. "Furthermore, in 1965, the average tenure of companies on the S&P 500 was 33 years. By 1990, it was 20 years. It's forecast to shrink to 14 years by 2026. And about 50 percent of the S&P 500 will be replaced over the next 10 years, if Innosight's forecasted churn rate holds.

So my personal view is that CEO's don't matter that much. Sh-t, I'd be happy to run a company into the ground in 14 years, for $20,000,000 per year. Why not me? Because 14 years, that's the statistic, going to go out of business anyways, no matter who the CEO is. So why pay so much? Bad investment of shareholder's money.

The problem is that there is so much CEO idolatry, it's not even funny.

But instead of looking at Ben and Jerry's from 25 years ago, let's look at something newer. What about Dan Price at Gravity Payments?

Dan Price was paying his people standard payscale rates - administrative help at $16 per hour, etc. One person was a 32-year-old phone tech earning about $35,000 a year. The phone tech was pissed, as Price saw from his body language. Dan Price asked what was the matter, and the phone tech said that Dan Price was ripping him off. Price asked why he thought that, and the employee said, "I know your intentions are bad. You brag about how financially disciplined you are, but that just translates into me not making enough money to lead a decent life."

Price realized his employee was right -- not only about being underpaid, but also about Price's intentions. Dan price cut his own salary from $1.1 million to $70,000, and put the minimum wage for working at his company, no matter what the position, at $70,000. A high-powered 52-year-old Yahoo executive named Tammi Kroll, who was so inspired by Price that she quit her job and in September went to work for Gravity at what she insisted would be an 80-85 percent pay cut.

"I was so angry," Price says. "Here I am walking around making $1 million a year, and I'm working shoulder to shoulder with people ... who are every bit as good and valuable as I am."

Price says establishing a $70,000 minimum wage is a moral imperative, not a business strategy.

“6 years ago today I raised my company’s min wage to $70k,” Price tweeted. “Fox News called me a socialist whose employees would be on bread lines. Since then our revenue tripled, we’re a Harvard Business School case study & our employees had a 10x boom in homes bought.

The impact on Price's own life has been minimal, he said. For example, back when he raked in over a million dollars a year, he would go heli-skiing in British Columbia. Now he just goes regular skiing.

Price says a colleague at a competitor recently suggested to him that if Gravity adopted a more traditional business model, Price could become a billionaire and do a lot of good with that money.

"He's telling me that the world needs another billionaire philanthropist, and I just don't know if that's the case. Because we've been relying on billionaire philanthropists for so long, and I don't really think that's working out very well for us," he said.

The C-suite have showered themselves in compensation, but most Americans haven't had a raise, in real dollars, since 2000.

Info from the Dodd-Frank bill, data from AFL-CIO (2017):

Weight Watchers International

CEO: Mindy Grossman

CEO pay: $33,372,283 (2017)

Median worker pay: $6,013

CEO/median worker pay ratio: 5,908:1

Mattel

CEO: Margaret H. Georgiadis

CEO pay: $31,275,289 (2017)

Median worker pay: $6,271

CEO/median worker pay ratio: 4,987:1

McDonald's Corporation

CEO: Stephen Easterbrook

CEO pay: $21,761,052 (2017)

Median worker pay: $7,017

CEO/median worker pay ratio: 3,101:1

In a 2017 article, Forbes asked "How Many Workers Must Live In Poverty For McDonald's CEO To Make $21.8 Million?"

Gap

CEO: Arthur Peck

CEO pay: $15,587,186 (2017)

Median worker pay: $5,375

CEO/median worker pay ratio: 2,900:1

F-ing immoral.

Did you all know that the top income tax rate was from 70% to 90% From the 1940s through the mid-1980s? Now it is like, 35%, but the wealthy can use all kinds of tricks to lower that down to nothing, because they bribe (aka lobby) Congress for that?

Did you know that the City of San Francisco was going to raise the city tax on the wealthiest citizens by 1%, in order to help solve the homeless crises, and they all started making noises about how they were going to leave SF, because of a stinking 1%?

F-ing immoral.

I know that I wrote a lot, but it is something that I get pretty heated about. As you all can tell.

Oh rackspace. That expensive lesson has already been learned by so many companies. Going to be a disaster.

>Apollo Global Management bought Rackspace in 2016, took it private, and layoffs followed.

Yikes, private equity strikes again!

They are a public company now.

That's how the private equity firms squeeze their assets for cash, on the open marketplace.

Technically it's only decimation if the remaining 9 workers are required to kill the 1 themselves. But it's still nice to see the word used.

I went to see the definition of the word decimate because I thought it was a stronger word than one-in-ten reduction, more like reduce-most-of or something, but yep, it’s history is fascinating and it actually does mean one-in-ten harking back to Roman army times apparently!

To me the crazy bit was the other nine having to perform the execution. Imagine doing that to someone you knew.

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