Salesforce will lay off 10% of staff as part of restructuring
marketwatch.com
marketwatch.com
We really need to lock this absurdity down and increase severance requirements for large companies heavily. It's one thing to gamble risk for the company, it's something completely different to gamble employee livelihood when you're signaling job security by hiring.
My current worry is that the first round of layoff at my first company will get 4 months severance, I'll miss that round, and 2 months later get laid off with only 2 months severance. This would of course mean that my severance ends at the same times as the first group but I had to work an additional 2 months.
My hope for folks affected (and, as a former SFDC employee, I know several affected) is that it's pay & vesting for the WARN period, with the severance period following that.
Either that or they see something the rest of us don't when looking at economic data (a long recession).
Typically, revenue suffers if either clients downgrade or stop their contracts. Or go out of business. Is Salesforce in a position or niche where that doesn't apply?
https://en.m.wikipedia.org/wiki/Worker_Adjustment_and_Retrai...
- layoff results in fewer than 50 workers losing their jobs at a single employment site
- If 50 to 499 workers lose their jobs and that number is less than 33% of the employer's total, active workforce at a single employment site
These seem to let some* tech companies off the hook.
* Those that are highly remote or distributed.
Does "more reluctant" here = "more thoughtful"?
I'm sure you could take it too far, but I'm highly skeptical that we're in any sort of optimal situation today.
A strong labor market has been effective in rasing the real incomes of the bottom 25% or so over the past few years, it's entirely possible that a weaker labor market with stronger workers protections would've been less effective at doing so leaving the very poor worse off.
Source?
> A strong labor market has been effective in rasing the real incomes of the bottom 25% or so over the past few years
is it possible that strong labor market was due to increased demand from the stimulus checks?
Where's the efficiency for employee or employer?
- "If we hire this specific person, we might be stuck with them for a while" and
- "If we build out this entire department, we can't close it down on a whim"
I think that's a lot of repeated applications of the former case.
Employment should be easy to find, switch and end.
More like dating than marriage.
You may not be able to put little Timmy in private school and he may have to gasp go to a public college.
The other side of the token is that such a guarantee would help convince more people to accept an offer. I'd personally be hesitant to switch to a less stable job right now, and getting an offer yanked or immediately laid off with minimal severance would be brutal for many. A company providing "we changed our mind" insurance would retire a lot of risk for job seekers - and, if things are going well, it costs them essentially nothing to do.
Typically there is not a hefty severance paid by most companies though. There's some restructuring costs and lots of disruption though.
I’d rather it be harder to get a job, but have higher job security when you get it.
If you were out of work, 3 months behind on your mortgage, and wondering if you have enough money saved to keep your kids fed until you get another paycheck - I doubt you would make the same statement.
Look into how hard it is to fire someone in Germany post trial period (Probezeit).
Depends on where it happens. They are in many places.
It's definitely hard to process. Lots of feelings of anger, sadness, relief, etc.
Fortunately for her, the severance is pretty generous (paid through March, then 6 months on top). But there's also anxiety about the job market right now with so many tech workers being let go.
When that happens regularly, and you get used to being woken up in the middle of the night to respond to a technical outage or needy management, the lightest phone buzz can shock you awake.
Given the described situation, I'm not surprised they woke up to an unexpected phone notification :(
To clarify, we woke up at our normal time and saw the email.
When we woke up at (roughly at 6:30), she saw a work email on her phone announcing the layoffs.
"Literally" literally means "literally", but figuratively now means "figuratively".
It's "figuratively" or, more... literally, "metaphorically."
Deprecate means "to continue supporting but to discourage its use." 99% of people believe it means to end support.
"Ave! Auxilium requiro."
"Oxnychz navar werun dosh? [laughs in extinct language]"
"Quid?"
https://en.wikipedia.org/wiki/Downsampling_(signal_processin...
So I'd expect at least a big chunk would be S&M cuts, even through of course you still need salespeople.
10% of a 75k company is still 7k people. From the King of SaaS. Wild times.
Finance spreadsheet alchemists last 10 years saw big gross margins in software (overinflated by not taking into account cost to acquire user), bought into long-term incumbent dominance narrative from founders, and now they're stuck with companies that are willing to spend 10x+ lifetime customer value to acquire a user.
Everyone with a vested interest in these companies/investments always seems to say the real returns are 10 years+ once they are in a dominant position in their industry and have monopolistic pricing power.
How are we supposed to know what happens in 5 years, let alone 10+? Seems like a big carnival trick to me. What's interesting is that this mentality is so engrained that the people promoting it don't seem to even get that they're in on an act.
You could have the best tool on the planet, but if the cost to distribute it is greater than what those customers acquired will ultimately pay you, you don't have a company.
Most SaaS founders know that a 3:1 ratio between LTV and CAC is ideal - and while arguments might hold water that a worse ratio is OK for a brief period, I don't think anyone involved doesn't realize that it's difficult to sustain that.
The mental magic trick to justify it probably goes like this - "Yes, we're underwater on the LTV-CAC ratio for now, but once we're in position XYZ we'll be able to launch new products ABC and increase LTV from there". Which isn't wrong. And the new CAC to upsell product ABC to existing clients is going to be very low. So in a sense, you CAN justify (at least in a 'superficially prudent way') a worse ratio with that argument.
And ironically, Salesforce is a GREAT example of this WORKING (up until now?). They have ruthlessly increased ACV and LTV for decades, through increases to pricing, growing features, launching new products, creating the app ecosystem, etc.
If you’re LTV is actually higher than LTV can’t you finance the difference?
LTV = the expected cashflows on a gross margin basis, for the life of the customer. If you get $100 @ 80% gross margin, you have $80 gross margin profit per year. If you lose 100% of your clients after 3 years, you expect to make $80+$80+$80 = $240 of profit. Ah but you also need to discount those future cashflows (let's use a discount rate of 10%). So you really are making $80 + ($80 x 0.9)+($80 x 0.9^2) = $217.
That's your total LTV. Your total profit from the client before ANY "operating expenses" like Sales and Marketing costs and salaries, Rent, Overheads, R&D costs and salaries, office supplies, professional services, etc.
So OK you have $217 of LTV. But you have to spend $250 of CAC (which is "total sales and marketing spending and salaries divided by total new clients added") then you are losing $33 per customer BEFORE all the money you're spending on everything else required to run the business.
Now, of course, reality isn't this simple. And it's not all VC bullshit. Maybe this LTV is dramatically underselling the value of having that client, because in Year 2, you'll have New Product Module ready to sell them for $75. And your cost to sell (CAC) that module to them is $1 - since you've already done the hard work of getting them as a client. So now you adjust your LTV calculation and it's not quite as bad.
Or... by having 100,000 customers, network effects mean that either the lifetime of a customer is actually 10 years (vs 3) or the network effects mean you can monetize something else or... lots of arguments you could make for "grabbing the real estate now".
So if VCs -- who aren't idiots even if some are morally questionable -- see a path to greater LTV, you can kind of get comfortable with a higher CAC.
BUT AGAIN - the rule of thumb is that 3:1 is healthy, since that provides gross margin profit from the get-go, and any other LTV expansion from upsells is gravy.
That's what causes the A in CAC
I really think that's part of what drives a lot the confusion here among companies
ARR = Annual Recurring Revenue
S&M = Sales and Marketing
Is that right?
The lock-in to the platform appears to be very fierce. Are there viable routes to exit Salesforce if anyone ever needed to?
(Note: I’m not saying Salesforce is doomed or anything, just the layoffs got me thinking in that direction theorically).
This offers a strategy to read old SFDC data BI tools or in parallel with using a new CRM.
However the real SFDC lock-in is around business process. If your global Sales or Support team lives in SFDC it’s not easy to retrain them to another system.
Not my area, but I was under the impression Salesforce was trying to pinch continual-export by jacking up prices on bulk data exports.
Perhaps increased limits are bundled into other license costs.
Their pricing and permissions models are both hard to understand too :)
I've only been exposed to it on ad hoc projects, but I've heard customers say they limit the amount of what they stream into their warehouses for (reasons).
I wouldn't be surprised if their pricing model hits it, even obliquely. They've built a nice "Salesworld" toll-bridged garden. Everything sales needs must be transferred in. Everything sales has that everyone else needs must be transferred out. :/
But I think the business model behind it is you hire a "Salesforce consultant" to steer your integration with the understanding that you can replace a small team of developers doing a home-rolled solution with a single developer who runs your SF integration. And Salesforce slurps up 60% of the labor cost savings and you keep the 40% and declare success.
Currently, we are moving forward with Odoo, which has its own quirks but has better functionality than Salesforce IMO. No transition is fun, but an ETL from SF to Odoo is very doable (odooable), and the feature sets are pretty equivalent.
HubSpot is not a replacement for hugely complex organizations that needs to dump tens of millions or more into a Salesforce instance (software + labor), but for mid-size and below it's great.
Why worry about the company having economic issues, unless it means degraded service or it getting shut off?
How is this different than any other SaaS?
This is good, especially for small new teams at startups that want to shop different tools before having a lot of stuff to move around.
All SaaS aspires to be sticky because investors told them to be that way. Almost all SaaS with institutional investors has to make stickiness noises. But it is easier for some than others.
If not Open Source, it should use open standard APIs and data models, with free or cheap data export.
If you don't like it, administer your own database.
Benioff did a whole media tour talking about how Salesforce would do no pandemic layoffs to set some kind of example, and said that they didn't expect other companies to follow their example, but asked them to just pledge no layoffs for 90 days, even though Salesforce was going to do better than that.
Around 91 says later, Salesforce laid off 10% of the company, with no prior warning to the employees who were laid off. The atmosphere internally from the top down was outrage that any of the employees who were laid off would mention that they got laid off to their family/friends/coworkers, and that doing so was somehow a betrayal of "trust".
Brett Taylor, who was then the "co-CEO" (read: Benioff's cleanup crew and babysitter), led an all-hands a month or so later where they took no questions and referred to this as a "one-time reshaping exercise". Benioff slipped up and told MSNBC that this was an annual thing. Brett Taylor pretended not to know Benioff had said that, and acted like it never happened.
This all-hands was a full month after the all-hands that took place the same week as the layoffs. In that one, they took questions, but since all the questions were about the layoffs, they acted like nobody had submitted any questions and the Q&A host came up with some softball "what projects are you excited about"/"what's the biggest challenge with being a market leader" ego questions instead.
I didn't believe that it was "one-time" then, and today I've learned that I was right not to. I left before it became a habit, and have only been relieved to have left.
I wonder when the next annual 10% layoffs will happen at Salesforce? Because it's pretty much the only thing I'd trust them to do reliably at this point.
It's also fascinating the opposite direction is also allowed to persist - the guy who is CEO of 4 companies at once.
As a lowly high income IC, I am prohibited from almost any outside business activity and in some cases forced to divest when joining a new firm. Somehow the guy running the company who has actual ability to make conflicted decisions is allowed to moonlight? Fabulous.
Don’t VC’s generally prefer that a startup has co-founders? Having such a team mate fosters better decisions, acts as cheerleader when one person is feeling down, etc.
I don’t see a material difference between that and having a co-CEO setup…
What do you think?
You need an executive function to set direction and unblock stupid territory squabbles. Someone whose decisions are final. If you have two actual CEOs, you don’t have that.
That amount is, I think, only applicable to Elon Musk and it looks like this is going to crash sooner or later anyway - the big Tesla investors are all furious about how much wealth Elon's shitposting has cost them and I would not be surprised if they threaten him with the choice of continuing to tweet or getting ousted. In any case, even he was a paper-only CEO at SpaceX anyway, Gwynne Shotwell has run the ship for years now.
So, I think you can replace "4" with "N where N>1"
It's actually worked quite well at Oracle over the decades.
Benioff, who is former Oracle, hasn't perfected it like Larry has.
Most Co-head situations I see are either higher-ups setting up a power struggle between 2 newly appointed co-heads, or an existing head pretending to step back by appointing someone as their co-head who they can sabotage in real-time.
Larry is still the largest single stockholder of Oracle (~27%). So everyone knows he still runs the company at the end of the day.
Benioff only owns ~2% of Salesforce. There's institutional investors who own more of Salesforce than even Marc.
It's just modern security practices! /s
What I don’t understand is why they don’t stretch it out over the whole year - less than 1% a month could be relatively easily “hidden” even if people kinda know what is going on. Average churn might be lower than that, even.
Which makes me think it’s performative and they WANT the shareholders to see it.
Department B, in February we need you to cancel the lowest-ROI 10% of your projects as part of a strategic realignment to focus on our core goals.
Department C, in March we need you to lower your ongoing costs by 10% by whatever means you think is best, to ensure we're on a stable footing financially.
Department D, in April we need you to chase the last Widget Classic users onto Widget Cloud and wind up the team working on Classic.
Department E....
If your a public company it’s not hidden. Analysts are watching everything. A one time even might hit your stock and then it starts to recover soon after, but an ongoing event would raise suspicions of a deeper problem.
...but was still 1,000 to 1,500 people.
I hope those affected are able to find work before their severance runs out. One positive aspect is that the Salesforce ecosystem is gigantic, and there'll be work for some in the partner firms and consultancies with expertise in the platform.
We've had a solid decade+ of FAANG dominance now and arguably all of these companies are comfortably milking existing cash cows with minimal innovation and increasingly degraded product experiences.
I'm trying to think of one large tech company that has a better core product today than 10 years ago. Maybe Shopify / MS? Someone help me out.
And hell, if you need ideas just look at the businesses that the megacorps discard because they're only million dollar ideas and not billion.
It's hard to be angry at the company for selling out, because the way capitalism works is all the money goes to the individuals who are able to effect the decision, so they get life changing amounts of money even though everyone else gets pennies, if that.
But it should be clear how detrimental this system is to a functioning and competitive market.
I think of it as a career thing. Someone gets promoted they need to hire 5-10 new people to manage. They lay off 5-10 people their career is facing a setback.
Is this the first step? How exciting.
People haven’t realized how crazy the labor market is about to get with a collapsing workforce population over the next many decades.
https://tradingeconomics.com/japan/job-vacancies
The US saw a crazy spike in job openings at the start of 2021 which has only recently started to show signs of cooling. So imo what we're seeing in the US is much better explained by the $2T stimulus injection that occurred at the start of 2021 than demographics.
It's been echoed here often that many of the large SV firms and MAANG-type companies were just hoovering up talent to keep them away from competitors. This seems like a decent corp strategy when cheap money is raining down for 1-2 decades. However, now that we're entering into a new macro-economic climate maybe this practice will subside a bit, too.
With 50 same emojis attached.
SW was a systemic failure
Have you considered moving?
Then they complain to national papers that workers aren’t hustling enough to get into leadership.
There will be volatility as a new generation takes over at companies. Each generation is larger and more educated than the last so demand will keep up.
I conspiratorially believe this is an intentional move to limit wealth transferring from boomers to younger generations as it normally would in the past, by houses being passed down and grandma dying and leaving stuff to youngins, because now all that is taken by "old age homes" instead of the younger generations.
I guess it implies all. To clarify, the cohort of retirement-age workers with the means to retire is experiencing a sharp rise as predicted. That contributes some to a worker shortage that should absorb those affected by layoffs like these.
Meta: up 2x since 2019 (although coming back down)
Google: up 1.5x since 2019
Amazon: more than double (although not clear how much of that is tech workers vs. logistics. They have certainly spammed my inbox enough)
Salesforce: doubled
Numbers from Macrotrends, for example: https://www.macrotrends.net/stocks/charts/CRM/salesforce/num...
https://twitter.com/PanchalBrinda/status/852947043576426500/....
Still, not unexpected given everything else going on. Glad I'm not competing for tech jobs at the moment.
> In the U.S., affected employees will receive a minimum of nearly five months of pay, health insurance, career resources, and other benefits to help with their transition.
That minimum seems to be better than the best package I've seen so far in this layoff cycle. I got two months of garden leave plus an additional 3 months of COBRA. The garden leave was mandated by WARN act (or they would have to notify me and have me work for 60 days), so the only real severance was the 3 months of COBRA.
Of all the "big" companies I've worked for, Salesforce was the top in terms of seeming to actually care about its employees and the world.
Salary is often one of the smallest parts of a CEO's compensation, so it doesn't mean a whole lot. It's better than nothing, though.
Source: https://www1.salary.com/Edward-H-Bastian-Salary-Bonus-Stock-...
Makes you wonder how "structured" are these restructuring efforts.
My gut is telling me that the "randomness" is intentional to eliminate, minimize, and/or mask any potential bias in the process.
This move probably would have been just as needed two years ago but would have tanked the stock at the time.
It’s sucks when real people get caught up in companies just virtue signaling to Wall Street
If Salesforce does a reduction in force when the economy is strong it get spun by Wall Street as a sign of weakness and their stock takes a hit.
Do it in a down economy and it's a sign of strength and Wall Street rewards them (stock is up 3% today).
Salesforce did fine through COVID, heck the stock price basically doubled from 2020 to 2021. So they hire like crazy knowing it's unsustainable. Now their stock is at pre-pandemic prices and they start letting all those folks go when they're most vulnerable.
Such a ratio only makes sense with high growth rates.
(sarcasm)
At the top of the list is Air Lease, generating more than $4m profit per employee.
I didn’t double check for correctness.
Admittedly I'm not in the USA but even adjusting for that it still sounds large?
Are all US salaries so inflated that 424k doesn't more than cover a typical employee even after all overheads?
That said there are some bumpy things about how Salesforce seems to have handled this. In several cases managers and skip levels got no advance notice and were left scrambling in slack to see which team members no longer had active accounts. At the mass of a level it can be hard to be coordinated, but still a few hrs after there is a lot of unclarity internally to teams and what that means.
Within Heroku there are folks currently on call for production systems that were impacted. I feel for those impacted as well as those still there scrambling to ensure things continue to operate for customers. Seems that within the broader Salesforce org some pieces of it were done in a better fashion than some others we've recently seen, but also some pretty missteps still.
Could someone explain how layoffs lead to stock rises in layman terms?
Company lays off 7500 people, saving ~$1.5B / year in payroll / benefits / office space / etc.
Company takes one-time ~$1.5B charge for severance and other layoff costs.
Investors believe company will see ~$1B more net profit in subsequent years, assuming 10% staff reduction can be absorbed with little profit impact.
Share price reflects NPV of future profits, so stock rises.
Eventually someone with a brain would realize they are hemorrhaging money and hire the guy back full time and even make it look like he was never laid off for 2 years contracting so he would keep his seniority benefits. My coworkers with 20+ years said this happened over and over again. I left and everyone was laid off in 6 months…
But often it’s just boardroom machinations for various reasons that can change as quickly as the weather.
I know people who made a good living being the layoff/callback dude for years. Basically considered it a 3-6 mo vacation every couple years. “Oh you want me to come in to consult? I’m in the Bahamas- it’s gonna costya”
The trick is understanding when part of the company is genuinely not contributing, and since things are complicated, what other parts are entangled and need to be adjusted as part of the plan.
Just randomly laying off x% is like randomly removing x% of code to improve performance. It’s going to produce more pain than gain.
For example I believe they were working on some sort of solution for managing NFTs.
Do you think those colleagues didn't contribute anything as far as their job title?
https://www.thedailybeast.com/salesforce-is-ditching-its-awk...
I don't know what percentage is too much, all I know is that the stock market is not the economy, and things that tend to be good news for workers and main street tend to be bad for the stock market. For instance, in the past ~6 months the labor market continues to be strong reporting many job openings, which is good for workers as this allows them to seek higher-paying wages. But the market went down after each report because it meant that JPow would further increase interest rates, which are bad for the majority of businesses since they don't have positive free cash flows and rely on zero interest rates to continue operating with debt.
We've been living in the upside down for a while now. And gravity is coming back :)
Also, sometimes I suspect that the market moves on news -- not because the news actually affects some prospects so much -- but because some other people can make money on the movement, and the news is just an excuse/tool.
He never did a single moment of actual money-making or money-saving work for the company. They paid him about $50,000 for the privilege. Exhausted by the absurdity of the situation, he quit, and is now making substantially more money elsewhere... but also has actual work to do.
Nice gig if you can get it, I guess.
I'm saying that if Salesforce has employees in this situation, they are making poor hiring decisions and it's no wonder they had a spare 10% of employees to lay off. I certainly am not glad anyone got laid off, but we wouldn't be in this position in the first place if Salesforce knew what they were doing.
The client was filthy rich and needed to transform core business processes.
Time to market on changes we wanted was nearly always "before lunch". And anything custom we were able to do too.
For me it looks like Salesforce is here to stay. We'll see how it goes for them if their clients start to tank.
CRM and similar are used by many outbound groups, including recruiters.
Recruiting shrunk except for senior tech and executives.
As usual, no accountability for it. Just responsibility. I take it boards are incapable at holding leaders accountable for bad decisioning?
The “responsibility” is all fake.