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Comment by idopmstuff | Hacker News Reader

I think the problem with this strategy is that it causes the wrong people to leave. If you're a top performer, you're going to feel like a 10% pay cut is very unfair, and you're going to be able to get another job elsewhere fairly easily, even in this environment. If you're not performing particularly well, it probably doesn't feel as unreasonable, and even if you don't like it, it's tough to leave.

When done correctly, layoffs give 100% of the pain to 10% (or whatever) of the people, but you get to select the worst-performing people. Spreading the pain equally is much more liable to cost you your best-performing people.

I do think the one important thing to note is that the reference you quoted is to a manufacturer, where you've probably got more consistent performance across a given type of employee as compared to software developers.

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Having seen both, I'm much more likely to leave /after/ a layoff than after a 10% paycut.

In abstract, if there were a way to rank employees by ROI and contribution perfectly fairly, I might not worry about layoffs personally. However:

1) In my career, I've never seen layoffs which were at all good at selecting the bottom 10%. Who gets dropped is pretty random.

2) I care about other people I work with. A 10% layoff means a few of my friends were hurt.

When I had a 10% paycut because the business needed it, it felt a little unfair, but I didn't leave. That same business raised my salary back up a year or two later. I'm still there, actually, and many people spend entire careers here.

I spend most of my hours working, and above some point, I care about having a humane employer, meaningful work, and a decent work environment much more than I do about salary.

Job stability also allows me to focus on my work over signalling. That works well if I value and enjoy my work (which I do).

> 1) In my career, I've never seen layoffs which were at all good at selecting the bottom 10%. Who gets dropped is pretty random.

This is very true, and I would say definitely the biggest weakness of my point. In a theoretical world in which you can drop the bottom 10% of performers, I think that's clearly the right thing to do, but obviously practice is not the same as theory.

I will say the one other thing about 10% paycuts for these companies that would drive me out is that the companies are still making lots of money. If you're in a business where belt-tightening is plausibly necessary (something that has boom/bust cycles, for example, and hits a particular bad bust one), maybe I can accept a pay cut. If you're cutting my pay but still maintaining a shareholder dividend, I am gone.

> If you're cutting my pay but still maintaining a shareholder dividend, I am gone.

After 1-2 years in any big tech company your equity surpasses your salary.

This has not been my experience, at all. Have I been working at the wrong FAANGs?

What tech companies are even doing dividends anymore? I guess Microsoft has a small one?

Apple

https://investor.apple.com/dividend-history/default.aspx

91 cents per year on a 138$ stock? And this is considered good?

Well, I can understand now why everybody gets out immediatly if stocks drop a little bit. Average daily movement of the stock is 4 dollars, and 8 is not unheard of ...

The question was which tech companies were doing it at all. I provided some data but not a value judgement.

> Having seen both, I'm much more likely to leave /after/ a layoff than after a 10% paycut.

Would you also stay when you get a pay cut, with the only reason being that the company wants to maintain a net margin above 30%? Because that is somewhat happening right now.

Personally: I wouldn't.

That depends. How well am I treated when times are good? If my company followed Lincoln Electric’s example, I’d stay. If not, the whole thing would unravel.

That’s been the one conclusion of every study on Lincoln. You can’t mimic a small part and expect similar performance.

> Having seen both, I'm much more likely to leave /after/ a layoff than after a 10% paycut.

It's different when layoffs are happening across the industry.

When everyone is doing layoffs, seeing your company do layoffs isn't as surprising. It's expected as everyone adjusts to changing market conditions.

But when everyone is doing layoffs and your company cuts your compensation, it's a sign that you might be underpaid relative to what you could get at other companies. So people start looking around for an opportunity just to get back to their old salary.

The other problem with paycuts is that you can only really do it once. In a slowing economy like ours, it's not surprising to have multiple rounds of layoffs as companies cut departments and react to dropping sales.

But having multiple rounds of paycuts would guarantee that your best employees all leave for other companies where they can get back to their old compensation levels.

As an employee, part of the upside of a pay cut is that I'm not looking at successive rounds unless the business is still bleeding.

As a business, it depends on the type of business, but pay cuts tend to be a more effective way to stem bleeding. For example, a consulting firm (so horizontally scalable) with 90% of the employees can only do 90% as much work. Revenues dip. That leads to a cycle where further layoffs are necessary. A pay cut, on the other hand, doesn't have the same dip in output as a layoff.

Now, all that said, many businesses (including some that did layoffs) are vastly overstaffed, to where productivity would be higher with fewer people. But even that can be managed more gracefully.

People seem to be assume they layoff only poor-performers. That’s not even close to true - in the case of layoffs anyway not the annual trimming some companies do. Entire depts will be laid off. In all likelihood some of these people will get their severance and also get to rejoin soon-ish with a pay bump. It also leaves a bad taste in the mouth. All in all, indiscriminate layoffs - like the ones happening now are just self-goals.

I'd leave ASAP if I got a 10% pay cut so the poor performers could remain coasting. Thank you, but no thank you. I'd only consider staying in this scenario if I felt there weren't poor performers around, which is almost never the case in the big companies capturing the headlines right now.

If you’re a top performer you bail as soon as there are layoffs anyways. I certainly do. It’s rarely a sign that anything good is in your future, they’re often performed poorly, and the work environment post-layoffs is incredibly bleak and disheartening.

If you have options there’s no good reason to stay.

Where would you go in this environment? Most of the top-name companies have had layoffs themselves, or at the very least are at the hiring freeze stage of the layoff routine.

In my case, I did the math on my savings and I’m taking 1-3 years working on side projects, by myself and with groups of collaborators

Wow, good on you. I wish you all the best. I wish I had such financial safety net to change jobs

I have that kind of cushion and I am considering taking a few months off working on side projects. But 1-3 years? I would need a very, very, very solid project to consider doing that!

The "we're in a hiring freeze" press releases all have fairly broad asterisks. New people are being onboarded daily in all of the companies that announced layoffs.

That’s true, but those same companies still wound up doing layoffs later on. So if your criteria is not to work at a company without layoffs then you’re still SOL.

I'd rather join a company post-layoff than pre-layoff.

Say you're at company A. Company A and B do layoffs of similar size. Why is switching to company B after the layoffs your preferred action?

Of course. But in a recession there can be multiple rounds of layoffs.

There’s tons of very profitable companies hiring right now - the “top-name” companies doing layoffs were all “growth-first, profit-never” types. We’re not in an industry-wide downturn and there’s a hell of a lot more out there than FAANG or MANGA or whatever we’re calling it now.

> the “top-name” companies doing layoffs were all “growth-first, profit-never” types

What companies specifically are you referring to? In the last few months we've seen layoffs from Microsoft, Google, Facebook, and Amazon. These rank among the most profitable tech companies in the world. https://companiesmarketcap.com/tech/most-profitable-tech-com...

Google, Microsoft, Facebook, and Amazon have made an absolute shitload of money. They are among the most profitable companies in the history of humanity. Definitely not "profit-never."

You’ll laugh but bear with me,

Meta recruiter just reached out to me this week, so even parts of Facebook are hiring, and my relevant skill set. Of course I don’t care about VR goggles, but you just had large layoffs, why would I work for you? (Plus ok Zuck is ruining your core business, but that aside)

Layoffs hurt inside and outside too.

If meta is hiring for VR, they are probably taking advantage of the recent Microsoft layoff anyways to pick up talent.

Do you mean the Microsoft VR layoffs literally announced only 1 or 2 days ago? That's giving BigCo a lot of credit in the agility department, skirting over the edge into conspiracy theory territory.

If they were still hiring for VR, why would the recruiters wait? It’s not like they are very busy.

This role's been open for a while, probably just recruiting getting re-organized after being cut to the bone.

Hire to fire is fairly common.

If a layoff is inevitable, It is common in many set ups for managers to hire people new people whom they would want to let go instead of their top dogs who've been rocking their projects for years.

Nah, this role has been open to long, survived recruiting cuts, and it appears even layoffs. I wonder if FB will get so desperate they even stop trying to downlevel.

Not if you are at a top company. Also it’s not like any company gets to cut 10% from what it offers new hires… it’s hard enough recruiting at market rates, will be harder 10% below market rates.

Reading a bunch of responses, I feel like I should qualify my initial comment slightly - I really meant it as being specific to these circumstances, in which the largest/most successful companies are doing layoffs.

I generally work at early-stage startups, and I 100% agree with you - at those, if layoffs start, barring some extraordinary circumstances, it's time to get the hell out because your options are about to be worth bupkis.

When it's FAANG, etc. I don't think that's true. Amazon and Microsoft can lay off swathes of people and still have plausible outcomes in which their stock prices are higher in a year or two (perhaps even more plausible than they were pre-layoff).

bail off to... where? Every single big tech has done layoff except Apple. Which fair you could go to Apple but then you have to deal with Cupertino and inflated bay area housing.

This ignores the morale. I've been in both situations and the pay cut definitely felt like "we're in this rough economic situation together". Compare this with a layoff where I made my peace while waiting for "you still have a job email" and started interviewing shortly after. Of course pay cuts always ignore shareholders as they are really getting the benefit of paying less for same number of people.

Exactly. I think a 10% pay cut with no layoff would create a sense of job security that most people would consider well worth a 10% cut.

> Of course pay cuts always ignore shareholders as they are really getting the benefit of paying less for same number of people.

Perhaps this could be mitigated by equity-based compensation equal to the amount reduced in salary. It won't make up for the lost cash, especially if the company is in a place where it needs to take such measures, but it would give more meaning to the "in it together" message.

Back before shares were liquid assets a shareholder often was required to put money back in the company when it hit a rough patch or lose their shares.

As a top performer, you are more likely to leave after layoffs, especially if layoffs feel indiscriminate. From LinkedIn, some people were let go as their projects failed, not necessarily because of their own performance.

One thing I've seen "performance" is largely subjective. It is not just X cls or Y design docs (and you can see how these artifacts are easily gameable). A large part is visibility, likeability and awareness of org politics. A lot of them are maximizing personal gain over company gains. As a reasonably well-performing manager and former IC (as well as getting my share of not so great ratings) this was the game I hated but accepted to play - after many years of denial. And don't worry, companies know this. Check out Macleod's hierarchy or Man in the high castle!

So if you are worried that "top" talent will leave don't. Their departure is not damaging the company as much as the boat remaining unrocked!

It’s difficult to measure performance even in the abstract. Every person in the company is a node in the network and even if a person’s objective metrics are lower than another’s, it could be that removing that node destroys institutional knowledge that causes everyone else’s performance to drop.

And as far as objective metrics, those are a crapshoot too. See: the software interview process, where people memorize useless toy problems into their brain so they look prepared for performative problem solving.

If you're a top performer, you're going to feel like a 10% pay cut is very unfair

This is also different too, in that, there was almost deflation at thst time.

Now, there has been great inflation!

So a 10% cut hurt less then, where as now, all workers should be pushing for a 10%, almost yearly pay increase.

Even if inflation is less than 10%, you have a year of extra experience.

Right now, I'd say most workers are 25% behind on 3 years of raises.

So in a sense, everyone already has had a 10% pay cut this year.

edit:

You know, just a thought, all of these companies were caught colluding to suppress wages in the past.

Whether tracking, or any form of behaviour punished by the courts, it never stops.

So if you are looking at inflation, at high increases coming at 25% over three years due to that inflation, why not all lay off people together, even if profits don't require it?

Why not put fear into people during contract renegotiation, during hiring? Why not, over return to office orders?

I think the problem with this strategy is that it causes the wrong people to leave.

That's a possibility, but there's also a good chance that very good performers who value stability will stay, particularly with senior management taking larger cuts. Will you keep that 1-in-1000-and-knows-it person? Perhaps not. Do you want to? Perhaps not (see the whole "fire the indispensable person" philosophy).

If you still get rid of bad performers but keep good to excellent ones because of good management, even if you lose the occasional rockstar your overall team quality will still rise.

It will also hurt you more if you’re on a lower salary. 10% on a 300k FAANG salary is a lot different to 10% on an 80k administrative job - you’re going to feel the pinch a lot more on 80k than you are on over a quarter of a million.

I'm reminded partial unemployment is a thing. Perhaps the law should be changed to reward companies for keeping workers on during downturns and ratfuck the ones that lay people off. Like slowly claw it back directly from the stockholders. As in Dunder Miffin's stock has a 12 cent a share clawback due to the previous layoff.

Legislate that workers have ownership in the company they work for and update the tax legislation so it’s not a punishment to receive a share in a company on employment.

The only reason we have options and RSUs at the minute is because you’ll get absolutely fucked by the tax man if you got shares - not a chance you’d be able to pay that tax if you didn’t already have assets and your salary was smaller than your compensation in terms of company ownership.

>> If you're a top performer, you're going to feel like a 10% pay cut is very unfair, and you're going to be able to get another job elsewhere fairly easily, even in this environment.

Nobody outside of your immediate team, manager and may be at best a few people apart from them know you are the top performer. It's not like sports or movie industry that people know who you are. Where you go next, you have to work from the beginning to prove you are a top performer. And that take 2+ years too. Overall rage quitting for these reasons is a bad move.

>>When done correctly, layoffs give 100% of the pain to 10% (or whatever) of the people, but you get to select the worst-performing people.

In nearly all companies the rating system is fixed. And largely depends on political lobbying at the management levels. There is literally no way to know who are the real top performers.

In fact in many companies, money comes from top projects/products, not top performers. This is why often the companies let go people on the lines of which businesses they want to be running or shutting down, not which people they want to keep and let go.

If you are a top performer, you're gonna leave one way or another. Because you have options.

Someone on my team said this year after about 30% of my team left for better jobs: "Why is it only the people who can fly, are the flight risks?"

If you’re a tech worker at any of the top paying public tech companies you’ve already taken more than a 10% paycut as you’ve seen the value of your RSUs decline

I agreed. The example given, a very specialized manufacturer, does not represent the tech industry. Probably these employees recognized it would be difficult to be hired elsewhere and this is why they were so willing to put up with a 10% pay cut.

With all of these layoffs and freezes, how easy is it to be hired in tech?

> When done correctly, layoffs give 100% of the pain to 10% (or whatever) of the people

Have you been in a layoff? Not having a job anymore is not the only form of punishment.

I maintain it’s not even the most painful. Being a survivor can suck mightily.

> but you get to select the worst-performing people.

Anecdotally I'm not necessarily seeing this. Amazon's cuts were concentrated in groups. Some parts of Amazon, like AWS were essentially untouched, except for recruiters. In a comment a few days ago I pointed out that the headlines could have said "Amazon pulls back on Alexa efforts", "Amazon reduces its bet on retail" rather than just the number of people...though that would have hurt the stock price, while cutting people often raises it :-(. And AWS appears to still be hiring at some rate (source: couple of friends who mentioned interviewing candidates in the past couple of weeks). I am sure, of course, that if Amazon did cut half of the Alexa team, where they had a choice they chose the lower performing one.

The same is true of Microsoft's cuts, AFAICT. Slaughter in the hololens team, for example.

Google's cuts seemed to include some people I have worked with in the past and who are IMHO good. Notably they are long termers, though, so perhaps google was considering people who were more expensive. My gf mentioned to me that someone she knew was laid off, and they had just been promoted.

There’s a lot of evidence that indicates that layoffs will cost you your top performers too. They see layoffs, have options and take them before they get laid off.

Large scale lay offs are generally done blind to avoid accusations of bias: they don’t lay off low performers, they use some other fixed criteria (like laying off teams, people under X tenure, etc…).

Performance based layoffs have to be well documented and take lots of time, so they just happen continuously but in small numbers. At least, that is how it seems to me.

Also, in some countries it is illegal to do a paycut.

Yea, constructive dismissal is a thing and some courts may determine that you have to pay out severance after somebody has their pay cut and then leaves.

A company-wide paycut of only 10% is unlikely to be considered "constructive dismissal" esp. if in lieu of layoffs.

If you, specifically, were given a 40% paycut, or maybe limited to just your team, that's a different story.

In case of google and other faangs this was easily achieved by just not giving annual bonuses that are 10-20% and are explicitly not guaranteed. For top performers you can still give bonuses just not as large

This is, for lack of a better term, "capitalist brain rot". It may even be "American brain rot". I don't mean this in a disparaging way to you, individually, by the way.

Myth #1: Most people believe they're "above average". In your post you talk about cutting the "bottom 10%". You feel comfortable with that because you likely believe you're not one of th ebottom 10%. It's yet another example of how true the Steinbeck quote [1] is about Americans being "temporarily embarrassed millionaires".

Myth #2: These layoffs are targeting "low performers". This is a myth for two reasons. First, it implies the myth of meritocracy. There are so many ways that meritocracy is a lie. The second way is that the company won't be targeting the bottom 10%. They will basically pick names from a spreadsheet, save anyone leaders vouch for, possibly skew layoffs towards projects getting killed at the same time and look at the demographics of the layoff group to make sure it can't be perceived as discriminating against a particular class such that the company might open itself up to litigation for discrimination.

These layoffs really are the worst kind of virtue signaling.

[1]: https://www.goodreads.com/quotes/328134-john-steinbeck-once-...

When you say meritocracy is a lie, are you referring to Daniel Markovits by any chance? He had a very stimulating conversation with Sam Harris in 2020 that I’ve recently re-listened to.

Meritocracy fails to live up to its promise because high performing parents always help their kids by artificially boosting their competence with e.g. test prep services. So tests tend to measure preparedness for the test, rather than a more abstract measure of merit. There are a lot of other interesting points made which I am not doing justice.

However, I am not quite sure what you meant in the context of the workplace. Do you mean just that in practice and even in principle it’s impossible to accurately measure merit in a company? Because that’s pretty clear to me.

Every company wants to measure merit and indeed its common to slice and dice stats along many dimensions to attempt to achieve an objective analysis of the worth of an employee. However these measures inevitably fail to capture many elements of an employee. We deal with this gross insufficiency with by adding human judgement and introduce both essential human analysis and a tendency to measure the value of interpersonal relationships instead of objective worth.

Organizations at scale end up either full of shit because they don't know what they aren't able to measure or full of shit because they are mostly measuring who is esteemed by whom. I have personally never worked for an outfit that wasn't basically full of shit. The well performing did so more as a function of having a functional culture of people who were capable enough and honestly cared about doing good work not because they were great at measuring worth.

Meritocracy is a form of propaganda to keep a compliant populace in general and workforce in particular.

It is the idea that if you work really hard you will be rewarded. It is the basis for most people thinking they're above average. It is why so many people believe they'll be Elon Musk one day so they die on the hill opposing any effort to tax the 10 richest people in America slightly ore because, hey, that will be them some day.

But what this really does is just allows someone to be exploited.

This permeated every aspect of life and starts from a very young age. It's going to better schools (even from a pre-K level), having access to tutors to better your results on standardized testing, getting access to lucrative internships and jobs (eg nepo babies), having social connections, getting into good colleges and so on. And it compounds.

Many fields require you to take jobs that pay nothing or minimum wage (eg a production assistant on a movie set). Having the means to do this gives you an enormous advantage for someone for whom this simply isn't an option.

For example, there's a lot of disagreement about affirmative action in college admissions. This is really the wrong conversation to be having. The right one is about how ~36% of each new undergraduate class at Harvard are legacy admissions and the legacy admission rate is 20% or higher.

It goes beyond wealth and privilege however. So much of the working world isn't about doing the best work or working the hardest. Instead much of it comes down to being liked and that encompasses a lot of things, not the least of which is coming from a similar background.

It was kind of remarkable, I disagreed with your initial statement that meritocracy is “propaganda” but almost everything that followed was something that I could’ve wrote.

It seems to me that de facto meritocracy largely does not exist because it can be gamed. This leads to insulting post-hoc justifications for hoarding wealth despite the fact that merit often has nothing to do with it. That ethos is absolutely propaganda.

Harvard would be more honest if they just auctioned seats to the highest bidder. At least that would have transparency and efficiency that their current process lacks.

I haven’t given up on the idea of meritocracy though. It’s certainly better than hereditary rule. The only solution I can see is to fix the measures of merit so that they’re harder to game.

You make top earners sound like entitled children who cannot reason around the big picture impact to their community.

Top earners at software companies should be heavily de-valued. Being so specialized as to be useless if that specialization ceased to be validated by economy policy of shoveling cheap money at tech companies to titillate the public is not so special. It’s intentional attempt at agency control.

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