Ok, 7%. With all the cost, I wonder if just stopping hiring and letting normal attrition rate play out would have had almost the same effect.
FB laid off about 14% of their staff.
Whilst there's good arguments to be made about workforce planning during recessions, and how you need to not have "slack employees" doing nothing... there are similar arguments to be made about stock buy-backs (ie., that having 40bn in reserves is a massive economic cushion).
That they choose to weaken their cash position for the sake of a temporary boost to stock prices shows that their incentives arent well-aligned to most stakeholders in this.
Mind you, Im not interested in buybacks but if they paid a dividend I'd hold them till they lose their advertising business.
Could you elaborate, how does the buyback help them to be valued as a growth company? Also doesn't the fact that he paid for the buyback with employee layoffs really damage FB as a prospective employer when FB at some point in the future again needs to hire? What was the logic here?
Buybacks are what growth companies do, dividends are what value companys do (for whatever reason). But more generally, FB needed to show profit growth to go back up in value, and the easiest way to do that is lay off a bunch of people.
> Also doesn't the fact that he paid for the buyback with employee layoffs really damage FB as a prospective employer when FB at some point in the future again needs to hire? What was the logic here?
Maybe it does. But if they offer shedloads of money, I can't see people worrying about. For context, FB performance reviews are hardcore, so it's not like people were resting and vesting there. I dunno what his real logic was (I left in 2018), but the above seems reasonable, to me, at least.
Attrition is not targeted or evenly distributed (depending on the goals). This can result in what would later be perceived as being lopsided compared to the layoff cut. For example (and purely made up), if part of the layoff was to cut back on marketing of the self hosted instances, then you would be looking to lay off marketing, and developer evangelists. However, if attrition doesn't hit those roles (because who's going to be leaving in this economy), you can have it take much longer to scale back that headcount. Saying to the developer evangelist "ok, we don't have something for you to do, we're going to switch you back to an entry level developer position with this other set of roles and responsibilities with a corresponding pay cut" isn't something that can be done easily.
If you target specific people, even if they do garbage work, somebody somewhere will find something to sue you over. If you do a less targeted layoff, you'll hit some of that target group anyway, and some will leave over their own volition after. Yeah you'll lose some good people but the whole point of this charade is that in management's eyes the engineers and knowledge workers are cogs in a machine, so collateral damage is okay and it'll all come out in the wash over the next few years with new hires.
- Effective number will be higher because some employees will be disgruntled because of the layoff event and will leave on their own. It's usually estimated that the effective number is twice as high
- By doing a layoff you can quickly get rid of people who are overpaid. The attrition would take much longer. And with the regular performance review process you can only get rid of under-performers
- With a layoff you can get rid of entire teams, wouldn't happen normally
- Finally, and probably most importantly, shareholders expect a layoff, especially if other companies had already done it. Cargo cult CEO thinking. You could see the stock price rising for some of the previous companies announcing layoffs
- everyone is doing it so it's that much easier to buck responsibility for the decision
- Why is this beneficial? The disgruntled will be the high performers. In no shape or form is this beneficial for culture.
- Assuming you mean average performers who are paid well, ie. well tenured? Considering these types harness significant domain knowledge it would be a strategic mistake to let them go in any meaningful number. The focus on smaller cuts tends to be low performers or recent hires.
- The only time this is beneficial is when there is indeed 1) a financial dire straights situation or 2) a significant change of course (ala Google) and blood letting has to be rapid, otherwise you're letting go of top performers in the process. It would be much cheaper to reassign to other teams given the cost to source/acquire and onboard top talent.
- Bingo. This is the primary reason almost always.
2. I could also be people hired recently, it is often the case that they're paid more than their peers on the same level.
3. Maybe re-assigning people from a dismantled team doesn't make sense because these people will be upset about their former team being dissolved and thus spread the negative energy to other teams?
4. I'm glad we agree :)
I think it comes down to bad management, my direct manager didn’t even know I was getting cut.
At one of the companies I worked at, the strategy was the opposite. Lower employee salaries in the hopes that people would quit.
Also, if the intention was to "instill fear". Why give good severance? Why not give nothing?
For the 7% you have to look like you care, since you will be hiring in the future and probably with lower salaries. Mass layoffs are a good way to lower wages throughout the industry.
You lay off hard to instill fear and legally-depress everyone's wages, but you give good severance so that when you inevitably want to hire people in the next two months (as GitLab is likely to do), they're aren't too terrified to accept your offer because of all the layoffs you just did. 7% of staff as "layoffs" comes out to about 150-ish? people, but they are also currently hiring for over 100 open job position at GitLab on job boards right now. GitLab is also up 74% year-over-year in quarterly revenue, and had their highest sales quarter ever just four months ago, according to their own PR department (https://ir.gitlab.com/news-releases/news-release-details/git...)
It's a pretty transparent process, frankly. Lots of companies are doing 'fake layoffs' (layoffs they don't need, done solely to appease the executive class, who strongly desire a recession), but unfortunately for them, the truth is that the economy isn't anywhere close to a recession, so they simultaneously have to keep hiring open, to keep labor incoming, to keep up with all the new business growth or increased sales they're experiencing right now.
Also, I am not sure how confidently you can assess the health of Gitlab. Those open positions my not actually be "open". While their revenue was up four months ago, much has changed since then. Their next quarter might be down and they are adjusting now.
> isn't anywhere close to a recession
No one knows where the economy is headed.
> It's a pretty transparent process, frankly.
Except that it is not. Perhaps you are correct, but you really have no evidence their decisions were to maliciously "instill fear". It is equally plausible that they are doing what they think is best for the company and the remaining employees.
There's not too much detail in that press release.
Thanks for sharing the link to the report!
Also, I looked at the wrong year. Currently they are in Q4 2023FY, the statements for the last quarter are here https://ir.gitlab.com/news-releases/news-release-details/git...
Helped morale tremendously. Don't treat your employees like numbers, it will bite you back eventually, in all aspects including finances. Even most cold-hearted sociopaths on the top should grok that.