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Comment by pie_flavor | Hacker News Reader

> I'm a Stanford professor who's studied organizational behavior for decades.

And I've actually been inside an organization or two. It's cost-cutting. Companies are ludicrously bloated because caring about it is too much effort for the value; during a downturn, they care a bit more, so they trim a bit of the fat. Musk was the one that pointed out that the emperor has no clothes, but that doesn't change how long it's been that way for. There's always this blind spot with academic types observing the software industry, where they assume that the dysfunction is rumors and the real issue is something thinky and academic (see e.g. the declining value of a CS degree - couldn't've been always worthless, must be a supply-and-demand issue), because it's just about impossible to fathom how something as dysfunctional as the software industry really is could possibly stand on two feet without falling over, until you've seen it firsthand.

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> And I've actually been inside an organization or two.

Unless you're inside the mind of the CEO, it's not clear how this is relevant. And if the CEOs are acting irrationally, it's not clear that even being inside their minds would help, because the irrational tend to lack the self-awareness to see their own irrationality.

The professor doesn't claim to be inside their minds either. The point is that, empirically, layoffs very often fail to bring about any economic improvements to the company, and may indeed hurt the company in the long run.

It's a matter of penny-wise but pound-foolish.

FWIW the GP sounds like he's taking a CEO view

  Companies are ludicrously bloated because caring about it is too much effort for the value; during a downturn, they care a bit more

This is bang on. There are lots of competing priorities and prioritizing some kind of streamlining rarely rises to the top. Time and cognitive power is usually better spend elsewhere, which is why CEOs can often "intentionally" let the org grow some fat without worrying about it

There's a huge difference between "caring" and acting effectively. If the CEO is letting the company get bloated in better economic conditions and self-destructively slashing in worse economic conditions, who cares whether they "care"? One might say that the CEO in both of these cases is merely reactive and not proactive. Anyone can follow the winds as they shift.

Also, "the economy" is merely an aggregate, an abstraction. In every economy there are both winners and losers. People tend to forget that one of the most successful products in history, the iPhone, was introduced shortly before the so-called "Great Recession". Of course a lot of workers and consumers were hurting during that time, but apparently there were still plenty of people able to afford new iPhones too. Imagine if Apple had decided to cut back severely rather than investing; that would have been a huge mistake. If you believe in your product, then you need to stick with it.

I think I can put this duality in developer terms.

Technical debt.

When you're growing fast, you accrue technical debt because you prioritize milestones over quality. The same goes for the hiring process. You might need a big push for some deliverable so you hire more people. After that, you're stuck with the people and whatever structural growth your company went through.

Then on the software side, the project gets bloated and grids to a halt so some asshole proposes a refactor in rust. This is largely useless and will further complicate things. Same can happen for layoffs in bloated company. You wanted to streamline but you ended up disrupting the processes you had and losing talent, which leads you to bad performance and rehiring.

Sound like laying off the person who wants to refactor in Rust would be a win-win.

I thought that went without saying

OT: Pet peeve 'refactor' is not synonymous with arbitrary (or even deduplicating) change to source code. It's to consciously choose a (different) factor to separate out and allow seams to form around. People who use 'refactor' too generically are often focused more on the form of solution than the problems themselves.

Also if you try to enact layoffs during the “boom times” every single manager will be demanding a “special case” for their team - a big headache.

If everyone’s doing it in crunch times, the internal pushback is much less.

Not only that, but streamlining and trimming the bloat/fat during good times signals to investors that there must something wrong with the org (just look at Intel) which will cause the stock price to go down, so CEOs never do it during good times to signal that the org is "healthy and growing" even though everyone in the trenches knows there's tones of bloat piling up.

The last bull run fueled by negative rates lasted far longer than it should, which lead to growth for the sake of growth without efficiency in mind, which lead bloat and inefficiencies to accumulate far more than normal, which nobody dared to address because "line goes up".

Now that the line went down, CEOs feel pressured to remove all the ballast they accumulated, which causes the line to go back up.

Great use of ballast!

Your explanation fails to answer why these same companies were hiring people at highly inflated salaries only a year ago, whereas the academic type explanation fully covers that scenario as well.

The argument was they saw positive returns for hiring additional people. Revenue grew as they added people. Did they go too far? Maybe. But being timid would have prevented them from growing as much as they did.

Programmers don't create revenue when they are hired.

There is a significant training period where programmers learn the local culture and quirks and tools. It takes a while before they can become effective.

Once programmers are effective, it can take months or years or longer before a project they work on gets any significant revenue.

---------

Consider all the money Facebook sank into the Metaverse, with nothing to show for it yet.

Or consider the typical video game, that takes maybe 3+ years to go from programming into revenue.

The 1 to 2 year hiring period from 2020 to 2022? I bet that most of these programmers did not create any revenue by the firing times of Q4 2022. It's just not how this industry works.

> The 1 to 2 year hiring period from 2020 to 2022? I bet that most of these programmers did not create any revenue by the firing times of Q4 2022

That's why we fire them! /s

haha show me a thousand-row spreadsheet attaching dollar amount returns to developers and other white collar positions and I'll show you a thousand confident lies.

>The argument was they saw positive returns for hiring additional people.

False. They saw positive returns because the market was rocketing up o matter what, which is why they over hired. That, and to signal to investors that "they're healthy and growing".

Copycat behavior?

We go through all these weird gyrations to explain layoffs, but do nothing to explain the insane hiring that happened. And, even with these layoffs, the companies are still way above their employee count from as little as 12-24 months ago.

The insane hiring can also be explained by copycat behavior, as well as a lot more actions that companies take. This is always somehow an unpopular take on HN, but companies copy each other's behavior all the time. "They're hiring like crazy, do they know something? We must hire like crazy too!" "They just told the world they are working on AI. We must tell the world we're working on AI, too!" "They're returning everyone to the office. We must also return everyone to the office!" "They released feature X on their device. We must also work on feature X!" Everyone copies everyone because the sad truth is that most company leadership didn't become company leadership because they were particularly creative or original.

People don’t go out of their way to root cause/introspect on things that benefit them.

Shareholders look at metrics, numbers going up is what they want. Except in a downturn, then they want that particular number going down.

I think they would carefully calculate profits extracted per headcount and only hire sufficient employees to maximise profits and minimise liabilities (in all terms, not just in the immediate term). Why do they not do that?

But there is a lot of copy-catting going on. Have you called a bank or any other large institution in the last 3 years?

"We're experiencing larger call volumes than normal".

The fact that this is pervasive and constant makes it a lie. It means that many organizations have seen that everyone else is doing it (cutting support staff, or not increasing head count).

I would say that is both copy cat and cost cutting behaviour.

Very few non-FAANG organizations have a lot of fat to trim post-2009. In fact, reduced head counting and overloading already over-stretched employees has been going on since the mid-90's in most industries.

It might very well be _also_ cost cutting.

The interesting part is why are they all in sync, and fairly similar in size. Did they really all make the same mistake in the past? Was the groupthink/copycat happening during the over-hire phase?

I personally know of a company that is currently in a "well Google did it" hiring freeze.

Having said that, the layoffs are not happening in a vacuum, there's been significant economic issues over the past year and cash isn't basically free anymore. Some companies may have made moonshot efforts hoping to be at the front of <now essential industry> with the pandemic but things largely went back to normal.

But it's likely not just one factor. I'd believe that:

1. Some companies are bloated and can (maybe should) downsize, or over-invested in projects that didn't pan out.

2. Some companies care more about costs now than they did a year ago (for reasons good or bad)

3. Some companies are more willing to conduct large layoffs since other large ones are doing it and it looks better

4. Some companies are facing pressure from investors to cut costs and do layoffs because "other bigs ones did it"

All can be true for some sets of companies - there isn't going to be "just one reason" why all a company decides to do layoffs.

There is an advertising recession underway. Ad budgets are down and sectors that were heavy spenders have disappeared (crypto for example)...this is having a knock on effect with Media companies (meta, google, amazon)...the downturn was quick and is exaggerated by the stock market turning bearish. As a result there is less forgiveness for companies to be publicly traded and not make a profit. I think the "google did it" is a post rationalization for past layoffs rather than a driver of layoffs. Cutting costs is the fastest, and mostguaranteed, way to profitability. For private firms there is more scrutiny of prerevenue start ups trying to raise, the message from these firms is "we need to get on a path to profitability" . In my opinion, if you are working in a company where your CEO has just said those words, you should start interviewing. Best advice i ever received was its easier to spend money than make money, and the past 10 years has allowed people to start businesses that don't, and may never, make a profit.

As the research by this professor shows, layoffs are not a guaranteed way to profitability. Unless a company is in a dire financial situation (Twitter), layoffs do not pay off long term. Lay-offs are expensive and tend to result in lower staff morale and, in addition to that, lower productivity. It generally increases staff turnover, especially if pay raises are also delayed. Good staff leaves typically first, as they have no problem finding another job. That leaves you with an overworked and demotivated staff base when the economic downturn turns into an upturn. Even if you manage to rehire staff quickly to deal with the upturn, you still need to train them before they start adding value.

Could you argue that excess hiring is also not a path to guaranteed profitability because it leads to layoffs.

> The interesting part is why are they all in sync, and fairly similar in size.

So many potential reasons, including:

- "If we're to do it, let's do it now, while we're still in the wake of Twitter and other big companies, and thus shielded from bad press".

- Some company's management was considering a layoff for quite a while, but worried it might be too damaging or too difficult. Seeing other similar companies doing their own layoffs without much effort or negative impact would relieve the management's fears, and lead them to staging their own layoff. Now imagine there were a lot of companies that independently overhired, then started thinking about "cutting the fat", and all got - again, independently - blocked by the same set of worries. This threshold is a sync point. Everyone may arrive at it on their own, but they cross it simultaneously.

You can think of most managers as being actors. Their main job is to project the correct image in order to legitimate their role and fend off internal competition. Is becomes more true the higher you go in the hierarchy.

This is eerily, scarily true and what’s more it works.

I loathe Zuckerberg but his insistence that managers contribute or leave is exactly what my org needs. Unfortunately this is the sort of change that’s basically impossible when so many people’s power is vested in it not happening.

I get the idea but how is “contribute” measured for managers?

Easy - they get paid have some additional responsibilities on top of a standard job. It would be better to have several of these than a single manager who only has meetings all day and is disconnected from the actual work of producing value.

Not sure I follow, a manager can have a huge impact (one way or another) on the final product and hence can produce great value. My question was how to measure that, your reply did not answer that?

Specifically, managers produce "managerness" which is consumed by others in the organisation. This goes all the way up to the C-Suite which need to project "CEOness" in the theatre of VC presentations and investor calls. Sometimes you find overt borrowing of theatrical techniques, like Elizabeth Holmes getting voice training.

Gives new meaning to "performance review".

"It might very well be _also_ cost cutting."

As I read the title, that is what it says. It does not say, e.g., "The widespread layoffs are because of copycat behaviour not cost cutting". It says

"The widespread layoffs are more because of copycat behaviour than cost-cutting".

To me the interesting part is that with all the coordinated layoffs, so far the public1 generally sees no "decline in service", assuming these companies claim to be providing services to the public.2 That implies these were, as Graeber would put it, bullshit jobs.

"Tech" companies are not known for original thinking. Knee-jerk, copycat behaviour can be seen in everything they do.

1. By "public" I mean the ad targets, aka "users", not the advertisers.

2. Twitter being a notable exception.

> That implies these were, as Graeber would put it, bullshit jobs.

...on the scale of a few months, maybe. There are a lot of activities that are essential to the long term health of the organization that can be abandoned for a little while: developing future innovative product lines, keeping infrastructure well maintained, having a full QA process compared to cutting corners, customer service tools and roles, etc.

I'd venture to say 25% of the jobs in large companies are bullshit. Bullshit jobs floating on a sea of pointless meetings is a pretty good description of a lot of corporate America.

Yeah, but do we trust the axe wielders to know the difference between value-free jobs and, say, maintenance of healthy information security?

no, and that's the real issue.

They’re similar in size in large parts because it doesn’t make sense to go through all the pain of a layoff for a <= 3% layoff and it feels extremely risky to do a >= 10% layoff all at once (absent an existential threat). The end result is a lot of layoffs in the middle of that range.

These giants have so much money part of their hiring plans were to deny candidates to others. It’s nuts.

The the point upstream about Musk is real. Companies like Google established that you need to hire 10x rockstars or whatever, and pay ludicrous salaries. The growth curve is going to slow, and the money people aren’t gonna want to pay the wacky salaries for people.

> The interesting part is why are they all in sync, and fairly similar in size.

As to the in sync part, the most plausible explanation is the economy. Inflation from the Russian-Ukranian war plus Covid stimulus drove the Fed to boost the interest rate.

The similar size bit is more difficult, but if a lot of that is support staff like recruiting, then that may make more sense, if those staffing levels were based on the number of engineering headcount in the first place.

One explanation would be that a rising risk free rate makes money now more valuable than higher future cash flows, so leadership who are stock incentivised in order to align thier interests with shareholders sacrifice future growth for higher margins.

R&D, marketing, even good customer service all allow you to grow next year but firing them allows you to return more money now.

Yes WEF

I don't think these things are mutually exclusive.

Companies have been bloated for...ever, and even more than usual in recent years. That they're all choosing now-ish to cut some costs is copycatting.

The excessive hiring before the market downturn was also copycat behaviour, not about about having good investment ideas. Now everyone has realized that they were in a mass-psychosis, and start having mass-sensibility instead.

if companies cannot hire sensibly why would i think that they're capable of firing sensibly.

Funnily enough, cost-cutting rarely reaches the executive class.

i dont think your interpretations are mutually exclusive

are / were we in the downturn? when in a downturn should a company start downsizing?

i dont think all these HR departments saw some objective point pass and base the layoffs on that. theyre watching what everyone else is doing.

Any CEO who instituted or countenanced such ridiculous amounts of unnecessary hiring needs to be the first one fired.

You need punishment in capitalism. You need incentives, and you need punishment. Because where you have incentives with no punishment, somebody just has a free option—-in this case paid for by damaging employees’ careers and health, as well as investors’ capital.

This insanity must end. And it will only end when you start doling out punishment to the guilty parties: The CEOs. No more CEOs “taking responsibility.” They need to be fired.

It’s all about the markets, if company A hires a lot and the market thinks it’s a sign of growth it rewards it with demand for its shares, then company B looks at A and sees a hiring wave as the only material event that could have triggered A’s shares outperforming its own and decides… fuck it let’s signal to the market that we do are growing.

Then the market psychology changes and some CEO is the first to think that maybe this time the market would reward the opposite action, aka a layoff. It works… so the next one over goes and the rest of the dominos fall in the name of competing for institutional dollars within a zero-ish sum game

I think it’s more competitive than that.

Company B isn’t just looking at company A’s “success”. Company B’s levels of attrition are increasing because its employees are going to company A. So company B has no other option than to open the hiring floodgates or else they can’t meet bare bones maintance tasks let alone growth.

Not your comment but most of the comments on this thread are whacky. It’s like people completely forgot how hot the software market was during the pandemic. Anecdotal but I had 2 friends trying to break into the software game at the same time. That didn't happen during the pre 2019 boom so who knows what that means lol

Apple didn’t go on a hiring binge. It didn’t hurt them.

Apple is a hardware company. Did other hardware companies go on a hiring spree? Otherwise it is unrelated.

From board perspective it is difficult, because it is difficult to find CEO to do the layoffs and start strategy work again. It is just easier to keep the previous CEO if he is willing to do the dirty work.

I want to see some heads on spikes!

Depends on the company of course. In any case and at this rate it’s also power play though. Worker demands had become too much “out of line” and that creates tension. Look at Elon Musk, he is not acting very rational on the productivity / performance front. I bet that’s not even the goal there, he is a provocateur sales man. And very good at that. He also has a fragile ego and likes leverage. Very human and makes sense I guess.

Here you have a Harvard professor on another tangent:

“Doesn’t it seem silly that, in a moment of crisis during the pandemic, we all figured out how to keep working productively without all these conversations and debates, seemingly because we were just rolling up our sleeves collectively and getting work done?” Ethan Bernstein, an organizational behavior professor at Harvard Business School, asked in the Harvard Gazette last fall. “And now that we have the choice, it’s the choice that makes this hard.”

https://news.harvard.edu/gazette/story/2022/08/back-to-offic...

I agree to an extent - Musk was only able to say the emperor had no clothes because he owns the company.

No public company wants to be the first (or the last) to make a move, so even at public companies that don’t NEED layoffs - especially indiscriminate ones that decimate a talent pipeline - will initiate downsizing.

It’s all to appease the street - they expect blood, mgmt gives them blood, share prices goes up, mgmt hits bonus targets.

Long term impacts don’t matter because they won’t be there to endure the pain - pass that off to another poor sucker and hope you have a chair when the music stops. Pubco 101.

> I'm a Stanford professor who's studied organizational behavior for decades

Insane how people locked up in institutions that resemble absolutely nothing like a workplace feel they can even comment on a workplace.

Hubris of academics is insane, living in a dreamworld.

Well, the issue is there's never been a university that had to "cut costs" since they've all got strong endowments or a base of students to rob slightly more year after year.

I wonder if this professor also thinks there's no bloat at the institutional level.. despite some schools having almost* single digit ratios of admin to students.

> Well, the issue is there's never been a university that had to "cut costs"

The evidence from recorded history disagrees.

These types are certainly employed in large companies, and attempt to make use of their Organizational Behavior degrees .. generally the first to be laid off

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