A Bit of “Inside Baseball” On These “Layoffs” and How You Can Avoid Them Maybe IDK

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Why does a semi-retired part-time blogger think he has the qualifications to speak on the goings on of the American business world?

Fair question. The two main things are I used to work in the recruiting/HR space and I also have been through four layoffs (surviving three) so I have a bit of a unique background in terms of discussing this specific topic. I just kind of “get it,” in my opinion at least.

To begin, it’s important to understand that anyone who works in a department outside of the groups that are actually making the company money (ex. in tech, the product teams, sales, marketing, etc.) works in a department referred to as a “cost center.” This literally means you are costing your company money for doing work that supports its operations. But you are indeed not making them a cent.

With that understood, here is my general view of what’s gone down.

Let’s first assume we all know companies (we’re going use the tech sector for this discussion) make stuff to make money. Right? And once the company and it’s original employees are making and selling so much stuff that they can’t do it alone lest they work 24/7 they start to hire people to do some of that work. Right? Makes sense so far?

Well over the last couple years (ish) companies have been doing well. They’ve been making and selling a lot more stuff. The money made from selling that stuff is called revenue. And as revenue has grown they’ve hired a lot more people to support the business. A lot of companies even predicted that revenue would keep steadily growing so they hired way ahead of their current numbers. They thought that sales would catch up with headcount and operational cost because of course they would! We’re killing it!

While this was all happening a lot of these companies also made a mistake that is becoming more and more common. You might have heard some variation of the phrase “stay close to the money” in terms of these layoffs the past few weeks. That phrase basically means, “don’t veer too far away from what made you make money in the first place.” And too many companies did not heed that advice. They decided to proof-of-concept (POC) or straight up begin building out new lines of business in which there was no guarantee of an actual revenue stream, let alone profit (more revenue than costs associated). So basically even if their normal revenue stream(s)/original business was doing well these pie in the sky side projects could be tanking their business. How exactly? Well what I failed to mention was the HUNDREDS IF NOT THOUSANDS OF FUCKING PEOPLE they hired to support them. So ya. Not great.

Now we cut to 2022 and these tech companies and 1. revenue and the overall operational business needs have not caught up to the amount of people hired. Yes, this does have to do with the economy to some extent because if their customers just had cash to burn they’d be like “fuck it buy a zillion software licenses.” But that’s only a small part of the problem. Then we get to 2. Those shiny side project that these companies have spun up are not making nearly the amount of money they thought, or any at all, so they are paying a fuckton of people to basically bury their business.

And this is where layoffs come in. As I mentioned it’s not necessarily an economic downturn. The business has just has too many people compared to what they need to operate the business at the “size” (how much stuff they need to make to produce the revenue they are creating) they are at.

And remember those “cost centers” we discussed earlier. Well when business are booming they tend to really invest in those areas. Because fuck it, why not? Isn’t it great for the brand to have a Sr. Director of Hiring Experience? Sure it is. It makes you look good to the talent market and shows you really care about your hiring process. Is it at all the fuck necessary to pay someone that much to do that extremely specific, not totally necessary job? Nope!

And so the fat begins getting trimmed. And it usually starts with the cost centers. It’s a recruiter massacre usually. Learning and development and HR usually get hit hard too. Then outside of the cost centers even middle of the road Marketing will generally also take it off the chin.

And then they come for those working on the projects making no money. Those ones we talked about. Sure, you’re a kickass Engineer/Architect/Product Manager, etc. but what you’re working on has spent two years costing the company money. Better hope the company could use your talents elsewhere or you’re out. And good companies will do that by the way. They’ll evaluate those getting cut and see if they can use them elsewhere. It sucks to lose someone excellent just because the exact thing they are working on isn’t a good fit for the company anymore.

Given that that is my take on layoffs in general, the other question is how to avoid them. Well, that really goes all the way back to your job search in my opinion. But I want to make it abundantly clear I am not picking on anyone’s career choices or trying to be mean. Do something you love and you’ll never work a day and all that, but you have to know when reviewing the ads for those Sr. Director of Hiring Experience roles that you will always be at tremendous risk at being “the first to go.” So rule one is finding a role that is necessary to the company, literally. The further you get away from that the more at-risk you’ll be.

Rule two is taking a step back and measuring how important the thing you are working on/supporting is to the company. Are you working on “the” product or a side hustle the CEO is trying to kick off for shits and giggles. I remember a killer engineer I recruited years ago that was working at a leading home coffee machine company. They were trying to create a new line of their very successful coffee makers that could basically be some sort of IoT of coffee machines? Or something? Ya needless to say he was pretty sure the whole unit he worked for was being laid off soon despite how talented he was. Rule Two basically states that again, even if it’s a cool new thing you’ll be working on at least make sure it has real market heat or is already making money or you’ll be at high risk to lay offs.

For Rule Three we take a final step back. This really applies to start ups (we are talking tech this AM). Here we ask ourselves about how viable the company itself here. Do normal or even slightly bad economic conditions support this company? If companies or people need to tighten their purse strings, will your company be the first to get dropped from their spending? Or maybe is your company a flash in the pan? I mean I feel horrible for the people let go at Peloton, but honestly how long was that ride going to last PUN FUCKING INTENDED BOO YAH. No but seriously it always sucks to see someone lose their livelihood but I can’t imagine thinking that the Peloton boom would last forever. Especially considering how much in-person group spin classes and studios were on the rise just pre-pandemic. So ya Rule Three, make sure your company has some legs and can actually make it.

Again, this was all one man’s opinion. If I can give myself and my brain credit for one thing it’s that I’m (and it is) the ultimate pragmatist. Don’t make things too confusing. Just admit when Meta and Google hired 10,000 recruiters and then watched shit slow down on them and move on. It’s going to happen from time to time.

Best of luck out there. It’s a weird and scary place in corporate America but not impossible to navigate with the help of some simple rules to follow.

Until next time.

-Joey B.

Categories: General

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