What to make of the high-tech layoffs

To my disconcerted students:

Sadly, the massive layoffs in Silicon Valley and around the world that we are currently observing are a low-frequency yet business-as-usual event. Let me tease apart the different components and draw some conclusions for your career.

First of all, you may have observed how they are all happening at once. This is no coincidence: Layoffs are bad press and so companies will try to make it go over as smoothly as possible. Once one company got going, others will hurry up and take the opportunity to jump in.

Then, the layoffs are massive in that we are not talking about a handful of people but large numbers: 5%, 10% of total employee count. How come?

First of all: These layoffs have been in the making for some time. HR systems that are worth their salt let an employer rank-order their employees and generate a suggestion of who to let go off a the push of a button.

The preceding hiring binge may have added to the need for the layoffs, but effectively it only means that employers wanted to swap out existing employees for newer employees. From a company’s perspective, there are multiple reasons for this:

  • Lower performing employees, according to the company’s systems, can be replaced by other people who may be higher performing (please see discussion below on what “lower performing” means);
  • Also while a lot of experience walks out the door and the resulting friction certainly has its costs, there is a benefit to change as it allows companies to bring in new blood and overcome outdated habits.
  • Newer employees are often younger and hence cheaper employees

A final reason is that the assumed cost savings from employee reduction pretties up the company to shareholders and the stock market. We can already seem some companies doubling down on this by buying back its stock, a signal to investors that the company believes it is in good shape and their stock is a good deal.

From a professional’s perspective, who has just been let go, these reasons may not matter of course. If it happens at a really inconvenient time, you may have a real problem, and in general, you want to be the one starting your new job search, not your employer. This begs the question: Why where you chosen and how to avoid it in the future?

There are two main aspects to how you end up on the wrong list: Your recorded performance and the relevance of your position to the company.

  1. You know best why your performance on the books may not be as good as you wished: You don’t like your job, you are in the wrong place for your skill set, there is tension between you and your boss etc. There are a myriad of reasons. They should be an indicator to look for change by yourself long before any layoffs happen (to you).
  2. Your value to the company is not as big as you might think. A judicious layoff takes value to the company into account. What is more valuable? It depends, but in general, the closer you are to a function that makes money the safer your job. Don’t fool yourself: Know how your work helps the company have and improve profits and communicate it.

Hopefully your partner, if any, works in an entirely different industry. Otherwise you may want to rethink your approach to risk in life.

From a company’s perspective, large-scale layoffs are a housekeeping activity. Don’t be distraught. If at some future point in time it happens to you, don’t fret but move on. Here is a great example of how to react and position yourself to get rehired quickly (local copy).

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