Big Tech Layoffs ahead of Recession

[JoeWras]

WSJ article:

You’ve Heard of Quiet Quitting. Now Companies Are Quiet Cutting.
Layoffs are down, but employers are still finding ways to cut jobs

Free link: https://www.wsj.com/lifestyle/caree...sr98i6b0wn3&reflink=desktopwebshare_permalink

The Megacorp I retired from was master at quiet cutting. Always making sure to get under the WARN numbers. They've been at it for 20 years. From what I heard, the last year has been brutal with round after round of quiet cutting. Nothing makes the news. No reports to the Feds. Just a lot of small cuts.

Sorry kids, the party is over.

 

[brett]

I spent my career in the IT industry.

The megacorp that I worked for for twenty five years was in downsizing mode/change for the last 18 of those years.

I retired in 2011 and that megacorp was downsizing during each of those years since retirement.

Laying people off, increasing management scope, hiring new talent.

This is an industry that was, and still is, changing. With change comes layoffs and a renewal of certain skills and talent.

Some of it had to do with the economy, much of it was simply about the changing nature of the business and the reduction in margins.

 

[Aerides]

Sorry kids, the party is over.

For every article there is a different take, this piece just a couple of days ago calling the larger tech layoffs as being in the rear-view mirror.

https://www.axios.com/2023/08/23/tech-layoffs-over-jobs

"The share of higher-income people who reported losing their job in the past two months has come back down, after spiking during the first half of the year."

The overall unemployment rate remains under 4%, so it will take a lot of noise in layoff in a lot of sectors to make a real impact to the larger economy. My Mega did layoffs annually, after 2008 it was pretty much part of the plan.

 

[JoeWras]

For every article there is a different take, this piece just a couple of days ago calling the larger tech layoffs as being in the rear-view mirror.

That was the point of the article. Big layoffs over, small quiet layoffs continue.

I don't think tech is dead. It has just reverted to normal. The party is over, time to get to work. Doesn't mean work has evaporated.

I partied in 1999 and thought I was king of the freakin' world until I got slapped silly by the tech crash. Talk about a wake up call and bad hangover... We were demanding -- and getting -- all kinds of goodies from Megacorp in 1999. And then we weren't. What a headache.

Just like now, we didn't lose our jobs right away. It took a few years, and then the small cuts started, and the off shoring, and so on. One very long hangover.

 

[brett]

That was the point of the article. Big layoffs over, small quiet layoffs continue.

I don't think tech is dead. It has just reverted to normal. The party is over, time to get to work. Doesn't mean work has evaporated.

I partied in 1999 and thought I was king of the freakin' world until I got slapped silly by the tech crash. Talk about a wake up call and bad hangover... We were demanding -- and getting -- all kinds of goodies from Megacorp in 1999. And then we weren't. What a headache.

Just like now, we didn't lose our jobs right away. It took a few years, and then the small cuts started, and the off shoring, and so on. One very long hangover.

Ditto. The megacorp that I worked for offered a buyout, DB-DC, for employees willing to switch. In 1999/2000. Many of my colleagues switched under the premise that self administered DC plans investing in the tech sector were bound to outperform a DB. Could not miss. Some were grandfathered and made the move, others were essentially forced to move to DC.

Numerous colleagues that did so subsequently had their DC balances slaughtered. Some by 55-60 percent. After that they compounded the mistake of a full tech focus by moving to fixed investment just prior to the market recovery. Megocorps DB plan went down to 75 percent funded....they pumped millions in over a few years to bring it back to 100 percent funded on both an ongoing and a windup basis.

I learned from this. Years later, 1n 2010/2011 close to retirement I started to exercise stock options. I was told by some of the same colleagues who lost their shirt years earlier that I was foolish. The stock, in the high forties/early fifties was going to $75. Did I want to be a chump and miss out on this?

Reality was that I needed to protect my retirement so I slowly cashed out. It took time because I was restricted in terms of when in a quarter I could sell and my plan was to do it gradually. But I did. Afterward the stock went underwater to $15, not the $75 that the daydreamers imagined. Lots of tears in their beer glasses and martinis.

My point is that some people who were industry veterans and who knew better continued to drink the industry and the employer kool-aid despite being burned in the past.

I never could understand that. Greed perhaps, false optimism. I do not know. Still don't. A few of them are still working or are 'consulting' 12 years later.

 

[Route246]

I think most people outside of the tech bubble generalize and don't understand what is really happening. I have been through years of annual and semi-annual layoffs in previous companies. It was like clockwork and had little or nothing to do with financial health, but it always had to do with manipulating the sentiment of the stock for a given quarter. This strategy is well-vetted by finance people vs engineering people. It is an acceptable means to meet financial goals of cost cutting and engineering goals of jettisoning staff with insufficient ROI (i.e. deadweight, over-priced packages, etc.). Please note that this NEVER has to do with impending financial bankruptcy or overall health of the industry. NEVER. Those are handled by WARN disclosures and even those are not always an indicator of ill health.

I worked as an engineer for a fortune 100 company. Their policy was annual layoffs. It was easier to get rid of employees than firing them for cause. It happened so regularly that we called it October-fest. They were somewhat hesitant about H1B holders caused a stink because she was going to be deported - they negotiated to keep her on the payroll for an extra 3 weeks till her new job started. But in general - it was easier to get rid of problematic employees through layoffs because there was less risk of a lawsuit for ageism, discrimination, whatever.

I don't think tech layoffs are indicative of the broader labor market because a lot of big companies do what my company did - hire like crazy, then layoff the ones that don't work out.

Quiet cutting avoids WARN notices. WARN notices required much 'splaining by management and they don't like that.

WSJ article:



Free link: https://www.wsj.com/lifestyle/caree...sr98i6b0wn3&reflink=desktopwebshare_permalink

The Megacorp I retired from was master at quiet cutting. Always making sure to get under the WARN numbers. They've been at it for 20 years. From what I heard, the last year has been brutal with round after round of quiet cutting. Nothing makes the news. No reports to the Feds. Just a lot of small cuts.

Sorry kids, the party is over.

Turnover is a way of life. You need to get rid of deadweight. That is a fact of life.

I spent my career in the IT industry.

The megacorp that I worked for for twenty five years was in downsizing mode/change for the last 18 of those years.

I retired in 2011 and that megacorp was downsizing during each of those years since retirement.

Laying people off, increasing management scope, hiring new talent.

This is an industry that was, and still is, changing. With change comes layoffs and a renewal of certain skills and talent.

Some of it had to do with the economy, much of it was simply about the changing nature of the business and the reduction in margins.

Those of us who have been on the inside can see how this is normalcy and not a symptom of some "underlying problem with tech" which is just clickbait.

That was the point of the article. Big layoffs over, small quiet layoffs continue.

I don't think tech is dead. It has just reverted to normal. The party is over, time to get to work. Doesn't mean work has evaporated.

I partied in 1999 and thought I was king of the freakin' world until I got slapped silly by the tech crash. Talk about a wake up call and bad hangover... We were demanding -- and getting -- all kinds of goodies from Megacorp in 1999. And then we weren't. What a headache.

Just like now, we didn't lose our jobs right away. It took a few years, and then the small cuts started, and the off shoring, and so on. One very long hangover.

I think a lot of this is insider bias. Unfortunately, that bias is victimized by quarterly comms meetings that resemble religious revivals in some companies. You were smart to go with your instincts and slowly cash out. An old manager I highly respect told me he used the 1/3 system. He always tried to sell out 1/3 of his position on a schedule, perhaps every 6 months. By using this approach he always got something out if it tanked and always had sufficient in if it took off. A form of reverse dollar cost averaging I guess.

Ditto. The megacorp that I worked for offered a buyout, DB-DC, for employees willing to switch. In 1999/2000. Many of my colleagues switched under the premise that self administered DC plans investing in the tech sector were bound to outperform a DB. Could not miss. Some were grandfathered and made the move, others were essentially forced to move to DC.

Numerous colleagues that did so subsequently had their DC balances slaughtered. Some by 55-60 percent. After that they compounded the mistake of a full tech focus by moving to fixed investment just prior to the market recovery. Megocorps DB plan went down to 75 percent funded....they pumped millions in over a few years to bring it back to 100 percent funded on both an ongoing and a windup basis.

I learned from this. Years later, 1n 2010/2011 close to retirement I started to exercise stock options. I was told by some of the same colleagues who lost their shirt years earlier that I was foolish. The stock, in the high forties/early fifties was going to $75. Did I want to be a chump and miss out on this?

Reality was that I needed to protect my retirement so I slowly cashed out. It took time because I was restricted in terms of when in a quarter I could sell and my plan was to do it gradually. But I did. Afterward the stock went underwater to $15, not the $75 that the daydreamers imagined. Lots of tears in their beer glasses and martinis.

My point is that some people who were industry veterans and who knew better continued to drink the industry and the employer kool-aid despite being burned in the past.

I never could understand that. Greed perhaps, false optimism. I do not know. Still don't. A few of them are still working or are 'consulting' 12 years later.

 

[badatmath]

My old job that laid me off this spring now has more workers doing it than when I was there. . . mostly overseas though so cheaper.

 

[JoeWras]

I wish every one of these periodic quiet cuts was all about "deadweight."

It isn't.

 

[Ronstar]

^^ we had a business consultant who recommended firing 10% of the workforce annually. Good times and bad, in an effort to get rid of dead weight. Problem was that 10% would sometimes exceed dead weight, and given the amount of work that it took to find and hire people, we didn’t heed the consultant’s advice.

 

[tulak]

^^ we had a business consultant who recommended firing 10% of the workforce annually. Good times and bad, in an effort to get rid of dead weight. Problem was that 10% would sometimes exceed dead weight, and given the amount of work that it took to find and hire people, we didn’t heed the consultant’s advice.

Ah, the GE model. You should be able to churn the bottom 10% of your work force, or at least treat them poorly.

There are many problems with that model.

The other side is you should treat your top 20% with outsized rewards. Suddenly you’ve created an environment where it’s more important to show your worth than perform to the benefit of the business.

 

[Chuckanut]

I worked for a small growing company that was having some short term profit issues. But, the company realized that keeping its staff was important since they anticipated a return to normal in a year or so. They were also afraid that layoffs would trigger an exodus of many of the best people who would not wait around to see if they survived. So each manager had to notify the bottom 10% that if there were layoffs, they would be the ones to go. Enough of those 10% left that nobody was ever fired.

 

[Route246]

This is a problem when quiet layoffs happen on a schedule. Eventually, you keep shaving the bottom 5% and then you run short of workers. At that point you go after middle managers which requires fewer layoffs to achieve your financial goals. At some point after doing this for years or decades you end up with a lean workforce. At that point, innocent producers are axed which is tragic and self-destructive for the firm.

In parallel, you have middle and lower management who becomes quite adept at creating their lists. This leads to more politicalization which in itself is extremely destructive. Sycophants can really prosper and survive in this environment. I watched it happen and was appalled by it all but that is the way things worked.

I wish every one of these periodic quiet cuts was all about "deadweight."

It isn't.

 

[JoeWras]

It was one of the top 3 reasons I retired. It was so disruptive. I also can't think of a better form of legal psychological torture.

 

[eytonxav]

I think most people outside of the tech bubble generalize and don't understand what is really happening. I have been through years of annual and semi-annual layoffs in previous companies. It was like clockwork and had little or nothing to do with financial health, but it always had to do with manipulating the sentiment of the stock for a given quarter. This strategy is well-vetted by finance people vs engineering people. It is an acceptable means to meet financial goals of cost cutting and engineering goals of jettisoning staff with insufficient ROI (i.e. deadweight, over-priced packages, etc.). Please note that this NEVER has to do with impending financial bankruptcy or overall health of the industry. NEVER. Those are handled by WARN disclosures and even those are not always an indicator of ill health.



Quiet cutting avoids WARN notices. WARN notices required much 'splaining by management and they don't like that.



Turnover is a way of life. You need to get rid of deadweight. That is a fact of life.



Those of us who have been on the inside can see how this is normalcy and not a symptom of some "underlying problem with tech" which is just clickbait.



I think a lot of this is insider bias. Unfortunately, that bias is victimized by quarterly comms meetings that resemble religious revivals in some companies. You were smart to go with your instincts and slowly cash out. An old manager I highly respect told me he used the 1/3 system. He always tried to sell out 1/3 of his position on a schedule, perhaps every 6 months. By using this approach he always got something out if it tanked and always had sufficient in if it took off. A form of reverse dollar cost averaging I guess.

When a high level executive has their incentive plan compensation tied to stock price funny things can happen. I've seen a lot fudging of EIP goals of various types over the years.

 

[Surewhitey]

The other side is you should treat your top 20% with outsized rewards. Suddenly you’ve created an environment where it’s more important to show your worth than perform to the benefit of the business.

This is my wife's experience. They keep throwing dough (bonus, profit sharing & RSU's) and time (she's "working" half days in Mexico this week & Europe a few months ago and her boss is very aware)... Why she doesn't want to talk about ER.

 

[JoeWras]

It's nice to be in the chosen in-crowd.

 

[Toocold]

The Megacorp I retired from was master at quiet cutting. Always making sure to get under the WARN numbers. They've been at it for 20 years.

Same. It cuts both way for managers and those who cut. How can you meet the objectives if your staff continually keeps getting cut? Was so tiring.

On the positive side, when it was time for me to pull the trigger, I knew what to do to ride that wave and I rode it to shore with 15 months of severance.

 

[brett]

Tech was rewarding for me, and for my family. Over and above the compensation.

Early layoffs changed my attitude to personal finances. We decided to plow as much as we could in to paying off our mortgage. Zero consumer debt. And to save/invest just in case layoffs came. It became a habit.

Those layoffs meant that I sometimes attended job interviews in order to keep my resume and my interview skills sharp. And of course, to be on the lookout for new opportunities. It was important to keep abreast of the changes and trends. What competitors were doing or not doing....because at some point those changes would come to megacorp.

Within megacorp there was room for change, growth, and promotion. But it meant keeping an eye out for opportunities and a willingness to stretch yourself and take on new challenges. And relocate. Some of this was attributable to the evolving business, some of it to downsizing, offshoring, contracting out, etc. Megacorp recognized and paid extremely well for overachievement.

My view has always been twofold. One's impression of the IT business is colored by whether you are in the business or looking in from the outside. It is also colored by which facet of IT business has your focus. There are so many moving parts to this sector that overlap with all other sectors of our economy. It is fascinating business with lots of opportunity. In my experience it was sometimes a case of simply reaching out and grabbing that change or that opportunity.

 

[Route246]

That system is totally messed up, especially for companies that have ratable sales cashflows. I worked at a company where the CEO brought all future sales present and drained the pipeline while simultaneously cutting R&D so there was nothing to feed that empty pipeline. Finance people loved it as expenses were slashed, quarterly sales skyrocketed and as the stock price doubled they were happy, until they weren't. It wasn't a good look. CEO and his 4 top VPs got axed quietly without a word. It took 10+ years to recover from that one.

When a high level executive has their incentive plan compensation tied to stock price funny things can happen. I've seen a lot fudging of EIP goals of various types over the years.

 

[big-papa]

Worked in semiconductor for almost 40 years and, yep, layoffs were frequent. My first employer had a no-layoff policy in their employee handbook because they wanted the type of respect that IBM was getting at the time (mid 1980's). It was a good policy until it was no longer tenable, then it disappeared and layoffs became a regular course of events.

As a former manager I can't even count the number of people I've had to deliver the bad news to at this point. And I was on the receiving end myself 3 times. At some point I started to adapt by doing things like front-loading my 401K and HSA since semiconductor traditionally had their layoffs in the second half of the year.

If it's been a while since layoffs happened, it's usually easier to figure out who to put on the list since there's more history. And most managers know that layoffs are a lot easier way to get rid of poor performers than an outright firing, especially when you know that the layoffs are inevitable. Plus if you outright fire a poor performer two things might happen. You might not get a replacement req and when the inevitable layoff comes along, you're now going to be faced with letting go of somebody who might be a decent performer.

Speaking of adapting, others have written about the GE model of getting rid of the bottom 5% or 10% or whatever. What does this do? First, in any organization, you can always rank your team from top to bottom. The issue of course is that this is a relative view of performance, not an absolute view. As a manager, if I know that there will be an inevitable layoff at some point in the future, when I do get new reqs, should I always try and hire the best and brightest or should I make sure that my existing core team of high performers is always protected and target my new hires accordingly? I do believe that such things happen.

Glad I'm no longer part of that system, as rewarding as it was for me and my family. And it was rewarding: for example, the first layoff that got me was at a company where I worked for 20+ years. As such, the package was an incredibly sweet deal for me - it probably took 3-5 years off my plans to retire. Beyond that, good salary, good bonuses, Stock Options/RSUs/ESPP.

Cheers
Big-Papa

 

[big-papa]

Same. It cuts both way for managers and those who cut. How can you meet the objectives if your staff continually keeps getting cut? Was so tiring.

On the positive side, when it was time for me to pull the trigger, I knew what to do to ride that wave and I rode it to shore with 15 months of severance.

I like the new term, quiet-cutting. We called that one "sniper fire" or referred to the "disappeared ones".

Cheers,
Big-Papa

 

[Alex The Great]

For me, working in IT and semiconductors was a mixed experience. Early in a career time, I've been happy to work for Mega-Corp for nearly two decades. It was nice and pleasant environment with engineers on top of everything. But it ended up with horrible earnings, acquisition and layoff for the entire organization with tiny severance package and nothing else. I was 50 by that time and have not been ready to retire. Therefore, I kept looking for a new job. I've been able to find it, but overall it was a miserable experience and layoff hit me every two years. Finally, I've been laid off just a few days ago and decided to retire since I consider myself ready at this time. But in fact, I was preparing to quit myself as I did not want to work at this place anymore. My observation is that things are quickly deteriorating in the industry I was and there is no place for 50+ folks in a corporate world, unless they have long time secure high level position (but even that sometime may be in question).

 

[RetiredAt49]

While working for a well known tech company, I had to stack rank (and publicly publish) the individuals who reported to me…. I hated those annual reviews and postings

 

[brett]

Same. It cuts both way for managers and those who cut. How can you meet the objectives if your staff continually keeps getting cut? Was so tiring.

On the positive side, when it was time for me to pull the trigger, I knew what to do to ride that wave and I rode it to shore with 15 months of severance.

Ditto. I had packaged many employees and understood the difference between the company offer and what the actual negotiated numbers should be.

I spoke to colleagues to get a recommendation for a lawyer negotiate my termination package prior to the event.