[gerhardhaering]

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.

[izacus]

You're missing the point - the point is to send a message, to employees and to the investors. That they're SERIOUS COMPANY that does the right thing. Follows the market. Listens to economy. That won't hear complaints from the entitled lazy overpampered engineering workers. That they need to get back to the factory and be like all other quiet labor. That HARD DECISIONS can be made without regret when bankers ask for them.

[tedivm]

Exactly- Facebook laid off 7% of their staff and then followed it up with a $40 billion stock buy back. That's over $3,600,000 per laid off employee. The economy isn't the issue here, the companies know that since layoffs in mass are happening they can get away with it without taking the same reputational hit as if they did this on their own.

[mattgreenrocks]

It's incredible how submissive these companies act to capital.

[shagie]

Attrition tends to happen with the most qualified individuals leaving for other companies.

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.

[gowld]

Why have a bulk "layoff" instead of just layoff the specific people whose work you don't need?

[jkukul]

I think there are several reasons to do it this way:

- 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

[kirkules]

- tech labor cost is depressed most effectively when everyone is doing it

- everyone is doing it so it's that much easier to buck responsibility for the decision

[vintermann]

Can attest to this. I worked at an open source consultancy for a while. During a tough period, and having made some bad bets (trying to get into the enterprise Java world), they did some downsizing - or actually, it was more like warning that there would be downsizing. A lot of people quit, not even waiting to get a severance package. Including many people they definitively weren't happy to lose.

[brandall10]

Addressing point by point:

- 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.

[adamors]

As someone who was recently laid off at one of these % cuts at another company, these cuts target specific groups, for instance people who have higher salaries. Well paid people won't just quit.

[travisgriggs]

I’ve seen this happen over the years and I’m always curious why there isn’t a discussion beforehand that offers the “overearners” a chance to stay at a reduced salary. I’ve asked people who were in those positions, and they’ve often indicated that they would have stayed at a lower salary, at least for a while.

[dboreham]

No because some of the effect is to instill fear.

[likeabbas]

Not just fear. It's to flatten the salaries that spiked during covid

[ww-picard-do]

So, let me understand your argument. The CEO choose to lay people off in order to scare the remaining employees? To what end?

Also, if the intention was to "instill fear". Why give good severance? Why not give nothing?

[yevpats]

It's just the first cut (for all companies). You can't do 50% right away as you don't know what will happen, so you need to do in steps. If they were just 7% over hired then they could just do attrition + a bit tougher perf reviews, or close a few teams over the course of a year but there is high chance for all companies they are not 10% or 7% or 15% over hired but 50%

[dalyons]

really? a high chance for ALL companies that they are 50% overhired? based on what do you make this call? apart from doom pessimism.

[tsvetkov]

The fun thing is that their R&D cost is dwarfed by expenses on Sales&Marketing and General&Administrative. So, if I understand their financial statements for 2022FY correctly, a 7% cut on R&D could lower their total expenses by 2% at best https://ir.gitlab.com/news-releases/news-release-details/git... Even cutting their R&D 100% would not make GitLab profitable, if other expenses are kept the same, so economics is clearly not the reason for layoffs.

[jkukul]

How do we know they're laying-off people that belong to "R&D" category? Maybe they're cutting people from Sales&Marketing or General&Administrative.

There's not too much detail in that press release.

Thanks for sharing the link to the report!

[tresil]

From a cost basis, this could possibly be true. But, with that type of attrition, you would probably see a greater percentage of high-performers go because they have good options. Then, you not only have lower producing staff, but it also becomes more difficult to hire top level talent back, because they want to work with other folks like themselves.

[UnpossibleJim]

Isn't that attrition going to happen anyway? And with mass layoffs, wouldn't top talent, with plenty of options, be wary of a company who is likely to layoff 7% of its staff to please stockholder share pricing? I don't know the answer to top talent retention, but it seems easier and less expensive to turn your existing staff into "top talent" under the tutelage of the existing top talent and implement a hiring freeze with no huge news cycle.

[michpoch]

Yes, but then you might cut not the 7% you wanted.

[saiya-jin]

Our banking corporation did that some... 7? years ago. Instead of random firing rounds happening locally and globally few times per year, where even locally best people were sometimes let go ie due to current under-allocation, and everybody would be nervous for months afterwards... just nothing.

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.