I'm curious why do these company just don't freeze hiring instead of such huge cuts that have been shown to be expensive and morale killing?
You start firing people, people start refreshing their CV instead. Cooperation at work dies, toxic competition takes its place. It becomes more important to look better than your peers than getting stuff done as a team.
Kills morale, kills productivity, bad for the future. Instead by simply freezing hiring you could "remove" a similar amount of workers in 18/24 months just by the natural turnover that most tech has without the correlated drama.
Silicon Valley has been hiding a dirty secret for years: Many companies, if not the majority of them, are badly mismanaged.
This is really going to be the start of the next big shift in who will be the leaders in tech. Many companies that are seen as leaders today will eventually join the group of companies that are no longer seen as leaders.
It was easy to look good when the money printer was churning out negative rates and you could rely on investors to pump money in you instead of actually turning a profit. A couple of years ago you could literary close your eyes, put your finger randomly on some no-name company and if you invested in that company you'd get great returns because everything was going to the moon.
Now we're gonna see which companies are actually sustainable and which were coasting on dreams and cheap money.
IMHO such a correction was long overdue, but the central banks kept negative rates for far too long while everyone cheered them one because they saw their crypto, stonks and housing portfolios go to the moon and though this was great and nothing bad could happen because "line always goes up".
That’s probably true. But I’m not sure that fact has been reflected in stock prices. During the last hype cycle I would say that, in general, tech has been hyped a lot more than other industries.
This is why I have always laughed at people suggesting that private enterprise can do things more efficiently than big government. Have you worked for what passes as private enterprise these days? There is zero forcing function in the corporate space anymore. Everything is owned by the same like 100 people, and there is no competition, so even if it worked in theory, it should be clear and obvious it hasn't "worked" in the US for decades.
1. Many of these companies had year+ long hiring freezes as a prelude to layoffs
2. Companies that overuse hiring freezes end up promoting over hiring in periods where there is open hiring as teams hire in anticipation of not being able to in the future when they might need to
Also 3
If you have a need for hiring, it is likely for a higher priority project in need of a skill / domain you don't have free resources for internally.
Simply having a hiring freeze means you hamstring high priority projects you'd have allocated resources for, while letting others that may lower priority ride due to inertia.
and 4, when things are going well companies in general avoid firing anyone who isn't like harassaing people or something like that. Because it gives a bad outlook and the ones who can start to look for something else
Now they just use the old "never let a crisis go to waste" to let those who isn't good enough or overpaid go anyway
Taking an extreme, stupid, recent example - Let's say the ad market has slowed down and you really don't need so many ad salesmen. And you decide to switch gears to a subscription model so you need to do some work in payments. But you have a hiring freeze.
Do you think the ad sales guys can help with the Square integration?
Or let's say you've decided to bet your social graph / web / mobile app centric company on VR. How many of those existing devs are going to be useful in VR if you have a hiring freeze? Or when you realize it's a debacle and scale down VR, how many VR devs are going to be good iOS app update churners? Etc.
Some companies can't for cultural reasons. Sometimes, it's really just that you got your strategy wrong and now you have a bunch of domain/technical experts who specialise in stuff that's altogether useless for your new direction.
heh, indeed... I'm a contractor and I got shuffled around into a team that's not really picking the steam it was expected to. Talked to the previous EM -- whose teams are under significant load -- and yeah, what a pity: budgets are locked so shrugs.
You say that, but plenty of job adverts are for fullstack developers, e.g. backend experience in C# with dapper or EF, and frontend in Angular or React. It's not an absurd transition for an experienced developer, even if there is a learning curve.
As someone who works with database engineers, there's also a world of difference between the ones that know what they are doing and the ones that don't.
I was internally retasked from python to java full stack development. I have a bachelors in computer science, it's expected that I can just pick up, with a little time, any tool that fits the task. 95% of software development is just connecting pipes together. We are glorified digital plumbers for the most part, with only a few people working as the equivalent of civil engineers actually doing important design work.
If you chose to save a few bucks by hiring limited devs, that's a choice you made. In our orgs, the guy who moves CSS boxes for a living absolutely can write some SQL queries. Most places don't write database code, they write code that uses an ORM or other framework to interact with existing databases.
Of everyone I’ve managed (surely 50+ managers by now), I can only think of one who was heavily biased towards under-hiring. Most were biased towards over-hiring (some strongly so) and that’s the makeup of most companies’ middle management ranks. Many identified (often correctly) that the more people they had in their org, the more important they were. (Some leveling guidelines even make this explicit.) Add periodic freezes to the mix and this gets amplified during the “open season” times.
Every place I’ve worked I’ve heard things like “you better hire someone for that req before it goes away”, “if you think you need 4, ask for 6”, “make sure you don’t lose that backfill”, "never leave unused budget", etc.
Companies I have worked for where there has been implicit (and sometimes even explicit) overestimation of staffing needs when requesting extra people to counter the fact that the entire hiring round will not complete before the inevitable next hiring freeze.
I'm not talking the large scale stuff like Meta assuming the metaverse was a trend that would require their company to grow 50%, but the medium scale stuff like a department in a 1000 person company putting in to hire 12 people instead of 8, etc.
HashiCorp is a public company and their quarterly report yesterday was a major disappointment to investors.
Layoffs are a signal to the stock market that management is taking the problems seriously and cleaning house.
Look at Meta’s stock price. It crashed in 2022 right up to the first layoffs in November. That’s when Zuckerberg declared efficiency is a primary concern. The stock has nearly tripled from November.
I mean, passing around leeches and bleeding everybody, while performing occult rituals would also be a sign they’re taking the problems seriously. That is separate entirely from whether it’s irrational self sabotage or not
Funny you'd make that example, as that'd make pavlovs point even stronger imo.
Hashicorp is a publicly traded company, so their decisions need to primarily please their shareholders.
You’d be well served to do exactly as suggested if you’re currently a healthcare provider in an occultist village. You’d be gambling with your life otherwise.
Spot on. Layoffs barely save a dime in software behemoth like Google. Barring few startups that overhired in pandemic, it all boils down to this management tokenism.
If everyone is hiring and you don't, your shareholders will think you're not doing a good job. If everyone is laying people off and you do, shareholders will think you're making tough choices.
I really think that there isn't a rational reason for doing so, it's just CYA all the way up.
IMO apple has been the notable exception Cook is easily the top CEO of the valley. Its honestly impressive how well Cook was able to keep the company moving after jobs stepped down.
Their approach has definitely changed my mental image of the company, and I'm happy that a successful tech company is following such a strategy. My worst fear is a wave of cargo-culting MBAs pointing towards Musks approach to Twitter and copying it for the whole sector. Apple currently is the shining example against that.
Yeah, MBAs and private equity really ruin a lot of otherwise good companies. I honestly wonder how long they can keep this going in a high interest rate environment.
It’s just doing business within your current budget. Everybody knows projections and hence budget will change but rules are such that until they don’t you’d better lock in what you can.
You basically rephrased what I said - because "doing business within your current budget" doesn't mean you're making the right decision. If you temporarily overhire and then have to lay people off, you'll be in a worse spot than if you hadn't overhired in the first place. Good management wouldn't do this, but it's safer, because you will be judged less harshly for doing what everyone does ("doing business within your current budget").
You're doing the right decision for you in your org even if from the wider company perspective it's obviously wrong and everybody knows this, starting from the CEO, going via middle management and individual contributors, ending at shareholders. It's simply accepted that the rules of the game are such.
You can change the rules, but probably not if you're publicly traded... unless you're Apple.
In many cases it’s “non tech in tech” being fired. They are still recruiting engineers, they probably won’t recruit more non tech this year
When the Twitter drama started yesterday I searched LinkedIn for posts from hashicorp employees announcing they have been cut. In the first hours it was recruiters, project managers, and customer success people
My guess is they will also freeze hiring more recruiters
Another point is there used to be natural attrition in tech, during the great resignation it was even higher than normal. You plan ahead assuming some people will leave, and when things get bad and no one leaves, you’re stuck with more people than you budgeted for
I can think of two reasons.
The company is approaching negative cashflow and needs cuts to remain solvent, or reportable results are tracking below market expectations and announcing cuts will appease shareholder concerns.
Only when measured by the bizzaro world of tech valuation. They've never made money and if you took their current revenue and converted it 100% to profit they'd still not quite justify their market cap.
I know at least some mildly incompetent people that were hired in medium to senior positions at Hashicorp. It's not unique to Hashicorp, but basically by just being in the valley you were immediately guaranteed high paying jobs against much more competent peers. Yes this might be problematic, but a lot of these people should never have been hired in the first place.
Unfortunately there is something extremely toxic about VC money(not saying it applies to Hashicorp) which is that growth is defined in headcount.
I sort of cynically assume that the layoff takes the subsequent attrition into account. Like I imagine they actually wanted to cut 10%, so they do 8% and let attrition take care of that remaining 2%.
That's not cynical - that's just realistic management.
If you are current at headcount X and want to be at headcount Y by the end of the year, you don't let go X-Y people: you need to take into account the expected voluntary attrition for the year as well as any critical hiring you may need to do.
It does seem like mismanagement to me. Certainly there are some exceptions, but relying on layoffs to manage costs isn't free and depending on how it's done just violates the "treat people they way you would want to be treated" principal. That's not free, enough of it changes culture, and workers will adjust how they behave in a cut-throat environment. It will cost companies eventually in various dings to productivity.
I don't know about HashiCorp in particular, but usually, there's enough metrics for a company to see that they are headed into an overstaffing situation and work to correct that without layoffs. A true hiring freeze combined with natural attrition rates goes a long way. It varies, but a 5-15% for attrition is pretty common. And you can offer incentives for early departure to bump that up.
Also, depending on industry, there are other levers to reduce cost or boost margins that you could pull before resorting to layoffs. Including both labor and non-labor levers. Layoffs often feel like the lazy path.
I don’t disagree, but turnover is also subdued in a soft market, therefore the strategy is less efficient. I also assume some layoffs from others may have created an attractive pool of candidates that will be much easier to attract from a lower baseline. Regardless, this does have impact on morale as discussed here and further down the comments, and to some extent is raising alarms for customers too. I.e. what does that imply for the level and quality of support I will be receiving as a paying customer. Big customers do need both financials and growth due diligence before committing on a contract and that event may play well on one side of the equation less so on the other.
It isn't unusual for turnover to be much lower than 8%.
Having said that, I mostly agree with you. If they are selling the market on growth, there's no way to do that while simultaneously letting go 1 in 10 workers purely due to cost.
They get more completed work out of the engineers they "over hired" before they have to let them go. Then they'll move 3 cheap engineers to maintain that shiny new product that 30 laid off engineers built.
It does, but temporarily. If layoffs caused terrible, permanent, irreversible, core damage to a company, then companies would stop doing them. But they don't. It's not new, it's part of the up and down cycles of markets.
If we don't like layoffs, then we should also not like crazy hiring sprees either because of their recklessness and waste.
Many of them froze hiring last year in the summer and fall (Amazon, etc. definitely did a freeze). It's just that a freeze rarely makes the news like a layoff.
Moving people around isn't easy - teams aren't likely to willingly let go of their most competent employees, and when they do, the timelines they give for such a move are often months as they wind down that particular resource.
Additionally from the perspective of employees - you are taking on most of the burdens of job change - learning new technology, having to familiarize yourself with new people, organization - without the benefit of a higher salary.
Because corporate leadership is paid to Do Something (TM) so stock gamblers can spin yarns about how the fundamentals changed so you should overpay for their Magic Beans Inc shares.
Nobody will leave voluntarily now if they joined during the 2020-2022 hiring boom and they know are sitting on ludicrous compensations which they know they won't get anywhere else in the current economy. So unless they're stellar engineers with top offers in hand, they're more incentivized to sit tight until the market recovers instead of leave empty handed in these uncertain times.
Waiting for natural attrition now means the poor/mediocre ones who don't have better options will stay, and only your best will leave voluntarily, which is exactly what you don't want. Ideally you'd want to cut loose the dead weight holding you back and prop up your rockstars so they stay.
First, employees aren’t fungible. Some teams will expand, others will contract. Second, the recruiting apparatus needs some baseload to healthy operations for when the tide swings.
Why do you think all layoffs are morale killing? The first people a company lays off are usually the least performant/useful/valuable. I wouldn't mind at all if all slackers at my company got booted.
>The first people a company lays off are usually the least performant/useful/valuable
Quite naïve to assume this. Speaking to the most recent round of tech layoffs at my workplace, the higherups said repeatedly it's not based on performance. They didn't elaborate on the methodology at all. We had people who had just been promoted get fired, and we had people who were long-time employees and high performing get fired.
> the higherups said repeatedly it's not based on performance. They didn't elaborate on the methodology at all.
Ours said the same thing. PIPs get axed on every round, but our last one was heavy on employees over the age of 50 ("long-time employees and high performing").
This isn't the sort of thing anyone ever admits what it is, only deny what it isn't.
Come on, you have to really try to create a narrative where having a set of plans which are done with a set of people to do them and then you remove some of those people and it doesnt disrupt those plans.
People don’t like surprises, and they don’t like having plans messed up.
Just because you, personally, might have a role where you (?) aren’t part of plans or don’t do planning doesn’t mean that broadly speaking, you reflect the average of the teams in your company.
It’s far far more likely that if you dont care about your coworkers, you’re an outlier.
While it seems like the most rational approach, it isn't. Companies don't typically include many employees in an improvement program, so when 'low performers' who haven't been covered by such a program are laid off, the remaining employees start to question the fairness of the performance evaluation and the company's commitment to its employees. [1]
The whole industry switched to stack ranking. I wonder what potential long-term effects could emerge.
You start firing people, people start refreshing their CV instead. Cooperation at work dies, toxic competition takes its place. It becomes more important to look better than your peers than getting stuff done as a team.
Kills morale, kills productivity, bad for the future. Instead by simply freezing hiring you could "remove" a similar amount of workers in 18/24 months just by the natural turnover that most tech has without the correlated drama.