Get Fired Up!

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My entire family (less me) was in construction in North New Jersey. Big construction, heavy construction. Bridges, tunnels, roads. Things like GIANTS stadium or building out the Meadowlands. As my Dad would say, "We are Earth Movers." And in the construction world, many times the winter would be the time when things slow down. As in, no work. Most big construction jobs do not "launch" when there is snow on the ground.

So, in our family's world, you knew that every job you ever started - you were going to get laid off. Especially during the winter. 

The key difference between being laid off vs. getting fired is that a layoff is the fault of an employer while a firing occurs because of the employee's fault. Most workers get laid off because the company is trying to cut costs, reduce the staff, or due to mergers and acquisitions. 

Tech companies have been laying workers off by the thousands. In 2022 over 120,000 people have been dismissed from their job at some of the biggest players in tech –Meta, Amazon, Netflix, and soon Google – and smaller firms and startups as well. Announcements of cuts keep coming.

Moreover, layoffs don’t work to improve company performance. Academic studies have shown that time and time again, workplace reductions don’t do much for cutting costs. Severance packages cost money, layoffs increase unemployment insurance rates, and cuts reduce workplace morale and productivity as remaining employees are left wondering, “Am I next?”

The tech industry layoffs are basically an instance of social contagion, in which companies imitate what others are doing. If you look for reasons for why companies do layoffs, the reason is that everybody else is doing it. Layoffs are the result of imitative behavior and are not evidence-based.

I’ve heard people say that they know layoffs are harmful to company well-being, let alone the well-being of employees, and don’t accomplish much. But everybody is doing layoffs so why don't we do the same?

Could there be a tech recession? Yes. Was there a bubble in valuations? Absolutely. Did Meta overhire? Probably. But is that why they are laying people off? Of course not. Meta has plenty of money. These companies are all making money. They are doing it because other companies are doing it.

Layoffs do not cut costs. There are many instances of laid-off employees being hired back as contractors, with companies paying the contracting firm. Layoffs often do not increase stock prices. In fact, layoffs can signal that a company is having difficulty. Layoffs do not increase productivity. Layoffs do not solve what is often the underlying problem, which is often an ineffective strategy, a loss of market share, or too little revenue. Layoffs are basically a bad decision.

Some companies are laying off people they just recruited – oftentimes with paid recruitment bonuses. When the economy turns back in the next 12, 14, or 18 months, they will go back to the market and compete with the same companies to hire talent. They are basically buying labor at a high price and selling low. Feels kinda dumb.

Why ignore the evidence against layoffs? If companies paid attention to the evidence, they could get some competitive leverage based on science. After the Sept. 11, 2001, terrorist attacks, every airline except Southwest did layoffs. By the end of that year, Southwest, which did not do any layoffs, gained market share. Procter and Gamble's CEO said the best time to gain ground on your competition is when they are in retreat – when they are cutting their services, when they are cutting their product innovation because they have laid people off. 

The CEO of the software company SAS Institute, has also never done layoffs – he actually hired during the last two recessions because he said it’s the best time to pick up talent. Lincoln Electric, a famous manufacturer of arc welding equipment did this: instead of laying off 10% of their workforce, they had everybody take a 10% wage cut except for senior management, which took a larger cut. So instead of giving 100% of the pain to 10% of the people, they give 100% of the people 10% of the pain.

Companies could see a recession as an opportunity. In the 2008 recession and the 2000 tech recession SAS used the downturn to upgrade workforce skills as competitors eliminated jobs, thereby putting talent on the street. SAS hired during the 2000 recession and saw it as an opportunity to gain ground on the competition and gain market share when everybody was cutting jobs and stopped innovating. Social media is not going away. Artificial intelligence, statistical software, and web services industries – none of these things are going away any time soon.

When the winter months came, my Dad would "find work" to keep the gang busy. Dad knew that if the crew was lost in the winter, they would not be around in the spring. 

The PEOPLE are the most important thing in the construction game. I remember Dad doing construction projects that were going to lose money, just to keep people on the payroll. And this would repeat every year, every winter. 

It is easy to say that you are a "People First" company but if you are laying off your people at the first sign of trouble, that simply does not pass the sniff test. Laying off your workers? Your PEOPLE??? 

My Dad would have a different word for this weak leadership. 

Check out the NYDLAcast.com with Bill George