Ask HN: Is there evidence that layoffs work?
layoffs are often presented as a cost-cutting measure to save the business. I'm curious what research has to say on the efficacy of this, as opposed to other methods
6 comments
Yeah, the evidence comes from payroll. If you lay off a bunch of people, don't hire replacements, and don't take on more contractors payroll expense will go down. What's to doubt?
There are industries built around project based hiring, do the work, lay off the team. They don't tend to have lingering costs from payroll after the project is done.
Is your real question, can cost cutting fix a business? The answer is sometimes. But if nothing else, cost cutting can sometimes keep a business afloat for longeer. Depends on the company. Cutting costs usually also results in losing revenue, if you can cut more costs than revenue, that's a win; if you lose more revenue than costs, it's not helpful. There's also often a lot of one time costs during layoffs, and those costs are unlike to provide any revenue.
There are industries built around project based hiring, do the work, lay off the team. They don't tend to have lingering costs from payroll after the project is done.
Is your real question, can cost cutting fix a business? The answer is sometimes. But if nothing else, cost cutting can sometimes keep a business afloat for longeer. Depends on the company. Cutting costs usually also results in losing revenue, if you can cut more costs than revenue, that's a win; if you lose more revenue than costs, it's not helpful. There's also often a lot of one time costs during layoffs, and those costs are unlike to provide any revenue.
To rephrase the question, it’s obvious, probably to the OP, that layoffs cut immediate costs. But I think they’re really asking do they help the company.
Long term does company A that tends to layoff frequently vs company B that tends to avoid layoffs and cut costs some other way - is there a difference in medium and long term performance?
Long term does company A that tends to layoff frequently vs company B that tends to avoid layoffs and cut costs some other way - is there a difference in medium and long term performance?
Yes, this was exactly what I meant. Poorly worded the question haha
OP did you even think about your question before you asked it????
I believe the question is around layoffs being beneficial or detrimental. For example, let’s say you have a 6 person company and layoffs affect 50% of the staff. Now you’re down to 3 people. Is that beneficial or detrimental? Now 3 people need to do the work for 6.
At a large scale, maybe some companies over hire, so it cuts the waste and the amortized results are better financially. However, for others (Twitter?, tbd) when you mass cut a ton of talent, innovation dwindles, morale sinks, time to learn and pick up old projects increases. Layoffs can hurt companies financially much harder, but it may not be immediate. It may be the demise of the company in 1-3 years due to all the other complex variables at play
At a large scale, maybe some companies over hire, so it cuts the waste and the amortized results are better financially. However, for others (Twitter?, tbd) when you mass cut a ton of talent, innovation dwindles, morale sinks, time to learn and pick up old projects increases. Layoffs can hurt companies financially much harder, but it may not be immediate. It may be the demise of the company in 1-3 years due to all the other complex variables at play
There is probably research that shows that in the short term, stock value (and therefore bonuses) goes up when there are lay-offs.
Which other methods? Like counterfeiting a bunch of cash on the office laser printer when you run out of money to pay employees?
Last company quietly began laying off around time I was leaving.
Simple really. Team of 5 engineers and one SDM. Minimum pay on the team was over $200K, with the manager closer to $400K.
Laid off the whole team. Put their service in KLO and handed it to another team to support.
Over $1.5MM in payroll savings alone. Easy peasy.
Simple really. Team of 5 engineers and one SDM. Minimum pay on the team was over $200K, with the manager closer to $400K.
Laid off the whole team. Put their service in KLO and handed it to another team to support.
Over $1.5MM in payroll savings alone. Easy peasy.