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  • Writer's pictureChristopher McHale

Hired to be fired. Layoffs are a poor business decision.

We're going through a deep crisis of leadership.

Man walks down a railroad track
Leadership Is Causing Suffering

Layoffs solve nothing

Nowhere is the current crisis of leadership more exposed than in the tech industry.

In the last 12 months, over 120,000 people have lost their jobs in tech companies.

But this systematic gutting of the American workforce makes no sense. Statistics support the opposite. Firing workers does little for a company’s bottom line. And long term, it costs a company more as the economy returns and workers need to be rehired.

Of course there are companies who actually need to cut costs. But the latest data shows cutting staff to survive is a sure sign the company is failing.

In an article of the Stamford News, Jeffrey Pfeffer, the Thomas D. Dee II Professor of Organizational Behavior at the Graduate School of Business, Stanford University, maintains layoffs often do not cut costs, as 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 part because 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.

Why do companies do massive layoffs?

Social contagion: Behavior spreads through a network as companies almost mindlessly copy what others are doing.

Even minor players cut staff to join the club with the big boys. Hey, Musk gutted Twitter, maybe we should gut our company.

Copycat leadership.

In the tech industry, workers feel like they’re in an accordion orchestra as companies expand and contract in mindless unison.

Leadership scales to unsupported heights, grows on poorly thought out strategies, weak market research, dazzled by HBR dreams, hires with thoughtless abandon, then fires en masse when the facts of their business catches up with them.

Who doesn’t get fired

Zuckerberg is never fired. The top of the corporate pyramid always has cash to buy a new house, a fancy car. But workers pay a steep price for CEO flights of fancy and pet projects.

How many livelihoods is the metaverse worth?

The absolute worst thing any fired worker hears from HR is it’s not personal, it’s business.

Maybe CEOs would plan better if they felt how personal losing a job is. How much it stresses families. How much hardship people face. Maybe if they truly understood they’d be reluctant to hire people.

Not every business needs to expand explosively. Just because Google is doing it doesn’t mean everyone mindlessly follows suit. Despite business school logic, life is not actually a spreadsheet.

Life is kids, vacations, and family meals, and paying the electricity bill.

There’s never been a time when the workforce has had to navigate a more constantly churning marketplace. Most people would list job security as their #1 goal. And yet job insecurity has become a built-in feature of the tech worker’s life.

The advantage of a workforce on edge

Job insecurity allows CEOs to underpay, crunch the lives of their workers, make pie-in-sky promises that deliver a pink slip tsunami.

A deep crisis of leadership. Not just in the tech industry. The world is in a deep crisis of leadership at every level. This crisis has its roots in a profound moral crisis as we face an uncertain future.

Of course this will reflect in the micro-cultures of corporations. That makes sense. But something else makes sense too.

Those micro-cultures can offer solutions. And those solutions begin in recognizing the deeply personal identity of a job.

It’s personal, not business.

Do not grow your company when the highest risk is other people's jobs. If you are the leader the greatest risk needs to be yours, not your workers livelihood.

Step back.

Look at the patterns.

Watching Meta in the last decade is a classic example of a leadership bedazzled by random success.

Does Meta understand its own success?

It’s not clear if it does.

Listening to Zuckerberg speak, sometimes it sounds like he still can’t get over his lucky break back in a Harvard college dorm room. And I never get the sense he’s suffering one inch of the pain his workers suffer as Zuckerberg’s nose leads them from one scheme to another.

I don’t mean to single Zuckerberg out. The tech industry has a deep pattern of hiring and firing as a company rushes around from scheme to scheme.

Meta is a tech industry leader. Other tech companies take up the pattern and the net result is an astounding 120,000 people suffer over a seven month period.

I use the word suffer precisely.

America’s deep crisis of leadership causes deep suffering.

It’s past time for tech leadership to acknowledge the pain they cause on a daily basis.

  • Scale is no excuse.

  • Copycat behavior is mindless.

  • Poor planning shouldn’t make people poor.

What’s the plan?

We have at the forefront of our corporate leadership a generation that built their business with a set of gold-rush goals. Accumulate as much personal wealth as quickly as possible.

They have not built companies to generational standards. As huge and intrusive as Facebook is, Facebook could be deleted overnight.

We had dreams of building a new digital world. But many of those dreams have become nightmares for workers.

  • Companies are feeding on themselves.

  • It’s a watered-down world.

  • Security is a myth.

But people won't keep buying sour milk. They will move on.

Workers always have the last word

The greatest asset of any corporation is the commitment of its workers.

What lies ahead?

We will build the new companies with the security of employees in mind.

It’s the basic nature of business. Innovation replaces stagnation. And if I see anything in Silicon Valley, particularly in smaller businesses, it’s a paralyzing stagnation, a delusion that the established technology sector way of doing business is inviolate.

Google can survive most upheaval.

Smaller copycat businesses cannot.

Even as I write this, I am seeing business plans with an entirely new model in play. These plans are attracting investors like bees to honey. We reach a pivot like this every thirty years. The other side of the pivot is a new world.

None of this is surprising. Most of the current generation of ‘new’ companies have not aged well. They were built violating basic business principles. They built a steep-grade vertical model. The people at the top benefit. Everyone else has their jobs on the line every day.

But it’s the 21st century. The workforce has changed.

Pronouncements and demands from elite leadership fall like pieces of discarded wood to the floor.

With a thud.

Where’s the future?

If I was to give advice to any leadership in 2023, it would be to move on to business models that offer security above all else. Even if that means shelving plans, and backing away from explosive growth.

Economies have cycles. The next cycle is not rainbows and unicorns. We’ve seen where that leads. After 120,000 people lose their jobs might be a good time to reflect on the core values of work in the modern world.

It might be a good time for leadership to reflect on their own responsibilities; understand it’s very much personal, not business; think smaller; think slower; think more with your heart, less with your MBA.

Vision statements are cotton candy. The real meal is in the passion of your workers. Betray that at your own peril.

No one wants to be hired to be fired.

Help me keep writing and sharing my thirty-years of hard-core business experience. Please subscribe. Thanks for your support. Chris



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