layoffs are bad, don’t get used to it
layoffs in the tech industry have continued into 2024, with some repeat offenders from 2023 popping up in a few places. i have little patience for this. while it is true that the pandemic was a black swan event that no one could have predicted (we overhired a ton at docusign to capture unprecedented growth in inbound during the pandemic), it’s obvious that inflation and subsequent interest rate rises were the true cause behind the upheaval in tech. pandemics are unpredictable, but anyone with basic knowledge of economics knows that governments intervene to stave off inflation. they would also know that intervention from the u.s. federal reserve is temporary.
the federal reserve reported on wednesday that it won’t necessarily lower interest rates in march. as a result, the s&p 500 had its worst day in four months. this wasn’t the guidance that wall street and the private sector was looking for; most economic indicators (unemployment, inflation rate) pointed to more optimistic news. the fed, however, is not convinced that it is on track to reign inflation back in to its ~2% target.
what does that mean for the tech sector? as mentioned previously, it looks like companies are still relying on layoffs to appease wall street. job cuts have always been a lazy way to ignore your business fundamentals and still hit the targets provided to wall street or your board. one cannot be impressed with the behavior of companies like google, which continues to slowly cut its workforce without any clear strategy or direction. in a shameful memo to employees, ceo sundar pichai admitted that job cuts would continue throughout 2024. it’s always fun to work in an environment where an ax is hanging over your head, right? i don’t think he makes it through the year as ceo.
you know what feels good? not laying people off because the economy hits a snag. how can you avoid layoffs? keep an eye on your business fundamentals. what is your customer acquisition cost? how has it changed as the cost of capital has increased? how have your close rates and sales volumes changed over the past two years, compared to the pre-pandemic era? what is your baseline for “normal” growth rates? did you start your business during the pandemic? do you think that is a good baseline for measuring the performance of your business?
these are just some of the questions you should be asking yourself as 2024 gets off to a bumpy start. try to remember that in most cases, if you are laying people off, you are failing as an executive. build a business that is sustainable and can hold up against all sorts of headwinds. shoot me an email to chat about how to avoid embarrassing job cuts.
