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Comment by baddox | Hacker News Reader

Comments like this show up on all stories about layoffs. I don’t really understand your point. There’s never any reason to have layoffs unless the company deems it a good financial decision, right? And surely all layoffs would hit the lowest performers (by the company’s estimation of performance, which obviously might be flawed), right? So what is the difference between “the company did layoffs of its lowest performers due to financial pressure caused in part by the pandemic” and “the company did layoffs of its lowest performers using the pandemic as an excuse to avoid bad PR”? To me those are nearly identical scenarios.

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It's true (or roughly true) that there isn't a reason to do layoffs unless the company deems it a good financial decision. But it's not true that a company will do layoffs whenever it's a good financial decision. You may know that there are low performers but choose not to let them go because you're worried about morale more generally to that other high performers will take it as a sign of trouble and jump ship. But in a bad economic environment that is less of an issue because high performers are probably more risk averse and fewer competitors are hiring anyway.

Well I think in good times, it's trickier to do a layoff. Like you said, it can appear like it's related to financial pressure. In good times, if you do a layoff, investors/shareholders will worry that you are doing it due to financial pressure or limited opportunities to use those employees to make money (growth). The way to say it isn't about financial pressure is to take the PR hit and say these are low performers. Which kind of implies you messed up by hiring them. So either way, it hurts you in good times.

Now in bad times, it's considered "prudent," because everyone is under financial pressure. Laying off people preemptively wins in both ways in that in can look like you're eliminating financial pressure when everyone is worried about it (as opposed to the good times, where you will be singled out), as well as being able to get rid of the lowest performers and reducing pay of everyone else while avoiding bad PR, and even being considered good because you're still employing the rest. As long as the business remains solvent it's a win-win for the company.

Not saying this is good or bad for the economy or the employees, but just reflecting on some of the game theory of this.

Laying off in good times means you were bad at hiring in the first place. Laying off in the bad times means the bad things weren't your fault. It's a very good way to not have to convey to the market, your investors, your supervisors, and/or yourself that you may not be very good at hiring while also giving yourself another go at it (hopefully with better results, though probably not, unfortunately).

I think everyone is bad at hiring because hiring is hard. The problem is that companies are also bad at letting low performers go because we're human beings and public perception, conflict avoidance and empathy for co-workers influence our decisions

I don't know what world you live in where any company (beyond a tiny, tiny scale) isn't "bad at hiring". Especially not using the ludicrous bar of "never hiring low performers"

In many countries proving someone is a low performer is a high bar. They certainly can't dump 10% of their workforce without a justification like restructuring or downsizing, something a company wouldn't go through just to replace some people. A fake restructuring might hurt the business even more than some lower performing employees. And if a company does go through this phase, legally it can't just turn around and upsize by hiring other people the next day (not that this would guarantee they end up in a better position than before).

Such a crisis is a good moment to slim down the workforce since it is a legitimate restructuring and it avoids any image harm. and it's not just low performers that suffer sometimes. An average performer might get caught in the net if the pay/performance ratio is not good. Many good performers also do just because the area they worked in is not deemed profitable or necessary anymore.

Layoffs don't just layoff lowest performers, they often layoff departments that the company doesn't find necessary anymore. High performers are laid off all the time.

> So what is the difference between “the company did layoffs of its lowest performers due to financial pressure caused in part by the pandemic” and “the company did layoffs of its lowest performers using the pandemic as an excuse to avoid bad PR”?

This is a confusing question, seems the answer seems embedded in the question...the former signals that there's "financial pressure" on the company over and above the reasonable baseline that every company faces, while the latter doesn't. A 100% financially healthy and secure company may choose to pay the ongoing cost of restructuring during good economic times, since layoffs in good times may have PR costs (for recruitment, for example) that outweigh the carrying costs of the low performers (or unbalanced departments, or whatever). If a downturn lowers this cost, then you'd expect companies to take advantage of it.

When I see a layoff story, I think two things: 1. Those poor folks losing their jobs... 2. That company must be under a lot of financial pressure

The comment above yours is basically saying: #2 might not be the case, especially with only 8% being laid off"

Exactly, and the nature of the layoffs in this situation only supports this: Cruise (like other SDC companies) has switched their stance from "launch is imminent" to "we have more technical work to do". The fact that business development, product, and marketing were the lion's share of the layoffs seems like exactly the strategic move that a pushed-off launch date would imply, economic downturn or no.

Evidence against this is the fact that they also laid off lidar engineering staff in Pasadena; I don't know Cruise's business, but this also seems like the kind of consolidation you'd expect a relatively healthy company to do (though "healthy" is a weird word for a pre-product R&D co).

Source: https://electrek.co/2020/05/14/gm-cruise-lays-off-8-of-staff...

People don't want to join companies that have recently had a layoff because they're generally interpreted as a sign that the company isn't doing well financially, outside of companies that advertise firing low performers as an aspect of their culture (Netflix). In an ordinary market, losing low performing business functions might make your company more efficient but it comes with outsized PR cost that makes it harder to hire.

A broader economic crisis offers good cover for such an action. If everyone is laying employees off, it's not as bad if you do it too.

1. Whether the company might cut deeper later

2. Whether other companies will be forced to follow suit

3. Because of 1 and 2, whether the average HN reader should worry about their livelihood.

(HN readers are, of course, 100% high performers their employers are lucky to have)

One indicates the state of the company and might indicate wider issues for the industry and the other doesn't?

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