The new buzzword in Silicon Valley is “Reduction In Force”, or RIF. In the past six months, hundreds of thousands of people have been laid off by tech companies, with these RIFs following a similar playbook: call out “the macroeconomic environment”, slash some teams, and offer a severance that’s just big enough to avoid any class-action lawsuits.
My gripe with these layoffs is that they reek of mob mentality over sound business practices. In time, these companies often find themselves understaffed and rushing to hire, with significantly increased costs from trying to replace the institutional knowledge and top talent that they cut.
Professor Jeffrey Pfeffer of Stanford’s Graduate School of Business shares this view: Tech and other white-collar layoffs are falling prey to social contagion over evidence-based practices; the evidence actually shows that layoffs don’t improve company performance. There are of course extenuating circumstances (e.g. if a company is on the verge of collapse or facing an existential threat), but the big RIFs we’re seeing nowadays are occurring at very profitable companies.
One thing Pfeffer doesn’t call out explicitly is the layoff consulting industry — a small group of companies are routinely hired to help companies plan and execute their HR strategy. If one firm suggests layoffs to a couple clients, it can suggest layoffs to all of its clients by using brand-new “industry market research” on layoff trends.
Unfortunately, it’s hard to change heuristics and patterns. Old board members clamor for layoffs because that’s what they’re used to seeing from past experience. Consultants can quantify the short-term savings while wiping their hands clean of long-term increased costs companies pay to unemployment insurance, future hiring, retention, institutional knowledge, and ability to access top talent in the first place.
If you’re in a position to evaluate your company’s strategy, replace the rubbish of past patterns with a longer-term view before choosing to move forward with a RIF.
Andrew Jabara 