Using the economic downturn as a way to clean house
Don’t get all flummoxed about Microsoft laying folks off, or Google either. When you have been on a hiring spree for 20 years, all companies end up with a lot of deep weight that need’s to get cut.
How can you possibly only hire good people, especially when you’ve been hiring 1,000s a people a year?
Unfortunately work ethic does not stay constant and when projects are completed and teams shift and new managers show up, when acquisitions happen and when personal projects get canceled - well then employee morale changes and workers become less valuable to a company.
Now multiply that by 1,000,000 and that’s the workforce and teh work ethic we have.
The kind of energy that drives a startup and entrepreneurs is long lost at large companies. And truly understanding this energy is something most VCs WISH they could grok. Instead a new breed of VCs who focus in on younger people (and exploiting them) is the source for cash today.
Finding investors who can appreocaie hardw ork, enterprenurial spirit and innovation is hard, since so many of them ate stuck in their own models of how they find comapnies, evaluate the opportunity and finally - pick 1-out of-100 investments.
So when a cycle turns and we encounter the kind of tiems we have right now, all sorts of things happen:
1. Companies use the downturn as an opporunity to clean house
2. VCs get to flip the funds and find more money - ooooooooops - there’s no more money to be found, so even KP has to go out - begging.
3. Its good times for headhunters, Monster.com, Craigslist and LinkedIn - but 20% layoffs is something even they can’t absorb.
This economic downturn gives companies the opportunity to trim the bottom 10% of their workforce and not even notice a difference.
These kind of layoffs are inevitable - and why old farts like me scream so much when VC money is squandered, when stupid decisions are made, when old school nepotism and country club ties are favored over sound investments and strong founders.
Cause you need to be squirelling away your nuts for the inevitable nuclear winter. All bubbles burst.
Layoffs keep the remaining employees motivated, it saves costs and there’s probably no change in productivity or getting things done. That’s what’s been going on at other companies - as well. That’s why markets and economies rise and fall - it’s the natural order.
Downturns also give companies the opportunity to recast stock options, and other fun stuff.
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