Gitlab to lay off 7% of staff

Interesting. Looks like the bulk of their spend is on sales and marketing, which I suppose makes sense in that these companies require using this kind of money to acquire new customers. But obviously that spells out the questions, how sustainable is this business model, and also, how much of this are they decreasing in addition to or as part of the layoffs?

This is on the Condensed Consolidated Statements of Operations. Total OpEx: 351,625; Sales and Marketing as part of that is 190,754 or about 54% of their operating expenses. I don't read finance statements that often so I don't know how normal this is for the industry.

eugenekolo• 3 years ago

I'm honestly surprised they're not profitable. The cloud tax and cost to acquire new customers is just too high I guess.

yla92• 3 years ago

Noob question: how does one learn to read these financial statements?

pb72• 3 years ago

There’s an opportunity for a SaaS that will provide a boilerplate layoff template, all you have to do is put in your % impacted and severance terms.

bottled_poe• 3 years ago

ChatCEO

nonethewiser• 3 years ago

Its called ChatGPT and its free.

pb72• 3 years ago

Where’s your entrepreneurial spirit? Companies will pay at least $1,000 to offload the negative PR of copying others’ layoff emails verbatim. No brainer.

rwmj• 3 years ago

https://twitter.com/mattstratton/status/1618018859763798016

nness• 3 years ago

Basically a "Employment Law Specialist as a Service."

ta1243• 3 years ago

I've been reminded of the "Up in the Air" film from the last recession, where George Clooney flew around the country firing people

https://www.youtube.com/watch?v=TkX-TPaodoM

The film included a lot of people who had really been fired and what their honest reactions were

DharmaPolice• 3 years ago

That doesn't sound too far from a mail merge.

maineiac• 3 years ago

Good on them for offering proper severance. At my company, we got 2wks and nothing else. Not even a thoughtful letter from the CEO. Nothing. (And this was a sizable tech company in the middle of an IPO).

moneywoes• 3 years ago

Same albeit smaller company

ctvo• 3 years ago

Any reason to protect them here vs. sharing their name?

Dalewyn2• 3 years ago

Burning bridges who might have been references for subsequent employment is almost never a good idea.

There is always a time and place, of course. But generally speaking, you don't speak ill of your (former) employer or even talk about it publically lest there be ramifications beyond your imaginations.

molsongolden• 3 years ago

Many severance agreements prohibit sharing details of the severance agreement.

impish9208• 3 years ago

Severance: A single payout equal to four months' base salary, and payments will be made according to local processes and timing requirements.

Equity: We’re accelerating vesting through 2023-03-15 and removing the vesting cliff for team members who have been granted equity and have been with us for under six months.

Healthcare: Based on location and current benefit options previously selected by team members, healthcare premiums will be covered for up to six months, where possible. Modern Health for mental health support will continue for all team members for six months.

Hardware: Team members can keep their hardware and home office equipment subject to our security protocols.

Career support: We will provide outplacement services with a third-party vendor, including coaching, resume building and guidance, and job-seeking support.

cactusplant7374• 3 years ago

Was the severance written into their contract or was it just a nice thing the company did?

naikrovek• 3 years ago

Are layoffs like a fashion statement, now? "Look, we're cool, too!"

why is everyone doing this at the same time?

davidu• 3 years ago

The economy and stock market impacts similarly positioned companies all at the same time. And in this corner of the Internet, that seems like "everyone."

There are other companies doing great -- Stryker (NYSE: SYK) is near their all-time high and has not done layoffs as far as I know.

koolba• 3 years ago

Besides the economic realities of companies selling shovels to out of work miners, companies always have people they want to layoff but generally want to avoid both the confrontation and publicity.

Once the flood gates open up by your competitors or the sector as a whole starting layoffs, it makes sense to get your own house in order.

pydry• 3 years ago

Occams razor suggests that if the trend were kicked off by wildly profitable companies that have previously been fined for wage fixing then the cost of capital might not be the whole story.

gadflyinyoureye• 3 years ago

Partly. Another factor is that VC money is starting to dry up. Yet another is that many companies piled on employees during the PANDEMIC! They found that they didn't need that much staff.

I don't know if Gitlab hired a bunch during the PANDEMIC! They might be back to pre PANDEMIC! numbers.

izacus3• 3 years ago

They found out they didn't need EXACTLY the same percent of staff than all the other herd didn't need? :P Even if they're massively different megacorps with different financials? :D

dahfizz• 3 years ago

Everyone is subject to the same macro-economic trends. Massive growth and free money the past few years, now turned into rising interest rates and a bearish market.

ramphastidae• 3 years ago

In a way. Kind of like how burlap sacks and starvation were fashionable during the Depression era.

kevin_thibedeau2• 3 years ago

C-levels are driven by fads.

RA_Fisher4• 3 years ago

I think it’d be wise for more companies to employ an executive data scientist.

napolux• 3 years ago

And same percentages! https://www.marketwatch.com/story/pagerduty-to-lay-off-7-of-... https://www.calcalistech.com/ctechnews/article/hjyj6811as https://www.theglobeandmail.com/business/article-hootsuite-r... https://variety.com/2023/digital/news/vox-media-layoffs-130-...

etc....

shagie3• 3 years ago

There are only so many numbers between 1 and 10 where the cut from the layoff is deep enough to have an effect and not too much. Going above 10 says very different things.

dathinab2• 3 years ago

7% is the amount of layoff larger companies can "in general" layoff without hurting operation too much. Hence why some huge companies lay of the bottom 7% of performers every year (and normally hire that amount too).

So if the layoffs come not because of hard "we have x to much cost" reasons but of "we need to be more robust for potential dives in profit and increased cost" reasons and an arbitrary number must be chosen which isn't affecting operation too much but also makes a difference 7% is a common choice "because that worked well for some other large companies". Especially when the push comes from shareholders without much company insight 7% is likely.

If your company is smaller you make decisions on a one by one basis (after having some target for rough performance where you cut). But the moment your company has 100+ or even 1000+ people that gets impractical so a % line is set for how many people need to be cut.

mfer• 3 years ago

There are many reasons companies do it:

- They are on venture capital, not profitable, and the process around IPO, being purchased, or getting more rounds of funding has been complicated by the downturn. So, they need to change their rate of burn to last longer.

- Companies are profitable and their leaders want to keep the profit margin for their owners (share holders). If income is down or doesn't grow to the level it had then they can lay off to reduce expenses which pushes up profit levels. This has become trendy in the past 40 years.

- Income has been reduced and companies are breaking in less money. They may no longer be making a profit. To return to break even (or profit) they need to lay off.

There are other reasons. These are some that come to mind.

digdigdag• 3 years ago

1. The federal interest rate is nearly at 5%. Any business operating depending on lines of credit are going to hurt (Source: https://www.federalreserve.gov/releases/h15/)

2. Consumer spending is down (Source: https://www.bea.gov/data/consumer-spending/main).

So you have the producers spending more to operate, and consumers spending less. This leads to an inevitable contraction in the economic output.

Also known as recession.

grey-area5• 3 years ago

This is the correct answer. The Fed rate is the main driver for these layoffs. The fed is trying to cause a slowdown in the economy (including layoffs) in order to temper inflation.

SantalBlush9• 3 years ago

The tech sector didn't start layoffs early last year because they forsaw a possible recession more than a year ahead. Moreover, layoffs are still contained within tech. It's time for a new theory.

tyingq• 3 years ago

Some of it is that other companies doing it provides PR cover, where it's sort of implied that "It's not just us, look...we're posting similar reasoning".

fortran77• 3 years ago

See AGM's thread on Twitter: https://twitter.com/antoniogm/status/1593606745955348481

He got it exactly right.

scient• 3 years ago

Seems like an Elon bootlicker babbling more than anything.

Frost1x• 3 years ago

Ultimately the only thing really regulating these labor markets are competitive forces. If all the competitors are cutting their labor costs, you have reduced risk of your labor jumping ship, less mobility, etc. and have opportunity to cut costs as well. You have an opportunity to reduce costs and increase profit and revenue at the same time.

It may also be the case that this is an actual correction trend in the market to overhiring. Whether or not that's the case or the target is more of the former is ambiguous to any outsiders so this will be the explanation given because it puts things in a more positive light than the strategic "we have a golden opportunity to cut labor costs so let's do it."

dathinab2• 3 years ago

Because you always need to find some reason why you lay of which is satisfying for various parties (through not really the people fired, but investors both current and future, people with shares, companies you sell to, the public, etc.).

And "currently everyone does so and the economy is bad" is a good excuse.

And there are many reasons why a company might lay of people even if it's currently not strictly necessary:

- you don't really need that many people (anymore), common for small companies which grew to fast

- you want to restructure your company majorly and doing it will less people is easier

- you prefer to go a bit slower, so that e.g. current investment money lasts longer

- you want to be more robust to a potential economic dive, so you reduce money cost at the cost of going a bit slower and in turn can compensate hits in actual revenue better (at least for some time)

- you have accumulated a bunch of people which are not bad enough to fire them because of performance but also you know you can get better people, so you use it as an excuse to let people go, go slower for a "not short but not too long" while and then rehire. Alternatively companies like Amazone do that every year fire bottom x% then rehire roughly the same amount.

- you expect salaries to fall in the industry as a whole by quite a bit

- financial distress (e.g. interest rates and/or profit)

Lastly group dynamics to affect Investors, CEOs, Board Members, HR people etc. too, so it might be a "everyone does so so we better do so, too" situation (potentially forced onto the company by the board of shareholders).

FollowingTheDao6• 3 years ago

why is everyone doing this at the same time?

Are you serious? Maybe you all should take a basic economics course. We are in a recession. Businesses know this. It doe snot matter if the Fed says if we are in one or not. Layoffs do not happen if the future business outlook is positive.

Merad• 3 years ago

It's cargo cult corporate leadership. My company has less than 200 employees, so our layoffs weren't newsworthy, but the c-suite decide to cut 5% last week citing "trends in the industry." I can't speak for other departments but our engineering team definitely _is not_ bloated yet they still axed two positions from teams working on the highest priority projects in the company. Absurd.

breton• 3 years ago

How many is that in absolute numbers?

shagie3• 3 years ago

115 of 1,630

shever73• 3 years ago

It's impossible to parse these percentages when the article doesn't state the total amount of employees a company has.

According to their website, they have (had) 2,159 employees, so this affects ~151 people.

gerhardhaering• 3 years ago

Ok, 7%. With all the cost, I wonder if just stopping hiring and letting normal attrition rate play out would have had almost the same effect.

dboreham• 3 years ago

No because some of the effect is to instill fear.

likeabbas• 3 years ago

Not just fear. It's to flatten the salaries that spiked during covid

ww-picard-do2• 3 years ago

So, let me understand your argument. The CEO choose to lay people off in order to scare the remaining employees? To what end?

Also, if the intention was to "instill fear". Why give good severance? Why not give nothing?

shagie3• 3 years ago

Attrition tends to happen with the most qualified individuals leaving for other companies.

Attrition is not targeted or evenly distributed (depending on the goals). This can result in what would later be perceived as being lopsided compared to the layoff cut. For example (and purely made up), if part of the layoff was to cut back on marketing of the self hosted instances, then you would be looking to lay off marketing, and developer evangelists. However, if attrition doesn't hit those roles (because who's going to be leaving in this economy), you can have it take much longer to scale back that headcount. Saying to the developer evangelist "ok, we don't have something for you to do, we're going to switch you back to an entry level developer position with this other set of roles and responsibilities with a corresponding pay cut" isn't something that can be done easily.

gowld• 3 years ago

Why have a bulk "layoff" instead of just layoff the specific people whose work you don't need?

michpoch• 3 years ago

Yes, but then you might cut not the 7% you wanted.

jkukul3• 3 years ago

I think there are several reasons to do it this way:

- Effective number will be higher because some employees will be disgruntled because of the layoff event and will leave on their own. It's usually estimated that the effective number is twice as high

- By doing a layoff you can quickly get rid of people who are overpaid. The attrition would take much longer. And with the regular performance review process you can only get rid of under-performers

- With a layoff you can get rid of entire teams, wouldn't happen normally

- Finally, and probably most importantly, shareholders expect a layoff, especially if other companies had already done it. Cargo cult CEO thinking. You could see the stock price rising for some of the previous companies announcing layoffs

kirkules• 3 years ago

- tech labor cost is depressed most effectively when everyone is doing it

- everyone is doing it so it's that much easier to buck responsibility for the decision

brandall10• 3 years ago

Addressing point by point:

- Why is this beneficial? The disgruntled will be the high performers. In no shape or form is this beneficial for culture.

- Assuming you mean average performers who are paid well, ie. well tenured? Considering these types harness significant domain knowledge it would be a strategic mistake to let them go in any meaningful number. The focus on smaller cuts tends to be low performers or recent hires.

- The only time this is beneficial is when there is indeed 1) a financial dire straights situation or 2) a significant change of course (ala Google) and blood letting has to be rapid, otherwise you're letting go of top performers in the process. It would be much cheaper to reassign to other teams given the cost to source/acquire and onboard top talent.

- Bingo. This is the primary reason almost always.

vintermann2• 3 years ago

Can attest to this. I worked at an open source consultancy for a while. During a tough period, and having made some bad bets (trying to get into the enterprise Java world), they did some downsizing - or actually, it was more like warning that there would be downsizing. A lot of people quit, not even waiting to get a severance package. Including many people they definitively weren't happy to lose.

saiya-jin• 3 years ago

Our banking corporation did that some... 7? years ago. Instead of random firing rounds happening locally and globally few times per year, where even locally best people were sometimes let go ie due to current under-allocation, and everybody would be nervous for months afterwards... just nothing.

Helped morale tremendously. Don't treat your employees like numbers, it will bite you back eventually, in all aspects including finances. Even most cold-hearted sociopaths on the top should grok that.

tresil• 3 years ago

From a cost basis, this could possibly be true. But, with that type of attrition, you would probably see a greater percentage of high-performers go because they have good options. Then, you not only have lower producing staff, but it also becomes more difficult to hire top level talent back, because they want to work with other folks like themselves.

UnpossibleJim• 3 years ago

Isn't that attrition going to happen anyway? And with mass layoffs, wouldn't top talent, with plenty of options, be wary of a company who is likely to layoff 7% of its staff to please stockholder share pricing? I don't know the answer to top talent retention, but it seems easier and less expensive to turn your existing staff into "top talent" under the tutelage of the existing top talent and implement a hiring freeze with no huge news cycle.

izacus3• 3 years ago

You're missing the point - the point is to send a message, to employees and to the investors. That they're SERIOUS COMPANY that does the right thing. Follows the market. Listens to economy. That won't hear complaints from the entitled lazy overpampered engineering workers. That they need to get back to the factory and be like all other quiet labor. That HARD DECISIONS can be made without regret when bankers ask for them.

tedivm• 3 years ago

Exactly- Facebook laid off 7% of their staff and then followed it up with a $40 billion stock buy back. That's over $3,600,000 per laid off employee. The economy isn't the issue here, the companies know that since layoffs in mass are happening they can get away with it without taking the same reputational hit as if they did this on their own.

mattgreenrocks• 3 years ago

It's incredible how submissive these companies act to capital.

adamors2• 3 years ago

As someone who was recently laid off at one of these % cuts at another company, these cuts target specific groups, for instance people who have higher salaries. Well paid people won't just quit.

travisgriggs• 3 years ago

I’ve seen this happen over the years and I’m always curious why there isn’t a discussion beforehand that offers the “overearners” a chance to stay at a reduced salary. I’ve asked people who were in those positions, and they’ve often indicated that they would have stayed at a lower salary, at least for a while.

tsvetkov2• 3 years ago

The fun thing is that their R&D cost is dwarfed by expenses on Sales&Marketing and General&Administrative. So, if I understand their financial statements for 2022FY correctly, a 7% cut on R&D could lower their total expenses by 2% at best https://ir.gitlab.com/news-releases/news-release-details/git... Even cutting their R&D 100% would not make GitLab profitable, if other expenses are kept the same, so economics is clearly not the reason for layoffs.

jkukul3• 3 years ago

How do we know they're laying-off people that belong to "R&D" category? Maybe they're cutting people from Sales&Marketing or General&Administrative.

There's not too much detail in that press release.

Thanks for sharing the link to the report!

yevpats• 3 years ago

It's just the first cut (for all companies). You can't do 50% right away as you don't know what will happen, so you need to do in steps. If they were just 7% over hired then they could just do attrition + a bit tougher perf reviews, or close a few teams over the course of a year but there is high chance for all companies they are not 10% or 7% or 15% over hired but 50%

dalyons• 3 years ago

really? a high chance for ALL companies that they are 50% overhired? based on what do you make this call? apart from doom pessimism.

amelius• 3 years ago

In which departments?

hendry• 3 years ago

Tbh I'm surprised, there is a real opportunity at least in Singapore to offer better support.

Lot of companies adopting Gitlab.

mattl2• 3 years ago

Nothing to stop them hiring for that particular role if needed... also hi!

trombonechamp• 3 years ago

Is this the mattl I think it is? If so, hi!

gizmo• 3 years ago

At least is a simple announcement without all the BS. You hire some you fire some. It's not fun, but sometimes it's the right move.

jrochkind1• 3 years ago

pay through unspecified transition period, but also 4 months salary PLUS 6 months health insurance?

that is such a nice severance package that I almost wish I worked there and was getting laid off!

But I have been thinking "the job market is still ok", but am starting to doubt that, it seems like it really is going to be a lot harder to get a job.

RA_Fisher4• 3 years ago

And the stock seems down 7% vs. the Nasdaq.

arbuge• 3 years ago

At this point it's beginning to look like tech companies are doing this because it's the trendy thing to do, along with inserting a few words about AI in their websites and pitch decks.

bhouston• 3 years ago

We are a SaaS tool and we've has to justify our value to customers as everyone is looking to cut expenses. We also did cut our own spending on SaaS tools. So I think that this is sort of percolating through the industry. There is a real contraction in SaaS spending.

killingtime74• 3 years ago

I work at a big SaaS and growth is still double digit

dfern• 3 years ago

"What explains why so many companies are laying large numbers of their workforce off? The answer is simple: copycat behavior, according to Jeffrey Pfeffer, a professor at the Stanford Graduate School of Business."

https://news.stanford.edu/2022/12/05/explains-recent-tech-la...

blippage• 3 years ago

A few weeks ago I was opining that companies were laying off staff because "that's what everybody else was doing." I'm glad to see to few folks concur.

Copycat behaviour is not uncommon, I think, and is swayed by market sentiment. If the (equities) market ( mean in a general sense) feels bullish, then Microsoft, Google, etc. start piling on employees. Because hey, we're tech companies, we have to justify our market ratings by pursuing (or at least looking like we are pursuing) growth, so that's what they do.

Then, when things sour, the mood becomes one of conservatism. Then it looks good to shed employees. This is all despite the fact that it may have little to do with the actual state of the companies.

Microsoft in particular is hardly a heavily cyclical company, so there is little need to behave like one. Not really. They could adopt a more even approach to hiring. If they tried.

Companies bleat on about how difficult and expensive it is to hire staff. And yet, here we are.

FollowingTheDao6• 3 years ago

tech companies are doing this because it's the trendy thing to do,

No, they are doing this because we are in a recession and businesses are always the first to know and labor is the last to know.

waboremo2• 3 years ago

It's not purely about the recession. If it was, they would halt hiring, keep talent, trim executive bonuses, and be precise about where dead weight exists. Not 5%+ layoffs of major teams and roles.

You see other industries, they're laying people off sure, but we're not talking 5%+. They're doing the above, being more precise about their spending. Like Blackrock, huge losses, and still "only" let go of 500/16000, ~3%.

You will not see tech companies balloon to the same number of employees ever again, if anything they will continue to shrink astronomically. No matter what happens to the economy, as these decisions are not because of the recession or the pandemic, both of those reasons are amplifiers not sources.

mr_00ff00• 3 years ago

Considering a recession is two consecutive quarters of negative GDP growth…

No, we are not in a recession

biftek• 3 years ago

We aren't in a recession

goodpoint• 3 years ago

beginning?! It's been pointed out for months that that this is part of a coordinated attack on workers.

marcosdumay• 3 years ago

It's a coordinated attack on the companies, and anybody that is going to hold shares long term. Focused specifically on the ones that will buy shares after one or two announcements of larger than usual profits but will hold for more than a couple of months.

The people doing this do not lose time thinking about workers.

(About Gitlab specifically, they are not profitable, so a layoff is a normal survival strategy if their cash is running low.)

zmxz• 3 years ago

You forgot to mention a huge number of impostors in our industry who get hired without actually being qualified.

jeltz3• 3 years ago

Sure, but that is what happens when you over hire at crazy speeds like the companies did a couple of years ago.

time_to_smile3• 3 years ago

I would be very willing to believe this if it wasn't for the fact that so many tech companies have fundamentals that just don't make sense.

We've just gotten so used to the idea that "tech companies don't need to make profit" that we don't even question it any more. I still hear people shocked when a companies revenue goes up but their stock price drops while completely ignoring the reality that costs also went up.

The truth is all companies need to have profit and many of these tech companies have never showed that they're even capable of turning a profit.

What's happening is that investors are going to boards and telling them you need to make serious progress towards profitability. If sales are growing slowly or even declining there is no other option but to do layoffs.

IMHO this is still just the beginning, there's a lot of feedback in the tech ecosystem that are going to start playing out as more and more companies start scrambling to show profitability.

hashmap4• 3 years ago

I don't know how this has gone over everyone's heads here, because what's happening is extremely obvious.

If you're a big FAANG-like company, you've seen workers make big gains in wages over the past year, and turnover rates have been increasing significantly during the great resignation. This isn't enough to sink you, but you don't like it, because it does eat into your margins a little. Of course you're still making massive profits, but workers getting any measure of power scares you. Imagine if this trend continues? Workers are only getting harder to find!

So what do you do? You can't walk up to all your CEO friends and say "Hey how can we go about paying everyone less? What if we all agree to lay off our expensive people at the same time? That way, we'll have a massive pool of workers to hire from that are all looking for jobs, and since they'll all be scared from having been laid off they'll happily take pay cuts. Additionally, it'll scare the hell out of the rest of the employees to see all their friends get blown up with no warning right in front of them. They'll want desperately to keep the jobs they have and won't leave!"

You can't say that because coordinated wage suppression is highly illegal (remember Apple and Google?). But wink/nod based wage suppression? Totally fine! If everyone just happens to fire their expensive workers at the same time but leaves no record of getting anyone to agree to it, it's perfectly allowed. This is not "copycat" behavior. This is all the CEOs recognizing what the game is and cashing in on it.

And better yet, there's nothing the tech workers can do about it! There are no real tech worker unions to speak of, and these companies know their workers have a highly libertarian bent who believe in the meritocracy myth, so there's no real risk of unionization no matter how bad things get. It's a pure win for them, with no real downsides, and the general consensus is that if they're smart they'll do this every so often to bring workers to heel. And given the pervasive attitudes about labor that I see among tech workers I don't see any reason to think that's wrong.

aerotwelve• 3 years ago

Indeed. I remain shocked at how many people who work in this industry are still making excuses for the companies that are performing these completely unnecessary layoffs. (They'll never be laid off of course, of course – only the other people who are old and bad at their jobs.)

charcircuit4• 3 years ago

These companies overhired and now they are realizing that the positive cash flow to justify all of these new employees isn't existing. None of these layoffs are focused on laying off their most expensive people. The severance packages have been very good meaning that the laid off employees have a long time to find another well paying job.

PoignardAzur2• 3 years ago

I don't really see it. Gitlab isn't a Google-style megacorporation; its CEO is co-founder, and it still has a reputation for having fairly horizontal management.

The idea that its execs just decided to lay off a bunch of people for no reason just to wage some plausibly deniable class warfare doesn't really make sense to me.

rkangel2• 3 years ago

It's less that it's the trendy thing to do, but more that the bar has been lowered.

If this is an option you're considering, then it's a much easier message to sell if everyone is doing it. Otherwise you look like the bad performer and it'll hurt morale and stock price even more.

skrbjc• 3 years ago

In my view they see a few benefits. If the "market climate" is layoffs, then they can be much less competitive with offers to any candidates they do want to hire. It's an opportunity to let go a contingent of lower-performing workers, and lastly, it's a way for the CFO to send a message to all the managers that they aren't getting the incremental headcount they are always asking for to inflate their team sizes. I don't necessarily think this is a good thing, but I think dismissing it as copy-cat behavior is not digging deeper than the surface layer. Instead of the group of managers making the case they are doing a good job because their team has grown over time, there is a shift in power to the managers saying they have saved the company x number of doll-hairs because they cut xyz budget and team.

fleddr• 3 years ago

The economy is bad but we're doing our part in making it worse.

softwaredoug2• 3 years ago

Listened to a great podcast about layoffs yesterday (https://hbr.org/podcast/2023/02/why-many-companies-get-layof...)

The takeaway is that layoffs are extremely trust destroying for employees NOT laid off, and in the end not clear they're a financial net positive. Both with direct and indirect costs (lack of engagement from employees, etc).

pelasaco2• 3 years ago

I've got already a message of a former colleague working on Gitlab. He wants to leave. He thinks thats better to negotiate a salary while in a job, than when you are desperate running against the clock. We are going to take him back.

msm_• 3 years ago

My issue with analyses like this is they argue that layoffs are a bad idea and it's just companies shooting themselves in a foot. That's what people want to hear, so it gets a lot of clicks and citations. But, this also means that all the big companies (and that's a lot of them) that just announced layoffs made a obviously bad move. Are they all stupid? I find it hard to believe.

It's more plausible, that yeah, layoffs are trust destroying and life ruining, but they make shareholders rich, so they are a rational choice expected from CEOs.

aaomidi• 3 years ago

Honestly yes. If you’ve been in any high exec meeting you’ll know they’re all stupid. Like, arguably more so than the average engineer.

Quarrelsome• 3 years ago

Are they all stupid? I find it hard to believe.

I find it very easy to believe. A lot of executives appear to have a prime motivation that is "number goes up" which IMHO makes them extremely susceptible to the same levels of groupthink and other cognitive fallacies as one would see on /r/wallstreetbets.

I appreciate that isn't necessarily the case for all executives but given that executive's fallacies are mostly disproved by a slow to react and sometimes illogical economy as opposed to a nearby cold logic machine, it makes cliff-marching much easier for them.

teeray2• 3 years ago

they make shareholders rich

In that regard, I wonder if it becomes a Wall Street meme--layoffs for the sake of doing layoffs. Companies that performed layoffs made shareholders rich, so therefore if your company isn't doing layoffs in a layoff climate it's assumed that shareholders are better off putting their dollars somewhere else.

cyanydeez2• 3 years ago

It depends entirely on what's driving the layoffs, is it:

1. Actual market costs requiring a diminished future projection of cash flow

2. A Market expectation of investors who'll rate your company as less valuable if you dont.

I'd posit right now #2 is more likely than #1 given all the record profits being reported everywhere. When #2 happens, it's definitely going to affect people. When there's no actual problem, just some future expectation of problems, that's going to cost you.

todd38342• 3 years ago

Most of them over hired like crazy during the pandemic bubble. I wouldn’t say they were stupid but collectively most of them made a massive mistake. So yeah it isn’t hard to believe for me. I don’t think the layoffs are a stupid decision but I do think the extreme over hiring as if the bubble was a new normal was. Between 2020-2022 I literally conducted over 200 interviews for my previous employer. It was like we couldn’t hire fast enough and I would always hear that we were way behind from what we wanted to hire.

greenthrow• 3 years ago

The companies are doing it for a short term stock price bump. They are always incentivized to think short term because of the way our distorted markets work.

fsociety• 3 years ago

Most executives and shareholders I meet are truly clueless in their business and how to be effective. I think this shows more in larger organizations because lower level employees are far removed from important decisions.

It’s fair to disagree, but in my mind it is why you pay top $$$ for great executives. But also unfortunate that an average executive can cause harm to a business due to a large sphere of influence.

lmarcos• 3 years ago

These companies laying off people are doing so because they made a mistake to begin with (over hiring). So, yeah, if you make one mistake, you can make another.

And no: not all tech companies have over hired during the pandemic and they are not firing people these days. No one talks about them because that doesn't sell.

cgearhart• 3 years ago

Part of the problem is that it’s very difficult to quantify the higher order effects of layoffs. It’s easy for an exec to understand “if we fire a bunch of people then our labor costs will go down”. It’s much harder to anticipate the effects of “if we fire a bunch of people then those who remain will be demoralized, will lose trust in us, may leave on their own, may be too distracted to work effectively for awhile, etc.” That means the risk assessment is a comparison between a sure thing and a bunch of possibilities—and there’s a long history of companies surviving after layoffs. It seems perfectly rational.

I have a couple observations from going through layoffs at a growth stage startup. If you have to do layoffs then you shouldn’t worry too much about protecting top performers—a noticeable percentage of them (10-20% maybe) will leave on their own _after_ the layoffs. You have broken trust with these folks, and they almost surely have other options. The people who stay either deeply and firmly believe in the company (good!) or for some reason feel like they don’t have other options (less good). Secondly, layoffs don’t end with the pink slips—your company is choosing to go down a long, slow path of rebuilding until almost anyone who remembers the layoffs is gone anyway. It will be harder to recruit top talent at standard market rates for awhile because folks will want to price in a risk premium to hedge against continued future instability, so replacing the fired folks may actually be more expensive in the long run.

andsoitis7• 3 years ago

they make shareholders rich

do you realize that for most software engineers at the hi-tech companies, the majority of their compensation is in the form of equity?

and at startups, reduced headcount cost gives more runway for the company and hence employment.

saurik2• 3 years ago

I don't think the comment is claiming the layoffs are a bad idea per se, it is merely claiming the cited reason is disingenuous.

simplyluke3• 3 years ago

Interesting takeaway. One of the big lessons I took away from the prior three years is that there’s an absolute ton of groupthink and trend chasing among tech leadership. Going all in on remote, over hiring 21-22, now layoffs all come to mind.

There are notable exceptions. Apple rejected (thus far) all three of those trends and is weathering this period much better than most of the industry.

WaitWaitWha• 3 years ago

Just a quick reminder regarding those "they", "shareholders" - it is a pet peeve of mind how we tend to forget who are the vast majority of these sharholders "getting rich" by the count of people, not necessarily by the value.

In the USA 401(k)[0] & 403(b)[1] plans are used by vast majority of people as their retirement funds. It is very rare for a small organizations to be able to offer full pension plans. What they do offer are investment plans like 401 & 403.

All those little 401k/403b plans, through the plans and the mutual funds are the "they" "shareholders", "getting rich".

In 2019 21% of US workers participated in pension plans, while 43% in 401K/403b [2]

[0] https://en.wikipedia.org/wiki/401(k)

[1] https://en.wikipedia.org/wiki/403(b)

[2] https://www.pensionrights.org/resources/information-center/

hk1337• 3 years ago

I would imagine there are two occurrences at play, some employees affected by both some by one, but 1. You're wondering when you'll be next 2. People you have been working with are just gone now.

whalesalad• 3 years ago

If your plane is gonna crash without dumping some excess weight, killing everyone on board, what do you do? You throw a ton of stuff out of the plane in an effort to continue on. This is what layoffs are. It’s a survival mode tactic. The cost of lower morale is smaller than the cost of complete failure.

iends• 3 years ago

None of these massive FAANG companies are anywhere near crashing.

aldarisbm• 3 years ago

but they are all reporting record breaking profits.

Lio• 3 years ago

Layoffs seems more Like jettisoning the fuel or engines to save weight in that scenario.

izacus3• 3 years ago

The takeaway is that layoffs are extremely trust destroying for employees NOT laid off, and in the end not clear they're a financial net positive.

Well... for whom though? When megacorp CEOs laid people off the stocks soared - massively enriching the C-suites executing the layoffs and the investors demanding the layoffs.

The error in your thinking is that the financials of the company and its continued success matters - when the people in charge are optimizing for THEIR OWN financials.

whatever12• 3 years ago

It takes long time for the layoff effects to hit the company.

The main effect is that you lose the trust of the top performers. These will be the in the lookout for new opportunities the day after the layoffs are done. If you cut 10%, expect 10% from the top to flee within a couple of years.

The second effect is related to the fact that companies usually target older people with expensive jobs. In an a big org these are the wizards who have the unwritten cookbooks in their brains. When they leave en masse, a lot of the organizational memory is gone, and expensive operational mistakes of the past are forgotten. These have longer effects that will haunt the company for many years.

The only way you can safely pull off layoffs is if you ensure that anything you do in the company requires the experience of a boot camp. That means that everyone is fungible and you can easily swap them.

And this is what tech did better than any other industry. The average required know-how depth of a tech white collar worker is easily two three levels below when compared to other industries. Pharma and chemicals come to mind from personal experience.

pclmulqdq2• 3 years ago

I think this is the logic that can make a company like Citadel, which fires 10% of their staff per year, work out well. If you have no expectation of job safety, it attracts a certain kind of person, but there's also no love lost if a layoff round is a little bigger than normal.

nordsieck• 3 years ago

The main effect is that you lose the trust of the top performers. These will be the in the lookout for new opportunities the day after the layoffs are done. If you cut 10%, expect 10% from the top to flee within a couple of years.

I don't know, but I imagine that there's a pretty substantial difference between an isolated layoff and an industry wide layoff. Maybe it hits differently when you get to see the sausage made.

Where is a top performer at Google going to go? I'm sure there's some companies out there that aren't doing layoffs right now, but most of those probably can't offer FAANG/MANGA salaries.

djkivi• 3 years ago

The only way you can safely pull off layoffs is if you ensure that anything you do in the company requires the experience of a boot camp. That means that everyone is fungible and you can easily swap them.

This is an interesting way to think of the Leetcode style interview. If you don't require any particular experience and you have built your company's systems in a way that any "competent" developer can join and be effective, layoffs may not be such a big problem.

atomicnumber33• 3 years ago

I worked at a bigco that followed this approach. I think the alleged fungibility of programmers is surface-level.

Sure - ~any decent programmer can jump into ~any codebase and do your JIRA tickets. But there's a more holistic ownership you miss out on that's going to be the difference between a system aging gracefully and a system becoming a giant hunk of butchered junk that's been one-small-jira-ticket-ed to death over a decade and now needs a very costly and distracting replacement/rewrite.

I worked at a different company that did the opposite of this. Programmers were expected to stay either 1 year or 10 years, and you'd be compensated according to which bucket you were falling into. They had excellent retention rates, and the dev team was small, <30 engineers. We never rewrote systems. They had owners who had either written them, or been handed off apprenticeship-style over the course of a year or two from the former master to the new master.

Place 1 was a fucking mess of tech debt and had constant incidents that made high value customers mad, execs mad, and oncall engineers mad. One of my coworkers literally went into his first oncall shift, got paged at night three times in two days, and resigned the next morning when he found out that yeah this is just kind of normal and good luck convincing leadership to let us fix it.

Place 2 literally never had tech incidents. The worst oopsies were generally related to (it was a trading shop) other people in the market fucking up and resulting in trade breaks that we had to clean up after hours, or exchanges having problems and sending us garbage data that we had to resolve by calling someone from the exchange to confirm order statuses and so on.

I only left place 2 because I was moving across the country and they didn't do remote (and still don't, even post covid). I was laid off from place 1.

ptero• 3 years ago

I am not sure about this (not disagreeing, just not sure). First, 10% of top performers out in 2 years is a normal attrition rate for a 20 year tenure. And I suspect mean time at the company is much lower.

But even more important, I think most top performers understand and accept the risk that their employment may end. For example, the company can fold. It is easier for top engineers to accept that because they likely have better connections and can pretty easily find a good job elsewhere. My 2c.

softwaredoug2• 3 years ago

The second effect is related to the fact that companies usually target older people with expensive jobs. In an a big org these are the wizards who have the unwritten cookbooks in their brains. When they leave en masse, a lot of the organizational memory is gone, and expensive operational mistakes of the past are forgotten. These have longer effects that will haunt the company for many years.

Is this true this round? I have noticed a few things:

* On the hiring front, much more demand for senior, staff, principal devs, less demand on the junior / intern front.

* (Anecdotally) A LOT of junior / new people laid off. It seems in this round companies want a small but elite force, rather than opting for junior people.

lelanthran2• 3 years ago

The only way you can safely pull off layoffs is if you ensure that anything you do in the company requires the experience of a boot camp. That means that everyone is fungible and you can easily swap them.

Yes, and that's the number one thing successful small business owners learn. The ones who don't learn this aren't successful.

You want as many of your staff as possible to be easily replaced. If you're running a restaurant, do you really want the success of your restaurant to hinge on a single talented chef?

Nope. You make sure that there's a process so that another few chefs can drop in quickly without changing the menu or the quality of the food. All the other kitchen staff don't do "complicated", they follow instructions.

If the business depends on having developers that are in the top 5% (say, one of the criteria to working on the code is understanding Haskell with Monads), the business is at constant risk because the developers are not easily replaceable.

eriktrautman• 3 years ago

Depends on the environment. In a startup, the top performers often say basically “what took you so long? Glad we can move faster now. And try to hire some more top performers for me to work with.”

waynesonfire2• 3 years ago

The main effect is that you lose the trust of the top performers.

Why? top-performers are most positioned to be aware of incompetence around them and may in fact welcome a housing cleaning. With that said, it's not always easy to identify who's who-- it's possible top-performs are affected or incompetence isn't, which can erode trust.

hardware2win3• 3 years ago

Why would actual top performers care this much if they would find new job easily + theyre probably not being targeted

clnq• 3 years ago

The main effect is that you lose the trust of the top performers. These will be the in the lookout for new opportunities the day after the layoffs are done. If you cut 10%, expect 10% from the top to flee within a couple of years.

I've been through one of the tech layoffs that happened during the pandemic, so N=1 and all, but this was exactly what happened.

On the day of the layoffs, few top performers were affected. It was a classic layoff with an HR email and immediate lockout. Managers of affected people learned later. Some people learned they were being laid off after hearing it in mainstream media first.

After 6 months, many best performers (more than 10% in my opinion) have left after struggling with low morale. A lot of company knowledge was lost, portions of the codebase became unmaintainable, projects went from being certainly doable to being in perpetual uncertainty about cancellation. The responsibilities of the the top performers fell on less experienced people, some received promotions but buckled under the pressure in disruptive ways.

Two years later, the company is still rebuilding but has obvious competency gaps. There was also difficulty in filling them because HR was disproportionally affected by layoffs. The distrust in management persists and more than a few people are openly talking about leaving. Though the hiring in tech has cooled down which had a chilling effect on people leaving, too.

foobiekr2• 3 years ago

Top performers are pets. You use layoffs to generate excess opex savings in order to retain them.

You guys are acting like companies are too dumb to think of these very basic concepts. I have personally witnessed discussions that can roughly be described as “ok we need to add an extra three people in order to fund retention for X.”

ISL• 3 years ago

Things might be a little different regarding losing trust of top-performers when layoffs happen broadly across a sector.

If every semiconductor manufacturer reduces headcount by N%, there may not be much incentive for an engineer to jump ship. If only one of those companies doesn't lay anyone off, though, the dynamics are completely different.

WalterBright3• 3 years ago

If you cut 10%, expect 10% from the top to flee within a couple of years.

If the company was laying off the deadwood and the quiet quitters, the top performers know who they are, and are not concerned about being laid off themselves.

Top performers don't particularly care to work with deadwood and quiet quitters, either.

underwater• 3 years ago

The second effect is related to the fact that companies usually target older people with expensive jobs. In an a big org these are the wizards who have the unwritten cookbooks in their brains. When they leave en masse, a lot of the organizational memory is gone, and expensive operational mistakes of the past are forgotten. These have longer effects that will haunt the company for many years.

This can be a good thing. In my experience these people are generally unambitious people who's claim to fame is that they held a job for a long period of time rather than any innate talent.

And when you have a majority of seniors who's only value is in being a well of knowledge, they're resistant to any change that reduces the value of that knowledge. This can quash innovation and perpetuates the anti-pattern of information hording.

Tao33002• 3 years ago

Another terrible effect is that the people who aren't laid off have to onboard the next wave of new hires. I've seen a lot of poisonous behavior as a result of someone having a chip on their shoulder because a friend was laid off, and that can have disastrous consequences for someone who has less experience and needs support.

nashashmi• 3 years ago

Productivity takes a hit for a week. And then starts up anew with new direction and new energy.

Sometimes layoffs are erratic and cause employees to question management's logic.

Most times, every employee is put on alert to not get complacent in their job and always be on the lookout for a better position. (this might be a net positive, POV)

codazoda• 3 years ago

There was a pretty good article about why layoffs don’t work here a few days ago too. Backed by studies and such.

https://matduggan.com/us-layoffs-are-unspeakably-cruel/

amw-zero• 3 years ago

There's not much of a choice if your company doesn't make money. Not paying employee paychecks also affects their engagement.

gorgoiler• 3 years ago

What are the different kinds of layoffs? 7% sounds like one person from every-other-pizza-team but in practice isn’t it more like “we laid off the self driving garbage truck team (70 of 1000 employees) in order to focus on our core infrastructure and future as a builder of large language models”?

siftrics• 3 years ago

not clear they're a financial net positive

What could possibly be more clear than

"we were spending $X and now we're spending $(X - c)"

Both with direct and indirect costs

Employees themselves are direct costs that are removed with layoffs.

anothernewdude• 3 years ago

I think it's a brinksmanship game. The company that does the least amount of layoffs and survives will be in the better condition coming out of the recession.

michaelcampbell• 3 years ago

and in the end not clear they're a financial net positive

This feels like another instance of Deming's (paraphrased) "People will destroy the enterprise to align to their incentives."

The people who make these decisions may be incented on the _short term_ cost savings. It's a fractally smaller version of the entire org aligning to shareholder expectations at the expense of company growth.

djha-skin• 3 years ago

Generous severance, half the layoff size of other firms by percentage, particular attention paid to health care. I have always admired GitLab, and I remain impressed.

FollowingTheDao6• 3 years ago

"Please sir, may I have some more?"

oytis• 3 years ago

That reads like an example of good communication, somehow not taking complete responsibility makes it even better.

bogomipz5• 3 years ago

It's interesting the number of company layoffs recently that have listed "you can keep your laptop" as part of the severance package. Is it possible that shipping charges for layoffs of this size plus the overhead and personnel to deal with such numbers of returns is more expensive than just having employees keep them?

sqldba2• 3 years ago

Companies like this drop-ship new laptops to new employees.

The laptops everyone has are COVID-era and about to expire for warranty, and would just be binned anyway. So there is no point taking them back.

mikeyouse• 3 years ago

Most companies, especially remote first ones like Gitlab, don’t have sizable IT departments that could deal with receiving, cleaning, reformatting, and deploying hundreds of laptops anyway. Can you imagine the poor technician who gets 150 laptops FedEx'ed to his house? The company is paying tens of thousands in severance costs per employee, way easier to just add the mostly-depreciated laptop onto that figure than deal with the logistics.

bogomipz5• 3 years ago

This was kind of my point though. It's a really net-benefit to the company but couched as a severance benefit to the individual being laid off.

tebruno99• 3 years ago

If they would lower their prices to be competitive they’d get a lot more cash. We tried to switch to Gitlab and at every turn they acted like We just weren’t worth the $$. Seems they want nothing but big enterprise accounts and they push everyone else to free

sonjaqql• 3 years ago

This rings so true. A best friend ran her business through GitLab for years. She was a subscriber for a team of 3-5 people, but recent pricing and plan changes [1] caused her to switch back to GitHub.

She's got a small team on GitHub and has all of the critical features for less than a single seat at GitLab now.

[1] https://about.gitlab.com/blog/2021/01/26/new-gitlab-product-...

isodev2• 3 years ago

I don’t get this - did every single company hire hundreds of people for no good reason? A global event forcing folks to temporarily use more online services is, well, temporary. I just don’t get the mindset that triggered all these companies to mismanage their teams so badly.

trentnix2• 3 years ago

It's quite simple: If you don't follow the herd, you risk being blamed if you fail. But if you follow the herd and do what everyone else is doing, even if the herd runs off of a cliff, nobody points any fingers.

You'd think somewhere, in at least one of these larger tech companies, there would be a leader boldly proclaiming "this is our time to increase our investments and beat our competitors!" But it turns out there is even less diversity of thought in tech leadership than there is racial and gender diversity.

That said, Gitlab may be making a very prudent decision given their circumstance. I don’t know enough to conclude one way or the other. But considering what they are doing so closely mirrors what nearly everyone else is doing, skepticism is warranted.

isodev2• 3 years ago

It makes me sad. These are actual human beings losing their jobs. I guess they don't include “human cost” or “how much pain we inflicted” as a column in financial reports.

65• 3 years ago

Nobody ever gets fired for buying IBM.

Eumenes• 3 years ago

Companies hire in a frenzy based off future growth, esp. in tech, not exactly always current needs. How many times have you heard a recruiter or someone say in a company all-hands that we're going to grow our engineering team 300% by EOY, or TRIPLE our headcount.

hagbarth• 3 years ago

20-22 there was basically infinite cash sloshing around the system. If your competitors takes advantage of that, hire like crazy to build out and innovate, what do you do?

Not saying it’s good management of a company, but that’s the mechanism driving this.

sqldba2• 3 years ago

It's weird because I've seen job posts for them running for 6 months now and still not be filled.

Are they running job ads but not hiring?

pc862• 3 years ago

It's really hard to find people willing to work on a second-tier product for 60% market rate salaries apparently.

irq• 3 years ago

A recruiter from gitlab reached out to me last week for a SRE management position. My guess is they had no idea about the impending layoff.

time_to_smile3• 3 years ago

Companies generally give as little evidence as possible of layoffs before they happen. Morale and productivity take a huge hit as soon as employees start to realize what's coming.

If you keep an eye open on who's hiring on linkedin you'll see a surprising number of companies posting new positions will have layoffs the next week.

isbvhodnvemrwvn• 3 years ago

There is a reason why they made their compensation calculators private.

pelasaco2• 3 years ago

https://www.businessinsider.com/fire-blame-ceo-tech-employee...

throway_gtlbr• 3 years ago

Laid off GitLabber here, the funny thing about this is the promotion season just ended. A LOT of people got promoted, so their employee cost is probably a wash after these promotions. Make of that what you will.

time_to_smile3• 3 years ago

My company is doing the same thing. Layoffs haven't happened yet (but anyone who isn't in denial knows they're coming), but we probably had a record number of promotions.

The reason for this is that you want to butter up the employees you're going to keep before layoffs. Getting promoted after you saw coworkers you respect get laid off makes you feel gross, and companies do need to do something to increase morale.

The funny part is many people at my co. believe promotions are evidence that we couldn't possibly get layoffs.

ActionHank2• 3 years ago

Would you mind sharing some rough details on the types of positions affected?

Really sorry to hear about the shitty situation you're going through, all the best in finding the next opportunity.

coffeebeqn5• 3 years ago

Same at my company. I see that many people got a BS promotion because their bosses are good at politics. Meanwhile about 7% were laid off and our bonuses were taken away

2-718-281-828• 3 years ago

I'll have to find a new job in spring this year in IT after a one year break. I'm kind of worried considering all those lay offs I must say. I'm not a high profile candidate by any means.

Aperocky3• 3 years ago

I've always wondered if programming skill would be useful and transformative of traditional businesses internally (instead of a salesman pushing a B2B solution). But it's clear that traditional business have neither the know how or the money to hire software engineers in numbers that could actually affect such change.

I wonder if downturns like this offers them a chance.

ericmcer• 3 years ago

I have thought about this too, it would probably be very innovative if smallish 100 person companies brought on software people to do menial work with eventual automation in mind. The problem is no competent software engineer is going to work for 60k a year and no company is going to pay 200k.

coffeebeqn5• 3 years ago

Anecdotallly I’m not hearing back a lot. I think positions are flooded with applications right now. Last year I would hear back for most applications at least to talk to the recruiter

ddevault• 3 years ago

I am in a position to hire and fire people in this market, albeit at a much smaller scale. We only hire those that we can afford to keep, even based on our most conservative financial models, because it's the right thing to do.

When companies like GitLab hire you, they lie about their principles and values. It's a polite lie that obfuscates their true goal, which is to generate profits for only a small fraction of the people to whom they are accountable, at the expense of the remainder.

This is cowardly, and morally wrong. I hope that those who were affected by this lie will find greener pastures at companies which live up to their stated goals and principles, who work in the service of what's right over what's profitable.

perrygeo• 3 years ago

General question about this wave of tech layoffs: Has anyone done a breakdown of what roles have been cut? Is it management or product or engineering? Senior or junior?

My general sense is that every company is rushing to trim some fat while it's socially acceptable to do so. But where are they making cuts?

oofta-boofta• 3 years ago

It's mostly sales, hr, and lower level managers.

Here's the number that I keep tossing around: in June of 2019, Microsoft had about 144k employees. In 2022, they had about 221k employees. They're laying off 10k, which still makes a net gain of almost 70k. It's pure optics for wall street.

I'm not particularly worried but this is why you should always be applying and looking for another gig to have in your back pocket. Or, even better, be overemployed and work multiple gigs at once.

These companies will toss you out like an old shoe, so f*ck 'em.

coffeebeqn5• 3 years ago

Our company is hiring more sales. Trying to squeeze more out of the market before facing reality I guess.

Our investors also forced us to do layoffs and other savings because it’s good optics and their other portfolio companies are losing money fast. Even though we’re a net profitable company

joegahona• 3 years ago

No one has done this analysis -- I keep wondering the same thing. I'm sure it's insanely difficult to get accurate data. If (e.g.) the majority of cuts are in HR/recruiting, that's more of a signal of tightening up hiring for the foreseeable future.

dzonga• 3 years ago

it's always the magic number between 5~7%.

which shows these companies are following the herd.

nwsm• 3 years ago

Anyone know about how many 7% is?

jlmorton5• 3 years ago

The current macroeconomic environment is tough

No, it isn't, and it's embarrassing at this point to continue insisting this. The macroeconomic environment is good, particularly in the United States. Business investment is growing at 3% a quarter (annualized), which is better than the average over the past decade. Employment is growing rapidly. Inflation has been tame over the past six months. And wages are growing steadily, but not rapidly in a wage-inflation spiral. In the US, the stock market is down about 10% over the past 12 months, but it's up over the past six months, and corporate earnings have been high.

Everywhere you look, the economic indicators are solid.

I do not have insight into Gitlab's customers, or the current state of Gitlab's business. But it is simply not true that the macroeconomic environment is tough. It is not. If there are problems, they are Gitlab problems, not macroeconomic problems.

onlyrealcuzzo• 3 years ago

The current macroeconomic environment is tough if you have deeply negative cash-flow (most of tech).

napsec2• 3 years ago

Yup, this is it for GitLab. They've never been profitable. I'm honestly surprised they went this long without layoffs.

jeltz3• 3 years ago

And it is no wonder they have issues when their customer support is hostile. I used to pay for Gitlab but switched to the community edition after having to deal with their support over billing issues. Easier to use the free version than the paid version. Making money does not seem to be a priority.

mberning3• 3 years ago

Record high credit card balances, record low personal savings, 40 year high inflation, rising interest rates and no sign of the fed stopping. Housing affordability at its lowest point since the real estate bubble and crash of 07/08. You are on some very good copium if you believe the economy is in good shape.

noelsusman5• 3 years ago

The economy is humming along just fine despite all of that.

sidibe• 3 years ago

There are always some measurements by which the economy is currently a disaster, and you are definitely going to hear those from companies that need to or want to lay off employees or from opposition politicians. A lot of other measures are solid now, the main thing is rising rates will hurt companies that aren't very solid financially and give everyone else a nice excuse to let go of employees.

deepGem• 3 years ago

Yet unemployment is at the lowest levels. So the economy is doing just fine.

kasey_junk3• 3 years ago

This economy is baffling to basically every professional who looks at it.

Just this week we saw a jobs number that absolutely rofl stomped the consensus expectations. At the same time the credit card number came in ism services business purchasing came in 35% over expectations and new orders were way over expectations as well. Businesses are out there doing something!

You could watch in real-time as the markets all did a collective about face on what the narratives should be.

I frankly don’t know if we are in a good economy or not, but there are lots and lots of indicators we are, so saying someone is on “copium” because they espouse that view says a lot more about your biases than theirs.

pwinnski5• 3 years ago

The only economic conditions that matter to any company is whether they will be able to continue earning money the way they have been.

Since most of the companies doing 6-8% layoffs are concurrently reporting revenue growth, it isn't clear why they feel their future revenue is going to suddenly decline. It also isn't clear why, if they truly expect a decline, they'd continue to buy back shares or issue dividends. Seems like they'd want to keep that cash on hand, if they actually had concerns about the future, and weren't just using the social contagion as an excuse.

bryanlarsen• 3 years ago

Record high credit card balances, record low personal savings, 40 year high inflation, rising interest rates and no sign of the fed stopping.

Actually, those are all traditional signs that the economy is overheated. They're not signs that the economy is doing poorly, they're signs that the economy is doing too well.

coryfklein3• 3 years ago

Some of these were true perhaps 6 months ago.

Record high credit card balances

Nope, it's back to normal. [0]

record low personal savings

Well perhaps. If you take a hyper-zoomed-in-view of this chart [1] then I can see how you'd have this takeaway. But contextually this is in the period right after a 1-2 year period where rates were consistently 3-5x above the average. Consumers drawing down on personal savings right now is a natural release from all the savings during covid, and in fact is a positive economic indicator because it injects a lot of cash into markets and that goes straight to corporate balance sheets. Probably a good time to be hiring, not laying off.

40 year high inflation

1. This is often good for companies and businesses, because it means that they get a free pass to essentially lower pay across the board for every single employee. While on the revenue side, since "everyone is raising prices" they get a free pass to adjust pricing UP to account for inflation, and then some! So in the end businesses are probably pretty happy with how inflation has played out this last year, particularly because...

2. The actual pain experienced from inflation is more connected to the area under the curve. If we had sustained 40-yr high inflation for several years, then yes that is truly disruptive to an economy. But an inverted "V" like peak (which is clearly what we have the last year [2]) means a single shock, but after that everything resettles. We're clearly in the resettling period, as current inflation as of December is only 6.5% and dropping quickly. That may feel painfully high for millenials accustomed to decades of near zero inflation, but merely newsworthy for another time and place.

rising interest rates and no sign of the fed stopping

As I said in another comment, perhaps this is a reason for a small startup with a short runway and highly dependent on investor cash and bank credit to layoff employees, but Microsoft and Google? They're flush with cash and are not dependent on credit markets to survive. These layoffs are clearly about "showing fiscal responsibility" and "trimming fat", and not at all about a mathematical response to economic conditions.

As it is, there are plenty of signs that the fed will be stopping soon. Already rate hikes have dropped from 50p to 25p, and markets are indicating a complete end to rate hikes some time later this year.

Housing affordability at its lowest point

One would think that raising interest rates would mean the housing market would totally seize up, right? In fact nearly the opposite has happened. Construction, housing starts, and housing completions are an a contradictorily high point right now, particularly in one of the most affordable segments: multi-unit housing! These giant real estate companies are not worried at all about interest rates and are instead plowing ahead adding tons of supply to the market.

Lenders are getting creative about how to get around high interest rates. Sellers often buy-down the buyer's interest rates. Adjustable rate mortgages actually make sense for once and are getting more popular. California is finally solving the NIMBY housing crisis and zoning high-density. Outlook in housing in general is pretty good right now.

[0] https://tradingeconomics.com/united-states/consumer-credit

[1] https://tradingeconomics.com/united-states/personal-savings

[2] https://tradingeconomics.com/united-states/inflation-cpi

xnx2• 3 years ago

Lowest unemployment rate in 50 years: https://fred.stlouisfed.org/series/UNRATE

ff317• 3 years ago

Right, this is the problem. The stock-market / macro-growth figures look good, but /personal/ finances and true cost-of-living look to be in trouble.

If the "solution" is a bunch of layoffs, it's just going to compound the problem. The solution is all these companies that aren't actually dying need to raise wages to match all the recent inflation.

synergy20• 3 years ago

IT industry has benefited the most from COVID along with drug companies, due to that, many if not all of them over hired by like 20% or much more, that's the main reason they're cutting ~10% across the board now when COVID goes away, it's a normal business boom and bust cycle decision to me.

Even though the macro economy are not bad or just fine, that still can't justify the crazy hiring those companies did in the last 3 years, thus the lay-offs.

On top of that, we have been in booming cycle since 2008, which is a long stretch, some adjustment is due.

Aperocky3• 3 years ago

All of that looks good but the current rate is at 4.5% with expectation to continue to rise.

That is the true underpinning of the economy right there. If everything else remained the same but rate is at 2% steady there is probably going to be a hiring crunch like we had in 2021.

ozim• 3 years ago

I saw that in one place I was working - macroeconomic environment was always tough for them. Like 2014-2016 was not global depression and it was long past 2008 but somehow they were still in depression.

robertlagrant• 3 years ago

Business investment is growing at 3% a quarter (annualized)

That's surprising given money is reportedly much less cheap now. Any citations?

gregors2• 3 years ago

Disney is laying off 7k workers...

>> “While this is necessary to address the challenges we’re
>> facing today, I do not make this decision lightly,” said
>> CEO Bob Iger, "

From the same article

>> ...the company released better than expected financial
>> results for the fourth quarter of 2022. Disney revenue in
>> the quarter rose 8% to $23.5 billion, edging past
>> estimates of $23.4 billion

Truly they are facing major challenges /s

https://www.cnn.com/2023/02/08/business/disney-earnings/inde...

ChuckNorris89• 3 years ago

Disney is laying off people because their movies keep bombing in the theaters. All they do is remakes and spinoffs of the famous old IPs they devoured, but that gravy train is coming to a stop. After a while people get tired of watching more half-baked Star Wars and Marvel sequels of bootleg quality.

They're running out of franchises to milk, and making something new and original is not in their corporate culture.

Alesiono• 3 years ago

And how is Disney related to gitlab?!

actually_a_dog• 3 years ago

Well, for Disney, making up for some of that early pandemic park revenue is certainly a challenge. Nobody messes with Mickey Mouse’s money!

rhino369• 3 years ago

Revenue alone is a bad way to judge how a mature company is doing. Their net profit margin is under 1%.

And the best way to capitalize on high revenue is to cut costs--layoffs.

danesparza• 3 years ago

It's part of a restructuring, and the cuts account for about 3% of their global workforce.

cragfar• 3 years ago

Their NI was $1.2 billion and cash flow was -$2 billion. YoY their cash balance went down by $8, while debt only went down by $5.

xwolfi• 3 years ago

But to be fair if a company can continue to operate or even grow while laying off employees, were these employees necessary in the first place ? I mean, should profit be given to employees, or owners ? Should company sacrifice their profit buffer to give it to employees they dont need ? Do they have a social responsibility to employees ?

I m european so we see work in a way more controlled, mutualized way were companies are expected by the state to provide for the citizens, but the success of the american model is that they disagree with us and are way more liberal with all of it. Should they change to copy us ?

willio58• 3 years ago

You can almost picture the Executive team at Disney on one of their private yachts on an island somewhere being fed food and drinks cackling at each other about how they'll be able to convince people they "Had to" layoff workers.

tablespoon3• 3 years ago

No, it isn't, and it's embarrassing at this point to continue insisting this.

Yeah, it feels the most charitable interpretation for the companies that say that is their CEO read doom-and-gloom predictions last fall, and hasn't opened a newspaper since.

My employer just put out good numbers for 2022 and what look like positive growth predictions 2023 -- they're not laying anyone off, but they're cutting budgets and letting go of contractors (mostly very good ones), which will really hurt our ability to deliver and maybe even negatively impact stability. I've heard that meeting the budget is the priority, even if the actions needed to do that are illogical. It makes no sense.

sethd• 3 years ago

Unprofitable tech companies are probably not doing too great in the face of rising interest rates.

grey-area5• 3 years ago

The cost of money went up dramatically last year, and businesses which relied on very cheap (almost free) money for the last decade now need to make a profit or die.

They are therefore panicking about the near future (and rightly so), this is what they mean by 'The current macroeconomic environment is tough'.

jayd163• 3 years ago

As layoffs echo through tech and belts are tightened, rightfully so or not, don't you think that would effect a SAAS like gitlab?

prepend2• 3 years ago

Inflation has been tame over the past six months.

No, I don’t think so. 6.5% [0] is still an absurdly high rate compared to the past 30 years. It is nowhere near tame and may still fluctuate quite a bit.

[0] https://tradingeconomics.com/united-states/inflation-cpi

jlmorton5• 3 years ago

That is the trailing twelve months rate, and inflation was very high in the first six months of the trailing twelve months.

Core inflation actually fell last month [1], and the producer price index has been very low the past several months [2]

[1] https://tradingeconomics.com/united-states/core-pce-price-in... [2] https://tradingeconomics.com/united-states/core-producer-pri...

sekai• 3 years ago

It's been trending down for the past 6 months, and markets are always future focused. Inflation is non-issue anymore

mywittyname• 3 years ago

If there are problems, they are Gitlab problems, not macroeconomic problems.

Agreed. But pretty much every business is taking a hard look at their SaaS spend and are making cuts where possible.

mmmm2• 3 years ago

It seems it's better to be a SaaS provider than a SaaS user. I'm curious how the pendulum will swing as this all plays out.

hn_throwaway_99• 3 years ago

This feels like another semantic argument, this time over what "macroeconomic environment is tough" means.

You are correct in everything you say in your first paragraph. That said, it's fair to say that "sharply rising interest rates" are also part of the macroeconomic environment. You can say that it was silly for all these tech companies and investors to think the free money spigot would go on for so long, but the key driver for all of the fall in tech company valuations and employment levels is rising interest rates.

If there are problems, they are Gitlab problems, not macroeconomic problems.

Yet literally every big tech company I can think of has had similar levels of layoffs. If these were Gitlab-specific problems you wouldn't expect the slowdowns and layoffs to hit everyone.

pwinnski5• 3 years ago

It isn't every big company. Apple hasn't, and they're the biggest of all.

I think that is the point: it does not feel accurate to say that "macroeconomic conditions are tough" or that you expect slowdowns while recording record levels of revenue, and yet company after company after company is using these imaginary tough headwinds to justify laying off 6-8% of staff, often while paying dividends or issuing stock buy-backs.

If it really is rising interest rates, then be honest. Say "due to rising interest rates, we are going to lay off 7% of staff... while buying back stock using our record profits."

tshaddox• 3 years ago

This feels like another semantic argument, this time over what "macroeconomic environment is tough" means.

Okay, but it has to mean more than “we wanted to do layoffs” because it’s being used to justify or explain why they wanted to do layoffs.

coryfklein3• 3 years ago

The sharply rising interest rates are a problem if you have a short runway that makes you reliant on debt or investor money, in which case yes you very well may need to cut costs just to keep the lights on.

But if you're Microsoft or Google? You're profitable. You're bringing in money hand over fist. Technically the high interest rates might benefit you because now you have more options of what to do with that giant pile of cash: you can lend it out and get a decent return!

So high interest rates maybe do justify layoffs in some cases. And even perhaps for GitHub specifically, though I'm not sure I understand the complex dynamics of how it generates value for Microsoft anyway...

UncleMeat• 3 years ago

People say “free money spigot” but I don’t understand it. Google has 120b in the bank. How was it able to leverage nearly zero interest loans before? Why isn’t new risk free (nominal) growth on cash a benefit considering they have so much cash?

dgb23• 3 years ago

Yet literally every big tech company I can think of has had similar levels of layoffs. If these were Gitlab-specific problems you wouldn't expect the slowdowns and layoffs to hit everyone.

Many might just take the opportunity because "everyone else" is doing it.

adamsmith1432• 3 years ago

How much are interest rates relevant for Tech companies particularly growth oriented firms? They raise equity via stock not debt and VC firms aren't primarily raising money for their funds via debt either.

lbrito• 3 years ago

Yet literally every big tech company I can think of has had similar levels of layoffs. If these were Gitlab-specific problems you wouldn't expect the slowdowns and layoffs to hit everyone.

That doesn't really mean anything other than they are all riding the same wave.

patentatt• 3 years ago

The macroeconomic problems facing all of these corporations are that labor is feeling empowered, that's it. Between union actions, NLRB actions, wages rising, low unemployment, and the whole return to work debate; power has subtly, slightly shifted towards workers. And it scares the shit out of the capital class. In response, they're culling the herd and raising interest rates to discipline workers.

andsoitis7• 3 years ago

if, as you say, the economy is super strong and employment opportunities are robust, then nobody should worry about the layoffs because hey, you’ll find a new gig easily!

hirako20003• 3 years ago

Many people have been at a place for a while, some over a decade. Massive layoffs means quick and picking individuals who rarely demonstrated poor performance.

What it means to someone being laid off is far more than the challenges in finding another place.

Plenty of fish and a rich dating scene out there. If you are dumped for dubious reason, would the argument that it isn't a problem at all to find someone else stand to not touch on the reasons?

Plus given the power dynamic at play, don't you think the debate should go on with the reasons for what almost look like a centralised decision making power deciding when millions people should be let go despite no correlation with poor individual performance and even business performance in many cases?

KoftaBob• 3 years ago

Well said.

Almost every CEO that uses this line is essentially trying to avoid saying “we foolishly overhired during 2021 and are correcting for that”.

Saying that would mean the CEO is admitting that they made a misguided decision.

ericd• 3 years ago

Does this look like a solid economic indicator to you? https://ycharts.com/indicators/us_pmi

Zoom to max.

mythrwy• 3 years ago

Well if enough people keep being laid off, perhaps the macroeconomic environment does indeed become tough!

hoelle• 3 years ago

Everywhere you look, the economic indicators are solid

Everywhere? Have you been down a grocery aisle? The Ukraine war is likely to continue disrupting global food, fertilizer, energy, and raw material supply for years.

Boomer retirement is crunching capital. Finding investment will likely only get harder for the next several years.

China may be on the verge of a demographic, manufacturing, and political collapse.

Stock your pantries.

Axien• 3 years ago

I read Peter Zeihan as well.

exmicrosoldier• 3 years ago

The current macroeconomic environment is tough

aka

Interest rates are high and I am worried about getting my next round of funding or meeting minimum payments on corporate debt.

Because an overwhelming number of corporations take advantage of tax laws that make interest debt deductible, every interest rate hike leads to firing people and decreasing business investment, just to stay profit margin neutral.

If you want to change this, it would really help to change the tax laws. https://news.bloombergtax.com/tax-insights-and-commentary/en...

jldugger5• 3 years ago

Interest rates are high and I am worried about getting my next round of funding or meeting minimum payments on corporate debt.

Curiously they IPOed in 2021 and report no debt. Perhaps they intended to borrow and got sidelined by rate hikes?

pokstad5• 3 years ago

The use of the term “macroeconomic” has become so overused and cringe at this point to conceal the true complexity of what is going on.

kortex• 3 years ago

It's typical paper-thin plausible deniability of corporations justifying actions.

- Oil supplies are tough so we are raising gas prices (we know we can get a few weeks/months of crazy profits and blame it on the energy crisis)

- Supply chain issues are tough so we have to tighten out belt (excuse to not give out raises/bonuses)

- The macroeconomic environment is tough, so we gotta lay off 7-10% (we have wanted to trim the fat for some time and now we have the perfect cover)

Funny how it is always slow to go the other way (slow for gas prices to come down, wages to rise, and rosters are expanded).

red-iron-pine2• 3 years ago

Something strong has to drive it. Hopefully that's economic pressures and not guillotines, but it may come to that.

jupp0r• 3 years ago

I also wonder where the widespread sentiment is coming from. Everybody had been expecting a recession on the basis of prediction markers like inverted yield curves and because it's historically due. That being said, no actual economic markers are actually pointing at one.

Lots of companies are using this and layoffs at other companies as an excuse to cut down their work force, which they (uncommonly) hadn't done for years (which might mean never for young companies). My guess is also that this is more acceptable to share holders because it allows companies to put some money in the bank in case a recession actually arrives. Being transparent about this would be more honest than blaming it on "tough macroeconomic environment". At least severance packages look pretty neat and there's lots of jobs out there still for software people. Hiring is getting a little easier for smaller companies too.

mostertoaster2• 3 years ago

The “good jobs report” is just smoke and mirrors to have something positive to say at the state of the union. Changing how you measure the number of jobs so it looks better is just par for the course for politicians. Using the old measure that 400k over the 100k expected is 20k less than expected.

lame-robot-hoax• 3 years ago

What? When did the Biden administration change the methodology behind measuring unemployment?

yowlingcat• 3 years ago

The world has just moved from a decade plus zero interest rate environment, combined with massive multitrillion dollar pandemic QE and accompanying hyperinflation, into a rising interest rate environment.

The macroeconomic environment is more volatile now than any year in recent memory. It is objectively tough, and cherry picking random indicators which aren't core drivers of the economy doesn't prove terribly much.

I think you would have to go back to the 70s and 80s to find similar precedent. If you look into the origin of the Volcker rule, you'll see exactly the kind of messiness the world might be in for.

radiator• 3 years ago

Wow, things really are so rosy on planet jlmorton. But meanwhile on planet earth, and especially the Western hemisphere, real inflation has been going through the roof -- to name only one of the myriad economic problems.

pacija• 3 years ago

Terribly bloated corporations all around.

We had such situation in socialist Yugoslavia in the 80s, just before it collapsed. Most people just "went to work" without doing anything useful or producing anything valuable while still getting fairly good money. Government kept printing money while increasing foreign debt to keep people content as opposed to let unprofitable companies close so that people get laid off but hopefully regroup into more profitable ones. It lasted for some time, but when it finally came to an end it was really ugly.

I feel sorry for everyone that gets laid off, but perhaps that is better than the alternative.

jldugger5• 3 years ago

Everywhere you look, the economic indicators are solid.

Sure, if you cherry pick the indicators. There's a pretty big one you're tiptoeing around: the Fed Funds Rate has gone from 0.25 in 2022 to 4.75.

I do not have insight into Gitlab's customers, or the current state of Gitlab's business.

Well, that is to your detriment, both as a persuader and decision maker. Gitlab is publicly traded, and their fiscal year ended Jan 31, so you have a wealth of data you could be consulting to make the case. Yahoo Finance shows[1] they have zero debt, and margins at negative fifty percent -- for every dollar take in they lose a dollar fifty.

It's not too hard to imagine the company has been losing money while money was cheap to grow marketshare versus GitHub, but now that rates are up it will be much harder to issue debt and pay it back. It's not to hard to paint Gitlab as a company in transition from loss leader to profitability by cutting costs and reducing long term investments as they become more expensive. And I think describing that as a response to macroenvironment conditions is appropriate.

[1] https://finance.yahoo.com/quote/GTLB/key-statistics?p=GTLB

ryanisnan• 3 years ago

Thanks for that. I'm curious if you have any resources you would recommend for improving one's literacy for corporate finance?

SantalBlush9• 3 years ago

Sure, if you cherry pick the indicators. There's a pretty big one you're tiptoeing around: the Fed Funds Rate has gone from 0.25 in 2022 to 4.75

Talk about cherry picking indicators—the federal funds rate isn't even an indicator. If you sincerely want to look at the data without cherry picking, please look at the top 10 US macro indicators [0].

[0] https://www.investopedia.com/articles/personal-finance/02021...

Patrol8394• 3 years ago

Current layoffs are not due to macroeconomics, but more a normalization of what happened in the last couple of yers. Most of the companies laying-off they all over hired.

Why don't they just say so.

https://www.statista.com/statistics/273951/growth-of-the-glo...

vkou• 3 years ago

The economic indicators are solid, which is why JPowell is promising that the Fed will keep pushing on the money rope until they stop being solid.

Why do you think the Fed just raised interest rates again?

mbesto2• 3 years ago

No, it isn't, and it's embarrassing at this point to continue insisting this.

Your macro is not the macro that Gitlab is referring to. It's disingenuous to interpret it otherwise.

All of these tech companies "overhired" (in hindsight) because they achieved unprecedented growth 2021~2022. If you're Gitlab - who sells to software development organizations - and the whole market has thrown hand over fist into the software development organizations, you have no choice but to chase that market. If that market (this is GitLab's macro) cools then you simply cut back.

Y'all think there is something nefarious going on and I don't get it.

jlmorton5• 3 years ago

Let's be clear about what the macroeconomic environment is, because it has a specific meaning. I'll quote from another definition here, so I'm not merely offering my own interpretation:

A macro environment refers to the set of conditions that exist in the economy as a whole, rather than in a particular sector or region. In general, the macro environment includes trends in the gross domestic product (GDP), inflation, employment, spending, and monetary and fiscal policy. The macro-environment is closely linked to the general business cycle as opposed to the performance of an individual business sector. [1]

If Gitlab had simply said what you said, then I wouldn't have commented at all.

Instead, Gitlab explicitly blamed economy-wide conditions for these layoffs, and that is what I take issue with. The economy is doing well. It's not all rosy, but in general, most indicators are fair-to-good, and trending better. (Manufacturing is one area that continues to trend worse).

And frankly, my comment was not directed merely at Gitlab, but rather the slew of layoff notices we've seen that appear to be copied and pasted from each other. It's comical at this point, and the idea that the broad economy is in bad shape is simply not true, and not supported by the evidence.

[1] https://www.investopedia.com/terms/m/macro-environment.asp

wellanyway• 3 years ago

Its almost like senior management consists of people that mostly copy whatever everyone else in their ivy league fraternity is doing.

tempsy• 3 years ago

This is a pretty silly take.

So all these tech companies who've laid people off are wrong and it's company specific issues? Don't think so.

dangwhy• 3 years ago

Inflation has been tame over the past six months.
but not rapidly in a wage-inflation spiral.

inflation doesn't feel Tame for my extended family.

riskneutral• 3 years ago

There is a great deal of uncertainty in the current economic environment. There was a pandemic, permanent shifts in the ways people live/work/travel, massive geopolitical events involving multiple, full spectrum global superpower conflicts, huge Ponzi schemes rising up and then collapsing in spectacular fashion (crypto), stagnating productivity (exacerbated by work from home), government bailouts followed by inflation hitting multi-decade highs and central banks mistaking raging inflation for something "transitory" and acting too late, and now skyrocketing interest rates, ongoing labor and supply chain issues, a looming recession and open questions about the ability of central banks to engineer a "soft landing" for the economy.

Investment, M&A and corporate spending activity has come to a near standstill in the past 6 months across multiple industries, as a result of the current economic uncertainty. Business loan default rates are expected to rise, there have already been increasing numbers of bankruptcies (e.g. Serta Mattresses, near default Bed Bath and Beyond, health care providers, etc). Not to mention the cascading bankruptcies of crypto schemes. The ramifications of permanent WFH have yet to cascade through the Commercial Real Estate sector - there are huge amounts of vacant office capacity that have yet to be written down, but we can expect to see sales of obsolete and aging office buildings at deep discounts. High interest rates also have an impact on the Residential Real Estate sector, with housing pricing declining, mortgage rates increasing, etc.

So 5-7% layoff is prudent for any large corporation in this economic environment, and layoffs / cost cuts have happened and will happen in many different industries, not just tech.

abawany• 3 years ago

I imagine the saying 'be the change you want to see in the world' pervades the c-suite pretty thoroughly. Thus, if 'the current macroeconomic environment is tough' is not true now, with all these layoffs it'll likely be true soon enough with all of these layoffs and the resulting cascading copycatting.

JibberMeTimbers• 3 years ago

Almost. The rate of inflation has been tamed. Inflation overall is high still comparatively

coffeebeqn5• 3 years ago

I do wonder which goods will never come down from the newly anchored prices

setgree• 3 years ago

For a company like GitLab, the widespread perception that macro conditions are bad is equivalent to their actually being bad.

The email says that clients are holding off on big software purchases, and that's GitLab's bread and butter. I see no reason to disbelieve Sid on this.

In general this is one of those weird things about the economy, that perception/expectations dictate a lot of terms. It gives me the heebie jeebies sometimes. If enough people suddenly stopped believing that stocks represented real value, we'd be in a lot of trouble.

bogomipz5• 3 years ago

Indeed. In fact 10 days ago the IMF upgraded their outlook for the global economy in 2023.[1] These layoffs and their accompanying statements from the CEO talking about "challenging macroeconomic environments" are really starting to feel like CEOs just parroting each other.

[1] https://time.com/6251381/imf-global-economy-outlook-2023/

slowmovintarget• 3 years ago

Tech went bananas hiring during the pandemic, and are only suddenly discovering that this may have been a bad idea.

You know who didn't? Apple. You know hasn't announced a hand-wringing, gosh-golly, tough times, BS announcement about layoffs? Apple. Got to hand it to Tim Cook, he seems to have stayed level-headed through the nonsense.

Gustomaximus• 3 years ago

From an investor POV are layoffs an indicator that companies management feel they dont have growth prospects? Companies, especially tech companies would rarely admit this openly, e.g. how they typically hold ever growing cash rather than pay dividends.

Logically you would think now would be a great time to hire if you genuinely saw significant grow/product rollouts coming. Especially if a company is making profit and not trying to extend runway, reduce debt, in world where money costs more.

tukantje2• 3 years ago

In this context it is a sign they bend their knees and kiss the ring.

Shareholders have been feeling that the tech workers held too much power, and companies were openly / not-so-openly having a fight with their shareholders, so to speak (especially in cases like Meta).

With the new blood sacrifices, shareholders can rest assured that their profit > everything else.

satysin2• 3 years ago

GitHub is also going fully remote (zero offices, current offices will close at end of lease) and reducing headcount by 10% :(

Statement will be coming out shortly I guess. I wonder if they knew Gitlab were going to be doing layoffs too and so waited them out.

isuckatcoding• 3 years ago

Is that part of the Microsoft layoff?

holman• 3 years ago

It was announced this morning- during the initial Microsoft layoffs they were told GitHub wasn't impacted.

satysin2• 3 years ago

Not that I am aware of. Microsoft did not include GitHub in their numbers so I am thinking this is in addition.

dsq• 3 years ago

So, are there FANGS that not only are not laying off, but are even hiring or raising salaries?

Or all they looking at each other and copycatting?

rootusrootus• 3 years ago

Every time a tech company announces a layoff, I'd like a corresponding announcement of where in their history this puts them. Back at late 2022 levels? 2021? 2020? All of these layoffs feel like a little purge after a big binge, not a serious signal of problems.

eptcyka• 3 years ago

Whilst never a nice letter to write, at least the employees here get to talk to their managers about this.

siliconc0w• 3 years ago

Layoffs make sense if you need to extend runway past the current economic climate (valuations are down and it could be very painful to raise now). Basically if it's make or break.

That doesn't describe the big tech companies who will certainly suffer greater than 10% lost productivity and opportunity cost and could easily weather a long down trend.

Manfred• 3 years ago

Weathering the trend only really makes sense when you know there is growth on the other side. Maybe a lot of these companies grew to accommodate the explosive growth caused by working from home and they are no longer certain they really need the extra workforce in the coming few years?

insane_dreamer• 3 years ago

It’s an easy opportunity for common to cut costs while making the same excuse as everyone else whether it’s applicable or not. If you do it when everyone is doing it, it’s not news and doesn’t scare shareholders the way it would if you did it at another time.

tiffanyh• 3 years ago

For a company that's entirely remote, I wonder how the logistics of this was handled.

(e.g. how were people informed, de-provisioning access, laptops/corp asset returns)

freeCandy• 3 years ago

Employees get to keep the hardware, according to the post.

alexggordon• 3 years ago

I'm a huge supporter of GitLab, I love their product. Facilitated the use of it for my work and really admire how open their product development and company morals are. So when I say that this is probably one of the worst decisions they can make I hope you can understand I don't say that casually.

The problem with running an open company (check out their handbook[0] if you don't understand what I'm referencing) is that you can be held accountable to your values when you break them. All these blog posts regarding the "current macroeconomic climate" make it sound as though they've been blindsided by the downturn in the economy. To me, that's just a straw man. If you listened to any economist or financial adverser, even while the economy was doing okay in 2022, most knew there was a recession coming[0].

Even if they didn't know that, and they were completely ignorant (of which I would expect multiple executive level firings), they bragged in the Q3 Earnings Call on 12/05/2022 that "We added over 200 new team members in 3Q and we continue to experience lower attrition than the industry"[2], undoubtedly as they were planning layoffs. According to Wikipedia, Gitlab had 1,630 employees in January of 2022, so assuming they added 500 new employees in 2022, 7% layoffs would be about 150 positions. Given that, I love this quote from that same call[2].

As Sid and I have said over the last several quarters, our number one priority is growth but we will do this responsibly.

The "I" that quote is Sharlene Seemungal, acting CISO[3]. I don't even have to research the layoffs to know that neither Sid nor Sharlene have suffered from the layoffs.

All that said, it's laudable the level of investment you took in ensuring the employees you laid off have a good transition--but it would be better if you didn't play the corporate bullshit shocked pikachu face game when the downturn everyone knew was coming came and actually hired responsibly.

[0] https://about.gitlab.com/handbook/values/

[1] https://www.cnbc.com/2022/06/09/recession-will-hit-in-first-...

[2] https://ir.gitlab.com/static-files/96839a79-517d-4d92-989f-9...

[3] https://about.gitlab.com/handbook/eba/

qbasic_forever• 3 years ago

If these layoffs were just done to go with the flow and because everyone else in tech is doing it, holy moly will it go down as one of the worst actions a CEO can take in history. Gitlab lives, breathes and dies on customer trust. If I send them money I am betting on them being a good steward of my source code (_the_ most important asset for many companies) and host for my artifacts, CI, etc. Nothing gives me more concern about the near and long term future of the company than a massive layoff out of the blue. How can customers trust Gitlab will even be functioning or exist in a year? If I depended seriously on them today I would be rapidly finding and moving to an alternative.

higeorge13• 3 years ago

7% seems like a number shared in a non paper across tech ceos. lol

iaccountthencom• 3 years ago

I fucking hate it when they talk about integer number of HUMANS as a mere percent (potentially a floating point value)

andreygrehov• 3 years ago

Is laying people off the new marketing strategy these days?

neilv3• 3 years ago

I would've guessed GitLab would be unlikely to join the layoffs party right now, just on culture and internal/hiring image reasons.

Then again, I also thought Google might've been a holdout among the FAANG companies. Before, I figured someone working at Google could assume that, if they focus on the company and do great work (or focus on the perf/promo metrics/criteria that Google seems to want), that Google will take care of them.

Now, for both companies, I wonder whether, rather than lighting a fire under anyone who needs it, layoffs erode the unusual trust and intangible appeal they might've enjoyed.

(Obviously, Google will still have the selling point of paying very well (or pay OK, if RSUs and bonuses don't recover). And I suppose Leetcode interviews make more sense, if you imagine it coming from a musty old complacent Fortune 100 bureaucracy. And GitLab, though not known in the US for pay, will still hire people around the world, with transparency on at least non-layoffs things.)

thwayunion4• 3 years ago

Google doesn't need good will; they'll always be able to get commodity labor. As long as they take care of a large enough number of senior folks they will be okay. (Unclear they're doing this, ofc.)

Companies like GitLab are different; these layoffs seem extremely risky long-term. But they're unprofitable and capital has gotten a lot more expensive, so they might not have much of a choice.

neilv3• 3 years ago

Do the founders still believe in Google culture? It seemed to be styled as a place that other Stanford new college grads would want to go (money, status, lifestyle, ambition).

Without goodwill, even senior people pulling down $500K-$1M and performing very well are going to be thinking about when it makes sense to leave (for a competitor, startup, or windsurfing/woodworking).

beepbooptheory3• 3 years ago

Is there a single company anywhere that doesn't intermittently layoff employees? Like, I think its good, of course, to analyze and criticize, but why particularize it so case by case in all these threads? It just feels like a lot of missing the forest for the trees.

If you were studying an animal that has been shown in all prior research to intermittently eat its offspring, you wouldn't then stop at each animal and ask "why is this animal doing this?" You would start to generalize as a good scientist and understand that this is just how these animals sustain themselves. You wouldn't moralize the animals, you would understand they are apart of a deterministic system which requires this.

If you have a problem with layoffs and workers being chronically undermined for the sake of the bosses, then you have problem with our current economic order, not this or that company.

Apocryphon8• 3 years ago

this is just how these animals sustain themselves.

Because in economics not everyone is a Keynesian who just ascribes behavior to animal spirits.

pokstad5• 3 years ago

As a former GitLab employee from an expensive region, I’m a little concerned Sid didn’t layout the layoff process more transparently. Were high earners more likely to be laid off while lower CoL areas were kept? This was always a distant fear in working for a very global team where I knew teammates from other countries did the same job as me for much less.

postexitus3• 3 years ago

The answer is yes, in all cases, he doesn't need to state in explicitly. So what? Layoffs are being done to save costs or to signal doing so to shareholders. It is not a "let's be meritocratic and only cut the lowest performers" exercise. The overarching question is, with our insistence on remote working etc, how will we ever justify hiring from high CoL areas again?

pokstad5• 3 years ago

There’s a lot of value in those high CoL areas. A lot of concentrated knowledge and skill is in the Bay Area.

SergeAx5• 3 years ago

It is not a "let's be meritocratic and only cut the lowest performers" exercise.

Why not do some extra homework and really cut the lowest performers, while we are here anyway?

firstfewshells• 3 years ago

Do you expect the CEO to tell his employees that they are more likely to be laid off if they are paid more compared to their peers?

pokstad5• 3 years ago

Yes. There was transparency about hiring plans and how low CoL areas were targeted. I would expect transparency on the other end of employment.

vparikh• 3 years ago

I am waiting to see the C-suite get some accountability - not holding my breath. if you over-hired by 7-12% over a an 18-24 month period that's a pretty significant management mistake - you clearly did not have a pulse on the business and its operations. I fail to see why these CEOs still have their jobs and worse, are continuing to get their performance bonuses.

Lapsa• 3 years ago

no surprises there

pachico• 3 years ago

I really looks like swinging the word 'macroeconomic' is a wildcard to justify just anything.

I'm tempted to see if I can get away with horrible shit by just appealing to it. "Agent, I got in the drugs business fue to the current macroeconomic situation..."

ddmichael• 3 years ago

There is no excuse. One way or the other it's really bad management. You may not realize it but 7% is a massive piece of the pie. Why did you hire those people Gitlab in the first place?

The macroeconomic environment isn't tough, my equity stock and shares could have been better but are doing just fine. And if it were tough, it would justify layoffs of 1%, not 7%. Covid, the Russian war and energy crisis have been going on for years now but they didn't stop you from hiring Gitlab. Your irresponsible hiring patterns show mediocrity, corporate chaos.

Exploiting the situation to rollback hiring mistakes is not justified. Nor experimenting with peoples' lives.

ilrwbwrkhv• 3 years ago

I mean Sid Sijbrandij has been a horrible CEO for Gitlab. Has squandered every meaningful lead the company had. If he was sharp and a good leader, they wouldn't be in this boat.

sylware• 3 years ago

When github was bought by msft, I moved all my code, but unfortunately not on gitlab as it is not noscript/basic (x)html friendly. I wish they were.

shrimpx• 3 years ago

What’s annoying is these companies maintain a “Careers” page with a bunch of job openings. “Oh look we’re the ones who are still hiring. Psych! We’ve been working on firing thousands!” At least GitHub shut down their careers page weeks before they announced their cut.

8kthrowaway• 3 years ago

They removed about 60% of listings back in January (without notifying candidates, mind you), and seem to have removed another chunk today.

An optimist might assume that the remaining listings are legitimate, although it's possible that some recruiters are yet to come online and remove further listings today.

nitwit005• 3 years ago

These small percentage layoffs seem a bit pointless.

A lot of these companies were hiring right up till their layoff (including gitlab if their careers page was accurate last time I looked). Just appropriately pausing hiring would deliver similar savings.

robinhood• 3 years ago

Considering the huge "organic" turnover Gitlab had already, they lay off 7% every month already.

They always grew thanks to the sweat of remote workers they already fired on the spot without any remorse. The excuse of "our commitment to responsible growth" is really cynical.

lozzo• 3 years ago

looks like layoffs are going to continue for a while amongst tech companies. I think it's more significant the 20% cut in yahoo https://www.bbc.co.uk/news/technology-64596061

Gitlab to lay off 7% of staff

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