Disruption — the other side of it
I put this image up to show that, contrary to recent media suggesting the oversized impact to the tech industry, there actually were a LOT of layoffs at several different companies across the spectrum prior to the downturn that really gained steam in October 2022. Tech took it’s share of hits between February and August to the tune of 1300 (the irony of Twitter letting go 30 people in July isn’t lost on me…), but Consumer Discretionary and Automotive got decimated, with Tesla doing more before end of 2022 to cap it off.
To give you an idea of the impact, I’m doing an eyeball estimate from the above chart — some 22,000 folks were shown the door in the first 8 months of last year. Some were given severance, others (like I imagine Ford) weren’t or were given pretty meagre ones. And this is absolutely an incomplete list — just take a look below at the screen shot (taken from https://www.trueup.io/layoffs) for the entire year of 2022 plus January 2023 to see how widespread this is.
Just one day’s worth (01/31/23) of layoffs shown in this screen shot below:
To be sure, many of these are startups prone to dramatic changes in strategy based on market economy changes. But PayPal has been around a Long Long Time in relative terms — started in March 2000 and survived the dot com crash. Cutting 2000 people (7%) of their workforce when they should have a pretty stable product lineup and expanding business banking/payment gateway opportunities seems like they both made bad decisions in terms of resource needs to start with when hiring, but also short sighted thinking to cut staff now.
Which leads me to the topic of today’s article — Disruption.
For the past decade or so, young assertive entrepreneurs and investors have picked up this term and labeled themselves as “Disruptors” — the intended interpretation being people who shake the status quo up for the better. It has become a mantra for anyone looking to change any given industry — banking/investing/lending, real estate and the buying/selling of it, enterprise management software, auto sales, etc, etc… and for a while at least there has been disruption causing increased competition and better deals for consumers and businesses.
The list above has a number of disruptor companies and like most startups goes through growth and contraction based on the market. But there are now established companies — for instance, Tesla can be classified as a disruptive force since
But disruption also has a negative side — and we are experiencing this now. I’ve personally experienced employment disruption as my employer needed to cut expenses by 15% which resulted in some 70 people being cut loose — many of whom like me are very senior resources and highly valuable.
Google, Meta, Amazon, Microsoft, etc… letting go in many cases people who have been with the company 5+, 10+, 15+ years and are subject matter experts who are extremely adept at adaptation and learning new technologies. If we revisit the first chart — Ford laid off 8000 people in the traditional auto sector as they refocus their efforts on EVs (again, Tesla disrupting the space). The list goes on — highly talented highly valued employees who have had their roles cut and are on the market looking for a new landing spot. Any multiple of these people could easily have moved laterally into new roles in the new business spaces these companies are now investing in, but instead Wall Street and the individual shareholders are looking at how the earnings report look for the next quarter or two, demanding heads roll to make the balance sheets look better in the now.
I do have some optimism though — a few companies have chosen alternatives or a hybrid approach to accomplishing this same feat. Tim Cook, CEO of Apple took a 40% overall compensation cut in a symbolic effort to stave off the pressure from the board to lay people off (and it worked so far). Intel’s CEO Pat Gelsinger took a voluntary 25% pay cut on his base salary and implemented a sliding scale set of salary reductions for executives down to middle management to essentially achieve the same kind of result. Although Intel didn’t completely escape layoffs, the effect of this was to reduce the impact and keep their brain trust in place where possible to ensure that they can rebound and recapture the market share going forward.
A company’s most valuable resource without question is their people. Even in disruptor companies, its the people who provide the horsepower and brain power to execute on the disruption, be the source of the new ideas and bring them to fruition. Support the company’s products and intelligence when there is a need for this. Continually innovate and expand their offerings. Lets take the story of Spencer Silver, an employee of 3M…
In 1968, Spencer Silver, a scientist at 3M’s headquarters in Maplewood, was working to create a strong adhesive. Accidentally, he developed a new material that was light enough to easily remove and peel apart. Silver felt that he had invented something unique and useful but struggled to find what that use could be. He spent five years meeting with others at 3M, trying to find someone who could recognize the unique capabilities of his invention and create a new product with it.
At this time, Art Fry, another 3M employee, was frustrated when his scrap-paper bookmarks fell out of the hymnal he used while singing in his church choir. As he was thinking of ways to make a better bookmark, Silver’s “not-so-sticky” adhesive came to mind as a way to make pieces of paper slightly sticky without adhering permanently.
In 1980, the Post-it Note was made available to customers in U.S. stores. It became hugely popular. The Post-it Note team was awarded the internal 3M Golden Step Award in 1981 and 1982 for their development of a profitable product that generated significant new sales. In 1981, they were also awarded 3M’s Outstanding New Product Award. (original article here)
The Post-it note was a disruptive product — it took 12 years for something that seemed like a failed byproduct to find a niche, but once their persistence finally identified it, it became not just successful but is also ubiquitously associated with anything to do with productivity. In fact, this disruptive product actually contributed so significantly to the company’s bottom line that they needed to hire more people to manufacture these things to keep up with demand.
I want to close this out to speak directly to those who are part of the army of the newly unemployed.
Yes, our lives have been disrupted to the point where our trust in the stability afforded in having a full time job signed up for indentured servitude to one of these assumed to be stable companies has been severely damaged.
For the majority of you, being laid off is not through any fault of your own. In fact you could believe its the direct result of short term thinking and planning, individuals and leaders believing the good times were going to last, and so they desperately needed to hire all you good people and compete for you. The last 50 years or so have been very difficult for those of us in the bottom 98% — wages stagnant and real measure of wealth decreasing as everything to do with living has been inflating. I don’t blame you in the least for fueling the fires of competition in order to get a modest increase in your salaries and overall compensation.
But remember, pushing up operating expenses for companies comes at the cost of escalating prices of products, commodities and services. It also impacts supply/demand as with that extra money we never had before we decided to splurge and buy up items that had a limited supply. You can point to Covid as one of the constraints that restricted supply and as a result pushed prices up for what was available — but inflation was inevitable and has been going on for years and years, just that the numbers never were reported in such a way as to highlight the gap between increase in wages and goods/services.
Please do find yourself new landing spots and get yourself improved salaries and compensation packages. But also understand the basics of a free market economy and the pressures of investors to keep the balance sheets looking great. Managers and leadership should follow the examples wherever possible of those at Intel and Apple, stave off the temptation to do the quick short term solution and find a way to keep your most valuable resources around.
Thanks for taking the time to read this — oftentimes I come up with an idea for a piece and I want it to cover a wide range of facts and data within the topic such that it might seem like it’s sprawling a bit, but I believe that in most cases (and hopefully in this one) it circles back around and ties up all the threads into a unified whole. Comments wholeheartedly welcome!