Annual Layoffs: The New “Best Practice”?

Are layoffs now just institutionalized in Silicon Valley? And if so, what does that mean?

Instacart was one of the 3 Tech IPOs to go out late last year, along with Klaviyo and ARM.

And then crushed the last quarter, with $800m of revenue and a stunning $200m of EBTIDA!

At the same time — they announced 7% layoffs to get more efficient.

Now, 24+ months ago, this would have been a shocker. Today, it’s the New Normal.

Everyone has to get more efficient. The average SaaS public company is now at $300k in revenue per employee, up from less than $200k in 2021. ServiceNow is over $400,000. Canva is at $500,000 in revenue per employee!

The single “simplest” way to get more efficient — at least on paper — is to cut the least efficient employees.  At least on paper.

The reality is, 5%-10% of any org isn’t performing well. Often more. But it used to be seen as too damaging to do layoffs except when truly necessary.

Now, it’s part of corporate planning at even the most successful in tech to prune for efficiency.

Will it damage morale? Perhaps not. The top performers are never at risk.

Will it damage the social contract? Perhaps not. Folks are still quitting jobs at near record levels, working multiple jobs and side hustles, and more. Perhaps the social contract in tech between company and employee is long gone. Perhaps even Quit Quitting started it, and 2021 fueled it.

But it is different. Even The Best of the Best doing Efficiency Layoffs every year.

It used to be that way, top leaders like Microsoft used to prune the ranks every year ruthlessly by performance ranking.

Perhaps it’s just Back to the Future.