Sometimes, A Small “Layoff” Is a Good Idea - The Entrepreneurial Way with A.I.


Thursday, May 26, 2022

Sometimes, A Small “Layoff” Is a Good Idea


Layoffs sound scary, and they are scary.

But sometimes, small layoffs are a good idea — even if you have tons of cash.

You don’t totally get this until you’ve worked in a Big Tech Company.  But there, the rules usually are you can’t really fire anyone.  And so as the years go by, teams fill up with more and more mediocre folks.  They can’t be fired, so they never leave The Big Tech Company.

So in a Big Tech Co, when once a year you get to do a “layoffs”, managers actually almost get excited.  Because now, for the first time, they can move on from their worst hires.  Because they can put them on the layoff list.

I don’t think real SaaS companies should ever do “real” layoffs, i.e. cutting to the bone.  You should be able to predict your growth enough, especially with 100%+ NRR, to know how many heads and folks you need the next 12 months.  That’s a real failing on you if you get that wrong.

But when you get bigger, over 80, 100, 200+ … sometimes a small “layoff” is worth doing in slightly more challenging times.  You can replace those 5% or so you move on from with better folks.  That doesn’t actually save you money per se.  But it lets you get better hires in for the same hiring budget and plan.

And really, when you move on from the bottom 5% of your hires — you always do better.  It’s harsh, but you usually don’t need them once you scale.  We all make a few hires that just don’t work out.  Some of them see it and leave on their own.  But others see it and hide.  And never leave on their own.

In slightly tougher times, swapping out a bottom performer for a top performer does a bit of magic.  On the exact same budget.

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Jason Lemkin, Khareem Sudlow