20% was just an arbitrary example. The underlying point I think is the first focus should be on trying to retain all full-time employees. And I probably should've mentioned that the likely outcome would be that the higher ranks would make the sacrifice, not the lower levels (unless absolutely necessary), since they probably depend more on their salaries for the basics.
Those who are not willing to make the sacrifice probably don't really believe in the vision and thus probably aren't the right people to help you get out of the rut.
And one other caveat would be transparency. That way a company can't just arbitrarily request that their employees make sacrifices when it's not demonstrably essential.
Those who are not willing to make the sacrifice probably don't really believe in the vision and thus probably aren't the right people to help you get out of the rut.
Sorry, but this is a bit ridiculous. You could make the same counter-argument from the employees perspective as well.
"If my company isn't willing to sacrifice to pay my current market worth, then they don't really believe in me as an employee"
Is this company going to pay an extra 20% when things start going well again to make up the difference lost?
When you sign on for a job/salary you shouldn't feel bad for leaving if the company can't hold up their end of the bargain. If you only worked at 75% of the capacity they thought you were going to, you'll most likely be fired.
That's not the point really. The criteria are: If a company is demonstrably (ie. open financial books) having financial difficulties, then I think the default reaction should be "what can we do to get ourselves through this without layoffs". The current environment seems to condone a "fire as first reaction to save the company" behavior. I would argue the default reaction should be "fire as last ditch effort to save the company". Before firing anyone the first reaction should be to find a compromise everyone is comfortable with so that everyone can find a way to help the cause.
Also I think there is merit to the point that if someone is not willing to sacrifice in times of scarcity, they are only thinking about themselves and thus are not mentally in a state conducive to helping the company to get out of its financial difficulties.
I've lived this situation. At one point in my career I had people on my team who I thought were truly brilliant, and I vouched to ensure their happiness and comfort in spite of difficult times. They simply took that gesture of goodwill as a sign of weakness and feasted like vultures without any real uptick in output in return.
In the end the lesson is that no matter how brilliant or gifted you are, a true sign of loyalty or dedication to a company's cause in the form of sacrifice is far more valuable than a self-absorbed employee who can churn out good code, but only as long as everything is going in their favor.
EDIT: And that's not to say a company shouldn't find ways to sacrifice as well. For example additional equity should certainly be on the table as an option. You can't expect people to give without expecting anything in return should things turn around and the company should eventually get back on its feet financially.
Being fired is an unplanned event. So the likelihood that someone who is fired is in a similar negotiating position as someone who leaves a company unannounced is highly unlikely.
Especially people with families. When faced with the decision of "either accept something at lower pay or risk your family starving or eating in soup kitchens" I think the decision is obvious.
Then again they could wait 6 months or several years more for the perfect position. One that pays similar salary, is in a similar location which will not require a relocation, and similar benefits so no additional out-of-pocket expenses for things like health insurance. The higher up on the food chain you go the less likely you'll fall into a comfortable situation. And even lower on the food chain it's not a certainty that things will work out. It's far less likely they'll be in a position to negotiate. Your first reaction will be "first company to offer me something I'll take" because lower wage employees generally have far less saved away for situations like this.
So net outcome IMO will probably just end up being alot of people accepting less than ideal offers given their less than ideal negotiating position.
Also don't forget that the dynamics of these situations in rural vs urban populations are going to be very different. IMO you probably need to be in a city like New York or London for things to work out in a net-positive way for employees who are laid off.
Not only that, but you'll lose your best people, since they're the ones who can get another job. The ones who struggle to get a job will be the ones who leave.
Regardless, firing 20% will be probably make the best look around anyway.
Comments
I'm looking forward to the day when the norm becomes "things have slowed down so we're all taking a temporary 20% pay cut".
If you're hiring full-time employees for short-term goals you're part of the problem, not part of the solution.
You mean a 20% paycut and double the equity, right?
If it's just the 20% paycut, all your best talent is going to jump ship and you end up losing people anyway.
20% was just an arbitrary example. The underlying point I think is the first focus should be on trying to retain all full-time employees. And I probably should've mentioned that the likely outcome would be that the higher ranks would make the sacrifice, not the lower levels (unless absolutely necessary), since they probably depend more on their salaries for the basics.
Those who are not willing to make the sacrifice probably don't really believe in the vision and thus probably aren't the right people to help you get out of the rut.
And one other caveat would be transparency. That way a company can't just arbitrarily request that their employees make sacrifices when it's not demonstrably essential.
Sorry, but this is a bit ridiculous. You could make the same counter-argument from the employees perspective as well.
"If my company isn't willing to sacrifice to pay my current market worth, then they don't really believe in me as an employee"
Is this company going to pay an extra 20% when things start going well again to make up the difference lost?
When you sign on for a job/salary you shouldn't feel bad for leaving if the company can't hold up their end of the bargain. If you only worked at 75% of the capacity they thought you were going to, you'll most likely be fired.
That's not the point really. The criteria are: If a company is demonstrably (ie. open financial books) having financial difficulties, then I think the default reaction should be "what can we do to get ourselves through this without layoffs". The current environment seems to condone a "fire as first reaction to save the company" behavior. I would argue the default reaction should be "fire as last ditch effort to save the company". Before firing anyone the first reaction should be to find a compromise everyone is comfortable with so that everyone can find a way to help the cause.
Also I think there is merit to the point that if someone is not willing to sacrifice in times of scarcity, they are only thinking about themselves and thus are not mentally in a state conducive to helping the company to get out of its financial difficulties.
I've lived this situation. At one point in my career I had people on my team who I thought were truly brilliant, and I vouched to ensure their happiness and comfort in spite of difficult times. They simply took that gesture of goodwill as a sign of weakness and feasted like vultures without any real uptick in output in return.
In the end the lesson is that no matter how brilliant or gifted you are, a true sign of loyalty or dedication to a company's cause in the form of sacrifice is far more valuable than a self-absorbed employee who can churn out good code, but only as long as everything is going in their favor.
EDIT: And that's not to say a company shouldn't find ways to sacrifice as well. For example additional equity should certainly be on the table as an option. You can't expect people to give without expecting anything in return should things turn around and the company should eventually get back on its feet financially.
Why? The 20% that are fired can get other jobs. The group as a whole ends up getting paid more with lay-offs than with pay cuts.
Being fired is an unplanned event. So the likelihood that someone who is fired is in a similar negotiating position as someone who leaves a company unannounced is highly unlikely.
Especially people with families. When faced with the decision of "either accept something at lower pay or risk your family starving or eating in soup kitchens" I think the decision is obvious.
Then again they could wait 6 months or several years more for the perfect position. One that pays similar salary, is in a similar location which will not require a relocation, and similar benefits so no additional out-of-pocket expenses for things like health insurance. The higher up on the food chain you go the less likely you'll fall into a comfortable situation. And even lower on the food chain it's not a certainty that things will work out. It's far less likely they'll be in a position to negotiate. Your first reaction will be "first company to offer me something I'll take" because lower wage employees generally have far less saved away for situations like this.
So net outcome IMO will probably just end up being alot of people accepting less than ideal offers given their less than ideal negotiating position.
Also don't forget that the dynamics of these situations in rural vs urban populations are going to be very different. IMO you probably need to be in a city like New York or London for things to work out in a net-positive way for employees who are laid off.
Not only that, but you'll lose your best people, since they're the ones who can get another job. The ones who struggle to get a job will be the ones who leave.
Regardless, firing 20% will be probably make the best look around anyway.