One big topic of conversation recently has been the big mass layoff Tesla recently did. Some people woke up on Monday morning only to find out that they didn’t have a job by the end of the day. If this is the first you’ve heard of the layoffs, I’d recommend starting with
But, while everyone is asking about the causes of the layoffs, I’ve seen very few people ask a more fundamental question: are layoffs the answer at all?Whatever you think the causes of the low performance are , one thing seems like it’s almost universally assumed: that a company facing trouble needs to do layoffs. Some people assume that all companies should do a round of layoffs every few years just to keep the company healthy and drop low performing workers even if the company is doing well.
When you’re talking about 10% of workers getting laid off under the theory that layoffs are not only good for the company but essential, you’re starting to go beyond the health of the individual company and you start getting into the realm of a whole country’s economy. When enough companies decide a recession is coming and then literally decimate the economy, it could even be a self-fulfilling prophecy.
When studied in 2009, it was found that the short-term savings a company gets through layoffs is overshadowed by the bad publicity, the loss of institutional knowledge, lower engagement among the remaining employees, more turnover, and lower innovation. These factors end up hurting the company more in the long run.
And new employees that the company needs later? They’re less likely to roll the dice with a “hard core” company that is seen doing layoffs that are in any way not based on performance.