The Real Reason You’re Being Laid Off

you didn't do anything wrong

Here’s a sentence that makes me feel weird: This week, I had a post go “semi-viral” on LinkedIn. I felt compelled to say something after reading about yet another brutal round of tech layoffs, which feels like it’s been a constant onslaught for months. For knowledge workers, in particular, it’s very confusing, daunting and demoralizing to hear that the US economy is doing great, their companies are citing record profits and yet CEOs across nearly every industry are laying off big percentages of their workforce.   

Since 2022, more than 425,000 people have been laid off in tech with another 270,000 projected to be laid off by the end of 2024.  There are a million think pieces and theories about why this is happening despite record earnings and other markers of success from some of these companies, from right-sizing from the outlandish tech hiring spree that happened over the last decade, the idea that AI is taking our jobs faster than we think and maybe companies are preparing for a recession that may or may not happen. 

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Honestly, the reason is less interesting to me personally than the human impact. Layoffs happen because of statistics and market forces and stock trends, not because of individual abilities - and yet the individual is the one who bears the cost. Reading statistics and big numbers about people who, by most Americans’ standards, are doing extremely well in life can easily numb us to the human story behind it all. Even the Department of Labor recognizes that “being laid off from your job is one of the most traumatic experiences you can experience in life.”  It’s a catalyst for exponential levels of stress – stress that can lead to depression and trigger cardiovascular and autoimmune diseases. It wreaks havoc on our emotional lives, almost like a death that brings overwhelming grief, coupled with the impact on our self-esteem and self-worth, mixing up a potent and uniquely distressing psychological cocktail. The financial impact and uncertainty of watching colleagues get the axe and knowing any day it could be you without any warning, the limited resources given to help us navigate the aftermath, and the shrinking job market, it’s taking people years to find work and sometimes even longer to recover emotionally and psychologically from the upheaval. All this can be true even in the best-managed firings, and as you know if you’ve seen viral TikToks of people filming their HR exit meetings, the reality is often dark and downright inumane. If you’re lucky enough to even get a face-to-face conversation, leaders are not equipped and prepared to handle you with care and dignity.  

I’m up at night largely imagining the impact on our society of more than 700,000 people projected to be laid off over 3 years. The damages to individuals, families, marriages, the impact on kids.  Are companies taking this into consideration when thinking about layoffs?  They want you to believe that they are, but they’re not. They are exclusively focused on maximizing shareholder profits. Even leaders who want to consider that aren’t given permission to think compassionately. For every company with a genuine social good initiative, there are a thousand more that don’t seem to think they have any responsibility or even any connection with the world and the people they exploit and rely on both as consumers and as workers. 

In 2018, as a “rising leader” at Netflix, I was invited to participate in the inaugural leadership development academy that the company was developing.  Reed Hastings (one of my favorite people), founder and longtime CEO of the company, had a deep love for developing and cultivating leaders inside the company.  He had shared that one of his most formative experiences as a business professional was attending the Aspen Institute fellowship – a legendary program designed to bring top leaders together for deep discussions, debates and conversations around what it means to lead. The program is unique because it compels you to think outside of just the corporate context and consider who you are as a leader and the legacy you want to leave behind.  Reed shared that his experience at Aspen was a spark that helped him create the Netflix culture that is now iconic and a gold standard. 

The leadership program I attended on his invitation, based on and created with some of the same people as Aspen, was no less amazing for me. It was a five-day offsite in the middle of nowhere with about 20 other leaders from across the company. We were given a book of material and readings to read before we arrived, varying widely from science fiction and poetry to corporate case studies.  Each day, we sat in a circle and discussed 5-7 readings in great detail using the socratic method of teaching where the facilitator poses thought provoking questions that make you feel deeper and think higher.  

One of the essays in our material was Milton Friedman’s very famous 1970’s NYT essay “The Social Responsibility of Business Is to Increase Its Profits,” where the economist argues that the sole purpose and role of a business is to maximize profits for shareholders and nothing else:

“...there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.” 

What Friedman is arguing is that a company is an entity, it is not a person. And an entity doesn’t have responsibilities like a person does.  He states,  “A corporation is an artificial person and in this sense may have artificial responsibilities, but “business” as a whole cannot be said to have responsibilities, even in this vague sense.”  He goes on to argue that any person who works for the entity is contractually bound and obligated to serve its owners – which, in a free market system, is the shareholders. His perspective is that any individual in the company is free to spend their money however they want and participate in “social responsibilities” but the company should not spend its money in that way.

I recall this being one of the more heated debates within our group.  The room split 50/50 on whether we agreed with this philosophy – you were either profit-first, people-second or people-first, profit-second. I was in the latter group.  It was fascinating because a company is quite literally nothing without people? I fundamentally don’t understand how you can disentangle the two.  I don’t understand why the people who make up the company, pour in their time, talent and resources wouldn’t at least also be considered of equal value to shareholders.  

Despite the debate, what was clear is that this doctrine is one that is widely accepted in business. Most leaders of public companies subscribe to it without question.  It helped me understand the cutthroat nature of business and how it truly is profit over everything - not just as a side effect or function of market systems, but as a planned and intentional philosophy. Even before Friedman’s essay, there were other economists like Fredrick Winslow Taylor in 1911 who shared principles around scientific management that included things like “In the past the man has been first; in the future the system must be first.” 

When you start to understand that the leading theorists and economists over the last couple centuries believe that the people who make up companies and businesses are not important, not a priority and an afterthought, you can then start to understand why the mass layoffs today are happening – they are always figuring out how to maximize their profits. 

Profit margins are a measure of how much money a company is making on its products or services after subtracting all of the direct and indirect costs involved.  When companies are in growth phases, they are willing to hire employees at higher salaries so they can attract top talent. With that top talent they are able to leverage them to grow the business.  Now that the businesses are successful, they look to cut expenses so they increase their profit margins, which is one of the key signals to Wall Street about the health of a business and potential for future profits.

Talent is usually one of the most expensive line items. Taking economics at its word, this should mean that talent is the rarest, most valuable and most precious resource. And yet, top talent is usually the first to be cut  because companies somehow convince themselves they’re a replaceable luxury (a contradiction in and of itself). Whether or not companies will hire people back is still up for debate. If they do, it will be for younger and cheaper talent so they can maintain those margins. Maybe they did over hire, or maybe AI is taking our jobs at a faster rate than what we expected.  But in either case, the underlying driving question is always “how do we maximize shareholder value and shareholder profit?” Another way of putting that, in my opinion, might be “how do we manipulate our numbers this quarter to make people with little understanding of or concern for the long-term goals of our business feel better?” 

As long as we are living in this system, this will be the case.  We can choose to be frustrated and disenfranchised by it, or we can choose to move differently as employees and adopt a new mentality where we take our agency back and move in a more empowered way.  For our own safety and survival, we have to exist in a way where we don’t listen to what companies say, but what they do.  We have to start existing in a way where we walk into companies with a clear intent of what we’re looking to get out of the situation and being unapologetic about what we need.  We have to start existing in such a way where we understand that our lifecycles within a company won’t be forever, so we create a more healthy relationship where our lives and wellbeing are truly the priority. 

Next week, we’ll be talking about what to do on an individual, day-to-day level to start fixing all of the above — and why I think contracting and consulting is the future. Until then, I repeat: we spend nearly 70% of our lives at work.  if you don’t love your work, it’s nearly impossible to love your life. 

And you deserve to love it all. 

m