A hard truth about many of these mass-layoff announcements 😔

For publicly traded companies, nothing is more important than earnings growth 💸

“Cut-throat business in Wall Street. How the inexperienced lose their heads.“ (Source: Library of Congress)

Getting laid off can be devastating.

In their effort to soften the blow, the people delivering the bad news will often communicate how they didn’t have any other choice.

These layoff conversations often go something like this:

We’ll get right to it. First, thank you for your time. As you already know, the economy has fallen on tough times. Our industry has been affected. And our company hasn’t been able to avoid the downturn. In an effort to reduce costs, we are restructuring our business. This has resulted in the elimination of a number of positions. And unfortunately, your position has been impacted. You will be paid for two months with benefits, but today will be your last day at work. Chris from HR will walk you through the details. Finally, I just wanted to thank you for all your hard work and dedication for the past eight years … [blah blah blah bullshit].

Sometimes, your employer is in actual financial distress and risks bankruptcy by keeping you on the payroll.

But that’s not always the case.

Sometimes, your employer would likely be able to ride out a downturn without the business operating even temporarily at a net loss. So frankly, much of this language is tailored in a way to gaslight you into getting the impression the company was in financial distress.

Why would they do this?

With big companies, especially publicly traded ones with lots of shareholders, it’s not good enough to be profitable.

Shareholders want profit growth.

Laying off workers to protect profit margins 💰

Among companies that recently announced mass layoffs were Alphabet and Meta Platforms. Last week, both companies announced quarterly financial results and provided analysts and investors with guidance on their business outlooks.

The Wall Street Journal’s Dan Gallagher wrote about the news and highlighted some hard truths about recent layoff announcements. From his piece on Alphabet earnings Tuesday (emphasis added):

…Further improvements to Google’s bottom line are likely, though. The company’s total head count of nearly 191,000 workers doesn’t yet reflect the laying off of 12,000 workers announced earlier this year. Google indicated most of that would be done in the current quarter. Wall Street expects the company’s operating income growth to pick back up this year and resume a double-digit pace by next year.

Alphabet earned $4.56 per share in 2022. According to Yahoo Finance, analysts expect the company to earn $5.26 per share in 2023 and $6.21 per share in 2024.

This is not a company struggling to stay profitable. Rather, this is a company doing what it can to keep profits growing.