Employees First, Profits Second.
The economy is in a sore spot, a recession is here and layoffs are plentiful; even within our own luxurious Internet industry. But what is bothering me most are the organizations that put profits before people; and hide behind terms like “right sizing”. While I am a huge fan of creating great work environments, a culture and developing unique business models; I am not a fan of doing so at the expense of human beings. If you have to “right-size”, all that really means is that you had it wrong and screwed up the first time around, your first attempt at it you clearly “wrong-sized”.
Your business model is not a one-time thing you create with far-reaching projections at the start of your entrepreneurial endeavor. It something that stays with you and is constantly evaluated; it is something that becomes more stable and predictable with time. So when we have giants like Google and start-ups like Carsonified in our industry with layoffs of the best-of-the-best talent; we have to ask, we have to question – did these organizations wrong-size themselves into these situations and were people the ultimate expendable resource? I hold a lot of respect for Google and Carsonified and the people that did and currently do work there; I don’t call them out intentionally, just as two good examples of very popular and influential organizations within our community. With Google layoffs in the tens of thousands and Carsonified at almost twenty-five percent, lets step back and take a look at the praise we once gave for what could have led to the demise.
We all loved the idea of Google giving twenty percent of their employee’s time back to them to work as they please. But, now looking back at it, if the entire company worked twenty percent harder, perhaps the layoff number would be tens of thousands less? We all loved the idea of Carsonified working a four-day work-week and thirty-five days of vacation. But, now looking back at it, if the entire company worked an extra day a week and took a couple weeks less of vacation, perhaps the layoff number would be a percentage significantly lower? Can we at least pretend to assume that if Google worked twenty percent harder, it would have had to hire twenty percent less or perhaps in turn would have contributed twenty percent more in revenue? Can we assume the same for the team at Carsonified; working more means hiring less, making more and ultimately laying off less or none at all? And remember, when I say “working more”, that really just brings them to working the same as the rest of us; a forty-hour, five-day a week work week. Nothing radical and sexy there, no speaking engagements or book deals for suggesting such a thing, but it comes at the expense of less human casualties.
I don’t mean to imply that Google or Carsonified ever really had it “wrong” or ever voluntarily put profits over people. But they both had no issue flaunting their radical culture in front of the rest of us and capitalizing on it as much as possible, so it does warrant public questioning; did they have some of it wrong?
I have a business, a services company, that is most vulnerable to a bad economy. I also have a business in which I promote the idea of culture and environment over all else. My company offers unlimited vacation days, highly competitive salaries, fun internal projects, available time for side projects as well ridiculous time for things like Mario Kart; all in a studio that is amazing beyond what we probably deserve and without a doubt more so than what we “need”. We also put a lot of our profits into ensuring we are all working on the best machines, monitors (we love you Apple), and software that money can buy. But, we make sure that we remember this is for our team, our employees. It is employees first and profit second. We believe that a great team will do great things, and we “assume” that a great team doing great things will result into a profitable organization. I am not immune to a bad economy or layoffs; I fear it and do my best every single day to avoid any negative impacts an economy out of my control may have on my team. That is the important difference; I worry about how these environmental issues will affect my team, not my business or my profits. Again, we believe in people first. Great people make great organizations, and we “assume” that great organizations remain profitable – that is our mission first and foremost.
So, while we currently remain unaffected by current economic conditions, this doesn’t mean we don’t think about them, their impact or prepare for them (fingers-crossed while knocking on wood). The objective is to never have to “right-size”; to always be evaluating that business plan and always be looking at the current and projected times of your organization and constantly be adapting accordingly. If you are running your organization correctly, layoffs may be appropriate, but they should never be a surprise.
I’ve explained a fundamental element of our business model, the “assumption” of profitability based on people, talented people. When the assumption fails, the organization unfortunately fails. However, the assumption can continue to be correct and economic times can still provide a strain on organization’s bottom-line. But when the strain exists, why are companies so quick to take it out on their best-of-the-best talent? Why do so many other organizations put profits over people? Why are they not cutting the twenty percent free time at Google or the thirty-five days of vacation time at Carsonified? And if they are, why are they hiding it from us when they were so quick to flaunt it in front of all us? If you are really here to share, then share the good and the bad; it is only fair to us all. If your revolutionary way of working that you were so eager to speak about ultimately equated to significant layoffs within your organization, it is almost a responsibility to share that as well.
When my times get tough, I know exactly what I will do. I will not layoff a single person. I will not let my ego get in the way of what is really important to my organization; the talented people that make it so great. I’ll break my lease and move to a smaller more reasonable “office space” before I’d let anyone go. As much as I love our studio and as proud of it as I am, it isn’t our company, our team is our company. I’d sell the assets that are more superficial than necessary before I’d let anyone go. I’d work harder, faster, longer and with a decreased pay before I’d ever let anyone go. I’d suspend my pay as long as I reasonably could before I’d ever dream of telling someone else they’ve lost their job. I’d ask the team to play a little less Mario Kart and perhaps work a couple extra hours before I’d walk in with pink slips. I’d resell our beautiful 23” Apple Cinema Displays and have us all work on our laptops before I’d ever tell anyone they’ve lost their job. I’d ask the team to embrace the lack of bonuses or raises before I’d tell them their salary is no more. People are often the first “expense” to be cut because they cost the most; but we have to remember that people cost more because they’re worth it.
The reality is that in an effort to keep top talent I’d eventually be losing the things that attracted them in the first place. But I’d much rather the team find a new job because they didn’t like the reduced Mario Kart time, the new smaller office, or the extra hours than to be laid off from the job they have. There is no point in having a company where no one is happy, but there is no point in keeping the idea of a company that once was when everyone has been let go. We would work back to where we started as opposed to hanging on what we’ve recently achieved; always remembering that it is people before profits.
This is easy for me to say because as I mentioned, I am never “right-sizing”. I am always evaluating conditions and preparing to adapt. We are always over booked and always have more work than we can handle; but I’d rather pass along leads to our friends at other agencies before I’d ever hire someone I wasn’t positive I’d never had to layoff. Some agencies love throwing their growth and size around, as if something to be proud of, as if they forgot it is quality over quantity. I gladly give up potential clients and potential revenue every day, because it means never growing bigger than we really are or really can be.
It just seems hard to be embracing my twenty-percent free time at Google knowing it is coming at the expense of a recently laid-off co-worker. Or, would be tough to be enjoying my upcoming three day weekend at Carsonified knowing that the person who used to sit next me is now nothing more than an empty expensive Aeron chair.
Again, not to pick-on Google or Carsonified too much; but the next time you find yourself praising free time for projects, four-day work weeks and Aeron chairs at your job, just remember that the sources of these thoughts ultimately “wrong-sized” themselves into an unfortunate situation. I know that business development and the current economic conditions are of very controversial topics – I am no expert, just one man with an opinion and a blog to share that opinion. My entire business model is based on an “assumption”; everyday I work towards making that model work and do not proclaim that I know better or am better than organizations such as Google or Carsonified.
I feel for all of those who have been laid off and wish them all the best in their search for employment! I hope organizations can better adapt to changing conditions so that they are also not “wrong-sizing” themselves into these unfortunate situations of such significance.
Simply put, be an organization that will change its model for its people, not change its people because of its model.
- December 15th, 2008
- 33comments
- I am a proud member of the 9rules network
You, sir, are a rare breed :) Can’t help but wonder if google maps or gmail ever would have happened had google not had an 80/20 arrangement, however. Wonder what the conversion numbers are on a dedicated R&D department vs ordinary employees who are motivated enough to come up with stuff on their own, and how do they as an organization keep that motivation up when times are doubtful?
Great question, even using Carsonified as an example, I wonder if Matt would have existed without their ‘idea week’.
I don’t know. I also don’t know if the lack of Gmail or Google Maps would have necessitated less hiring and thus less firing? I also don’t know the revenue numbers for either product; as much as I love them and as much as I can’t imagine online live without them; did the ROI end up working out in the end? The ROI for the employees of Google, not for Google the mega-corporation. Did it work out?
Look at places like Flickr; their top designer was let go. A designer who has had influence on us all … a designer that really made the experience of the product the product itself. The product became more important than the person which makes me feel as though they forgot that the product is only what it is because of the person.
I think you’re missing the point of perks like Google’s 20% free time. They are meant not only to attract and keep talent, but it could be argued that companies who don’t strictly enforce the 40-hour work week actually get more out of their employees. In Google’s case, a fair amount of innovation has come from those “free time” projects. Giving people the time to explore things that may or may not ultimately help the company’s bottom line can lead to things that can end up helping in ways that may be completely unexpected.
Judicious amounts of vacation time a la Carsonified are probably a little harder to justify, but burnout in our modern lives is a factor that affects employees’ performance. I don’t pretend to understand all the economic factors either; I just don’t think it’s as simple as drawing a direct cause/effect relationship between these company policies and recent layoffs
Me on the other hand would start firing people left and right when times get tough. Starting with developers. Who needs them?
Seth,
I get what you are saying, I think Dan was alluding to the same thing. However, it is still a little tough for me to swallow for you tell me that I have 20% free to work on something that may or may not be used, may or may not be profitable while tens of thousands of my co-workers are losing their jobs. And remember, for all of the cool projects that do come out of the Google 20%, there are many more that never make it launch.
I’d advocate for some direction with that 20% of time, that is an example of when the company is obviously growing beyond its means.
I really ask you, how much is innovation worth? We all love innovation, but firing over 10,000 people is the wrong kind of innovation. Hell, for that sort of human casualty, I’d rather keep using my old mail client.
I don’t know if I have the numbers right at all — but clearly the 20% thing isn’t working or isn’t sustainable. I can think of about 10,000+ people who can attest to that.
You obviously have the heart at the right place Martin. I agree, no employee should be fired (if they were good hires in the first place anyways), the company is not their paycheck, its the employees who are the company’s paycheck!
About the 20% “free time” Google is giving back to its employees… I’d have to agree with Seth there. At my current job, I can work no problem for 40 hours… but by “work”, I mean actually being there. In no way can I provide 40 productive hours. I stay here that long every week because it’s mandatory, but I can probably deliver something like 4-6 hours per day of productive and constructive work.
If we all had the opportunity of dedicating 20% of our time on R&D, that would be awesome and probably one of the best move of my employer. Through R&D (because I pushed and was allowed to do a little), I came up with replacement solutions for many of our current systems… + this gave me the opportunity of bettering myself in areas where I lacked skills.
Anyways, I’d love to have you as a boss, you have a great philosophy about all of this. I hope the best for your company.
@Alex srsly.
Jerome,
Thanks for the comment. I think you and others are right about Google and the 20% thing for the most part. But I guess on some level it even comes down to a debate of where to put your time and money in hard economic times; is research and development more important or less? It is a hell of a question.
Thanks for the comments about my philosophy. I know it doesn’t work for everyone in every situation, but I do feel it is fundamentally important for most in our industry, and can work for most and probably should.
Dan and Alex,
I probably should have clarified my definition of “people”, developers don’t really count. Agreed that they should be let go before any reduction in Mario Kart time.
Obviously kidding!
Martin,
I agree, if I were a Google employee seeing all my coworkers losing their jobs, I would think twice about the 20% time too. But I still say that you’re thinking of it too much in linear terms (either Gmail or 10,000 jobs).
Also, this might sound harsh, but layoffs aren’t the end of the world. Granted, this is coming from someone who has never felt the sting; but the good ones will survive and rise again. In the massive numbers we’ve been seeing lately they can look horrific, but I’ve heard countless stories of someone who was laid off only to start their own business which they wouldn’t have otherwise, or reassess and pursue what they really wanted to do all along but wasn’t the “safe” choice. That’s kind of off the main topic, but I thought it was worth adding that the pruning can (for some), long-term be a good thing. Not an excuse to justify firing people, just an observation that life doesn’t end after layoffs.
It’s cool that Google respects innovation and accommodates professional growth within their organization.
It’s not cool that the majority of Google services are free and are supported by an ad based revenue model which has failed us before. Google has mesmerized investors on Wall Street with its high valuation and unclear profit model since it’s initial public offering.
I’m afraid Google has had this coming for a long time. It would be naive for any employee who works their to think that layoffs weren’t inevitable.
“Right-sizing” should be discussed when things are good — not bad.
Seth,
I think you make some great points. I agree that being laid off is not the end of the world and great things can come of it.
I know what you mean about thinking in to linear of terms; but I don’t mean to equate Gmail to 10,000 jobs — more so I wonder, as mentioned in my post, does the 20% free time add to those lose of jobs? Is working 20% harder on the bottom-line better for the jobs of everyone over the side project you are working on that may or may not come to fruition.
Nick,
Great comment; I agree with your use of “right-sizing” in bad times, it is just a nice/friendly word to hide behind. Why don’t we call it what it is, “holding our employees accountable for upper-managements inability to sustain an organization after wrong-sizing it into a bad situation”.
Martin -
I agree with your philosophy of putting people first, especially in service and talent-oriented industries - both for humane reasons and because it is likely the best route to success.
I also agree that being careful about hiring decisions is fundamental to being a good manager - never hiring unless there is serious long-term potential to be able to support the employee.
But I think that laying off people early in a bad business cycle can often be the most people-oriented thing to do, both giving the people laid off a chance to find other work before the market is flooded with too many others, and keeping enough revenue to keep the remaining business intact. The absolute worst management style, which is quite common, is to be afraid to lay off people and to hide the bad business news from employees - usually resulting in the business failing eventually, with much more detriment to a wider group of people.
Of course, there are some managers who just flat-out made mistakes in the number and type of employees they hired, and will use the current economy as a cover for legitimizing layoffs that are really due to their mistakes or lack of vision about the future. But, as you know, managing is really difficult and there are a lot of variables that are sometimes not predictable or straightforward.
Best wishes with the great management job that your firm seems to be doing!
Victoria,
Thanks for the comment. I think you bring up a good point about not being afraid to lay off when necessary. I think that is something that we all need to remember. Never being afraid to admit when times are tough and be transparent about that.
There is this desire to be more than you are or bigger or better than you are. Why grow to an 11 person company when really you are only an 8 person company — only grown when you know you can sustain it, not just because you can at the time.
Martin,
Overall I think you are spot on in your belief of people over profits. However, like other commenters, I don’t know if the need to downsize can be blamed on 20% time and four day work weeks. I think the biggest issue is whether the company is publically or privately held.
As a private company, you have much more leeway in choosing to value people over profits than a company that has received funding or is publically traded. Investors don’t care about people; they care about profits, and any company that would choose people over profits could find themselves at the wrong end of an investor lawsuit. I think this is actually a great argument for keeping private control over a company as you have done with Nclud.
If anything, this recession will hasten the death of companies that relied on unsustainable business models (like not making a profit). Those that do survive will have been on solid ground from the start or will have “right-sized” into a viable company.
I agree with you in principle. Having spent 6.5 years at AOL, I’m all too familiar with seeing the rank-and-file pay the price for mistakes made far above their heads. But I can’t help but think that you’re contradicting yourself very early on in this piece. You say this:
‘If you have to “right-size”, all that really means is that you had it wrong and screwed up the first time around, your first attempt at it you clearly “wrong-sized”.’
…and follow it with this:
‘Your business model is not a one-time thing you create with far-reaching projections at the start of your entrepreneurial endeavor. It something that stays with you and is constantly evaluated’
The second quoted bit is dead-on. You cannot get it right once and then leave it alone; personnel needs are fluid, and shift with the business, which is itself influenced by both internal forces and external forces that are outside of the business’ control. Because a company has a round of layoffs doesn’t mean they clearly wrong-sized. It can just as easily (and more probably) mean that they were right-sized a year ago (for example), but what was right a year ago is no longer right, for any number of reasons. It is not proof positive that a year ago they mis-predicted their needs a year into the future. It’s only evidence in support of what you yourself said: It [is] something that stays with you and is constantly evaluated.
What a wonderful article and it makes me want to work for you. Any openings in NYC? :~)
Thanks for the comment! Unfortunately, we are not hiring right now (remember, that is a good thing!).
I think your comment, as simple and nice as it is, really sees the point of the article. This is a postive commentary on how companies should be viewed as groupings of people, not as revenue generating machines. I know that gets harder for large publicly traded companies, but for the web industry and those start-ups in it; remember that the talent you have on staff is how you got to where you are.
Hey Martin,
Thanks for opening up the conversation here. It’s an important topic.
We did everything we could before we decided to lay off Elliott, Simon and Dom. We are also currently trying to rent out our office but in the curent market, we’re not getting any interest.
I think there’s a problem with your argument though. You’re basically saying that you’d cut *everything* before you’d be willing to cut jobs. That’s fine, but at some point, you’re going to destroy the very company you’re trying to save. Your team’s morale and belief in the company will eventually be worn down and ruined. At that point, the shell of a company you’ve saved might not be worth saving.
The primary reason we decided to lay off part of the team was to save the jobs of the rest of the team. Sometimes you have to choose.
I think you’re accusation that we put profits before people is on over-simplification of reality. It was a choice to sacrifice a small number of the team’s job in order to save the rest of the team. There just wasn’t any other option.
Ryan,
Thank you for commenting; as I mentioned earlier, I highly respect you and Carsonified and mean no disrespect by using your company as an example.
I tried to touch on all of your points in my post as I know they are very much important, but I am glad you raise them.
1. As I mentioned in my post, I agree that my actions would eventually take away from the very essence that attracted top talent in the first place. If my company is built on culture and the culture changes, the company is no longer the same. But I’d argue that asking people to work extra hours, moving office spaces and reducing Mario Kart time are far less demoralizing than watching your co-worker lose their job right at the peek of the Holiday season. I think it is a sad testament that most of us would remember the lack of Mario Kart than we would our once-was co-worker, as true as it probably is. But as I mentioned, would rather my team leave me because they found a new job rather than me take away the job they have. I want my company to change for its people, rather than people change because of my company.
2. I don’t mean to imply that Carsonified or Google put profit before people; I use you as an example and the title of the post can make the link, but that is not my implication; I tried to reference this several times throughout the article. I don’t know either organization intimately enough to even make such an accusation. I use you both as an example because you both hold a lot of respect in our community as great organizations, ones with interesting models for how to treat employees and their time — a model we all look up too. I just want people to start questioning the model now.
Often, we look for innovation, but never hold it accountable. We are awestruck when innovation peaks but never hang around long enough to see what the real result was. I look at the Carsonified Jobs page for example, and like most, I say “wow, I’d love to work there”. And as a business owner, I say “wow, I’d love to do that also” — so I strive to do it because the idea of it is amazing. But we never come back to ensure that the idea was actually sustainable. I am fearful that 4-day work weeks, Aeron chairs and 20% free time might not be the best model after all.
Again, my deepest apologizes if you feel any personal attack.You are an example because of the weight you hold in this industry. That and because I know your mentioning of your 4-day work weeks has been mentioned hundreds of thousands of times throughout the industry.
No worries - I wasn’t offended at all.
I don’t think the 4-day work week has a whole lot to do with the whole issue, to be honest. We’ve always said that everyone had to get five days of work done in four - we don’t *do* less, we just *work* less.
I think it’s a red herring to say that the 4-day week, Aeron chairs and cinema displays are directly linked to lay offs. As far as the hardware, that was bought and paid for a long time ago.
It’s as simple as this: we thought we could sustain those three salaries because that’s what the cashflow said six months ago. I was wrong and I already admitted that. However, I don’t think I was alone in not anticipating the current gravity of the economic situation.
It has been touched on a bit - but I think one of the things that needs to be emphasized is “the street’s” pressures on quarterly numbers which often forces a public company to think on shorter term goals then they really should. This is an unfortunate reality, and one thing to consider before going public, and even when taking on investors.
I am also being told that the fact checking on the status of Google employees leaves a little to be desired. I do think that contract employees should be treated differently then full time employees. They often benefit when times are good, and often suffer when they are not. It is part of the risk/reward system of capitalism.
Ryan,
Thank you for following-up and thank you for your transparency; I think we all really appreciate it. Especially as many of us prepare for this recession. These are not easy times and these are not easy decisions.
A company is not the studio, the fancy MacBook’s, or the benefits it provides. A company is the team which makes it up.
If nclud was to move to a smaller studio and (God forbid) cut Mario Kart, I wouldn’t mind. The one thing that makes nclud, “nclud” would still be there, the team.
Sure, the unique culture is what reeled Doris, Dan, and I in, but after awhile, the team becomes the culture, and not even the lack of Mario Kart can take that away.
You can’t have that at a company like Google.
It is a good thing and if you were I’m the last one you’d want since I can crash a computer and spontaneously generate bugs simply by touching the keyboard. My son will swear to it, but hey, we all have our own gifts. :~)
Your point about what values we measure is one that too many public corporations have lost sight of in aiming for a quarterly number. There are more values than dollars and our National pursuit of ROI has cost us dearly in communities losing sustainable businesses that help to enrich our quality of life and stability in trade for an offshore price cut.
Many years ago, when I was first doing Venture funding deals I would argue that in addition to the talent that formed the startup and the return on investment we needed to evaluate the off balance sheet assets that included the value of the environment to foster synergy and commitment both within the organization and community and view it as more of an organic entity than just an industrial unit of production.
It may seem a bit more like an accepted notion now with everything from your group to the Googles of the world having succeeded, but in the era that predates the Internet it was a radical notion. Happily there were quite a few funders who accepted the idea and more than a few of those startups did find seed capital to grow and continue to thrive.
We do best when we all do well and I think you’re on the right track, one that many businesses will adopt as we redefine what constitutes success in the post TARP century.
I have worked for various companies over the years, big and small. How I was treated made a big difference in how hard I worked and how long I stayed. Keep up the good work. I wish more companies had your philosophy.
I did hear about the NFL laying off 11 people or something even though they made a profit in the millions of dollars. Was it really necessary to lay them off at this time to make a little bit more of a profit?
Thank you for the comment; I heard the same thing about the NFL — I wish were more knowledgeable about some of these organizations internal processes to speak to them.
MIke,
Thanks! Glad to hear you would stick around if Mario Kart time diminished, LOL — I don’t think Doris would :-(.
“I did hear about the NFL laying off 11 people or something even though they made a profit in the millions of dollars. Was it really necessary to lay them off at this time to make a little bit more of a profit?”
You also can’t forget that a lot of companies will also use “layoffs” (especially during bad economic times) to mean the same as “cleaning house”. I’m not saying that was the case here - but just pointing that fact out.
David,
Yup; I think some people use the term “right-sizing” to talk about getting right inline for the economic conditions, but also getting right inline with employees that might not have lived up to their potential.
[…] called out Google and Carsonified in my previous article, “Employees First, Profit Second.”, primarily because of their desire to flaunt their radical work cultures in front of the […]
Martin, don’t test me though..HAHA!