- Advertisement -

The wheels haven’t fallen off Twitter—yet. What that says about big layoffs

Peter Cappelli, Wharton expert
Peter Cappelli
Peter Cappelli is HRE’s Talent Management columnist and a fellow of the National Academy of Human Resources. He is the George W. Taylor Professor of Management and director of the Center for Human Resources at The Wharton School of the University of Pennsylvania in Philadelphia. He can be emailed at [email protected]

Elon Musk seems to make the headlines just for waking up in the morning. Especially in the past few weeks, there are plenty of new stories about what is happening at Twitter—or, more accurately, what is not happening.

- Advertisement -

As you no doubt know, when Musk acquired Twitter last year, it seemed like a mistake: He overpaid for it and apparently didn’t really want it, but somehow had committed to buying it. Not a good start. Then, he laid off half the employees and offered the remaining ones a bizarre value proposition: expect longer hours and harder work. He mocked those who quit and slashed the workforce further, eventually cutting the 7,500 employees down to 2,000.

The headlines now are that, despite expectations and claims of employees, the wheels have not yet fallen off Twitter. It is still operating, and apparently other tech companies are now starting to wonder if they could also slash their workforce and keep going.

What could possibly go wrong?

This approach has appeal because leaders are always under pressure to become more efficient and cut costs. Unlike other CEO tasks such as acquiring companies, you can’t just order the organization to get the same amount of work done with half the employees (or, in this case, less than one-third). Except for some individual contributor jobs, requiring higher output or being fired—what used to be known as a speed-up—isn’t possible in most white-collar jobs where employees have many tasks to do, much of the work is project and team-based, and job performance is not easy to measure. Rather than the hard work of going group by group to figure out what could be improved, you could cut employees and jumpstart a big performance-per-employee improvement.

See also: In this age of large-scale layoffs, can HR tech help you get them right?

- Advertisement -

But how does it actually work when you cut employees—in the Twitter case by two-thirds—and yet the place still runs? Could you cut two-thirds of the jobs in your organization and have it be OK? There are three possible answers regarding Twitter: One is that most employees didn’t actually have any work to do; or if they did, what they did never mattered, and no one noticed before. What are the odds it is like that for two-thirds of your jobs?

The second is that the remaining people now each do the work of four people, and they are somehow OK with that. Given that there appears to be no upside to doing so, the reality is that many of them will likely quit as soon as they can, and the best ones with the most marketable skills will go first. The labor market, if anything, is getting tighter with more jobs being created, so good people have a choice.

The third option is that they figure out how to work more efficiently. That’s the hope—more likely, the triumph of hope over experience—because the easiest way to get more efficient, or appear to be more efficient, is to just stop doing lots of things and focus only on the tasks that are immediately noticeable if you don’t do them.  We first drop tasks that are not monitored closely, like getting new customers and looking after existing ones, followed by tasks whose impact doesn’t show up until the longer-term, like maintenance. Maybe there are tasks we no longer need to do, but do you want your line managers making that call?

One might say, Musk and others who want to follow a similar path know this isn’t sustainable. They want to cut as far as they can to find out the bare minimum needed to operate and then add people back from there.  That reminds me of the aphorism, “I finally got my mule weaned off food, but he up and died.”  When you get to the point where you can say, “OK, the wheels are literally falling off,” only then do you start to see what the damage looks like: lost and irritated customers, competitors taking your business, a broken pipeline of  R&D or new products and services, and so forth.

See also: What Can Elon Musk Learn from Steve Jobs?

What then?  It’s not like flipping a switch to rebuild, hire new people, get them up to speed and try to regain all the tacit knowledge that went out the door with the layoffs and quits. In other words, you’ve been slowly bleeding down during this experiment, and it will take another six months or a year to get what you now think are the key capabilities back online. Counting the spiral down and the climb back up, it will be at least a year or two of damage. Depending on what your competitors do, it may be irreversible damage.

Why does anyone think this approach is worth it? Two reasons, I think. One is because we prize efficiency over effectiveness: If we can do it cheaper, that looks better, as I’ve argued before, because we measure costs but not what we have lost by cutting—at least not for a while. The other reason is because it is just easier for leaders. Trying to reengineer operations and change practices is a lot of work that takes time and energy from the senior leaders. It is so much easier just to cut, focus on outside deals and hope that employees will figure out how to get everything.

Sounds like magical thinking, doesn’t it?