Brandon Southern is the former head of analytics at eBay, Amazon, and GameStop.
Brandon Southern
Brandon Southern is the former head of analytics at eBay, Amazon, and GameStop.
He explains that companies say they want efficient teams but don’t reward those who create them.
Southern also says that managers add headcount when seeking a promotion and bloat the company.
I’ve realized that managers are responsible for layoffs.
As the former head of analytics at eBay, Amazon, and GameStop, I have seen several layoffs throughout my 20+ years in the workforce. I’ve recently been thinking a bit deeper about why layoffs occur at companies such as Microsoft, Amazon, Google, and others.
At most companies, the reason for layoffs is almost always the same: trimming expenses with a goal to achieve better margins. But many of those expenses shouldn’t have existed to begin with.
From what I’ve seen, managers are responsible for layoffs because they end up bloating a company when seeking promotions. Let me explain.
When it comes to promotion size matters
To get promoted, you have to show that you’re able to manage a larger scope, which almost always includes managing more team members. But managers rarely inherit additional teams or team members. Instead, the only way that managers can demonstrate their ability to lead a larger team is to hire more people. By hiring more team members, the manager’s scope would naturally increase which increased the odds of being promoted.
Even though executives at every company I’ve worked at — including Amazon, eBay, Gamestop, VMware, and multiple start-ups — stressed the importance of creating more efficient teams, they never actually rewarded those who were able to operate efficiently.
So instead of incentivizing leaders to create more efficient and profitable organizations, managers are incentivized to do the opposite.
Efficient teams would often end up getting their expenses reduced even further because they’re performing well with their current resources (while other teams would see an increase in their budgets or more hires because it looks like they need more to operate).
At the end of the day, everyone wants a bigger team or budget
A manager’s cost-saving efforts don’t impact one team in isolation. A standstill on budget or headcount reflects on the manager and the manager’s manager — all the way to the top.
So even if a leader says they want more efficiency, what they really want is a bigger scope and promotion to help them move up as well. And efficient teams aren’t actually helping them get there.
And if you’re the person who is reducing scope and budget (actual or relative to others), then you’re working against your manager — which is never a good thing to do.
If this doesn’t feel convincing enough, we have the annual review process to offer additional evidence: Rarely do we see a goal written in someone’s review or performance asking them to reduce costs.
Without goals and targets for individual employees, they aren’t incentivized to become more thoughtful and creative to reduce costs.
As great as becoming efficient sounds, it’s almost always at odds with getting promoted.
This is why so many leaders first look to add more headcount instead of first looking to make the organization more efficient. And why not?
When times are good, money is flowing, riskier projects are accepted, and budgets are getting approved. It’s quicker, easier, the smart choice for personal success, and everyone else is doing it. But it’s a ticking time bomb.
By not temporarily changing the mindset to assume that the only way to grow is through efficiency and cost savings, managers will take the shortest and most lucrative path — which is to default hiring instead of increasing efficiency.
This has and will continue to cause organizations to quickly become bloated while the increased operating expenses are shadowed by recent revenue and profit growth.
But when the next inevitable downturn occurs, the company will be forced to remove the bloat by reducing headcount to maintain costs and margin.
Executives can break the cycle by rewarding efficiencies
To break the cycle, executives will need to address problems head-on and reward for efficiencies while not over-rewarding to the point where managers focus on making their organization as small as possible.
For example, if executives over-incentivize for efficiency, managers could try to reduce expenses and headcount to a level that leads to a reduction in long-term investments that are crucial to the company’s success. Instead, they should maintain a proper balance of rewarding managers that champion cost-saving process improvement plans while hiring for strategic reasons and projects.
However, given human nature and the constant desire to build something bigger, I doubt that there is any real concern with managers trying to make their organizations as small as possible.
Brandon Southern is the former head of analytics at eBay, Amazon, and GameStop. He also creates TikToks about data analytics and career development.