Anatomy of a Tech Layoff

As a product manager, I want to understand when and how layoffs materialize, so as to avoid getting caught up in one.

Few things in modern life inspire more fear than logging into a meeting with your boss only to see the unwelcomed face of an HR representative.

What you thought was just another Thursday turns flips your life upside down.

HR Rep: Your role has been terminated. Today is your last day. Here is the pity money we offer you. Thanks for the years of blood, sweat, and tears.

It’s stealth.

It’s abrupt.

And frankly, it's dirty dirty business.

Something never discussed in the interview process is just how ruthless your employer will be when in the name of hitting financial numbers.

The worst part is the people who made direct decisions resulting in the layoffs often are not the ones. Most often it’s these same decision-makers who dictate you must pay the price for their mistakes. 

It’s unjust and unfair.

Despite this, it’s best interest to understand the root cause of these circumstances. It’s not the spineless executive who decided by looking at numbers on a spreadsheet the company needed you gone.

It’s the technology industry at large to blame. A Reduction in Force (RIF¹) is a feature, not a bug. It’s by design that more likely than not, you will one day face the music.

Don’t hate the player, hate the game.

Why Layoffs are Endemic to the Tech Game

In the 21st century, the technology space is where the most money has been made.

Billions of dollars are invested each year to find the next rocketship that can return 100X. Venture Capital firms deploy capital with the hope it supercharges the company’s growth and justifies their investment.

When a new round of financing comes in, companies start hiring. These are the good times in tech. New openings are published weekly. Seemingly every all-hands introduces new team members.  Budgets for new tools are easily approved.

Company offsites are scheduled more often in increasingly more glamorous locations. Bonuses grow are paid out a plenty!

Most employees join a company when it's in a growth stage. An air of excitement permeates meetings as plans to conquer the world are made.

The cycle of growth expands beyond individual companies. In the ZIRP² era, so much investment money was floating around it prolonged the growth state of the entire technology sector. More investment dollars = more hiring.

Well, the money spigot has now been turned off. We’re seeing which companies grew due to real demand for their products.

We’re now in an era where more companies are seeing growth slow. As a result forecasted revenue projections are missed. The numbers set from the previous growth cycle are simply too aggressive.

When underperformance continues quarter over quarter, major problems materialize for leadership.


Tech executives are judged by hitting revenue goals. While they might have large base salaries, their wealth comes from reward structures tied to meeting said goals.

When revenue goals are missed, the clock starts ticking in addition to unearned comp. You can only miss targets for so long. Either these leaders turn things around, or they get replaced by someone with a plan to do so.

This dynamic is what precipitates layoffs.

When numbers are missed, everyone at the leadership level is forced to examine why. Action must be taken, or else. In these moments, everyone would love to just make more money!

To make more money, however, is easier said than done. It requires time, focus, and effort, and is far from guaranteed.

But for these leaders, there’s another option. There exist 2 inputs to revenue Profits and Losses.

And what executives can control are the losses - in the form of spend and salary.

I’m going to be controversial here.

I ask you to extend an empathetic arm to tech executives living through this stage of the company lifecycle.

As a tech executive, a larger % of your take-home is tied to company performance compared to earlier in your career. Your years in the driver’s seat are where you’ll generate the majority of your wealth. You want to max out all you can before the business is done with you. Eventually, you age out.

The focus of these executives on net revenue is by design. A board of directors wants an executive to win when the company wins. Therefore, when off track, that executive has personal motivations to turn things around.

Inevitably, in periods of contraction, the eye wanders to all the new employees hired during the previous growth cycle.

Tech employee salaries are BIG. 5-10 employees cut can save millions of dollars annually. When growth stagnates, the question gets asked:

How can we maintain our current level of output at a cheaper cost?

The answer to that question is layoffs. What ensues is an audit of every role on every team.

What roles can be eliminated?

What employees can we survive without?

Executives are executives because someone has to be the one to make the tough, dirty decisions to protect the profits of the equity holders. 

Even the best of companies will see their growth stagnate. A wildly successful company eventually captures the entire market, and there’s no one left to sell to.

All companies exist at some point in the growth/contraction cycle:

Company Grows -> Company Hires -> Growth Slows -> Employees fired - > Company Grows OR Company Dies

How to Tell if Your Company is Trending Towards Layoffs

The key to understanding the dynamics surrounding an RIF is leadership wants no one to see it coming.

The entire process is conducted quietly on a need-to-know basis. It’s a small, select group that sets the plan in motion.

The first sign that your company might be trending toward an RIF is when open roles are closed without a hire. This pre-dates a hiring freeze, as the powers that be will resist any obvious signs of tough times ahead.

As an IC³, you won’t be told the role is not being filled. It will sorta just never happen...

To confirm it’s closed without being filled, you must ask. It’s a natural question - so you should be able to get a straight answer of “We decided we didn’t need the role”

If in this situation - observe if the velocity of hiring is decreasing. It will increasingly slow until it ceases altogether. Like inflation, the official hiring freeze will only be announced well after the decision has taken effect.

The next sign of potential layoffs is internal communication regarding revenue.

Companies LOVE to announce when big clients are signed. It’s a healthy company practice to be transparent with revenue trends. It’s when revenue starts to dip you should be concerned. You’ll start hearing more pressure sales to deliver in such times.

Conversely, it’s also a red flag when a major WHALE client leaves.

It is essential to track negative financial triggers that could cause executives to take action.

Who Gets Targeted In a Layoff

When a RIF is enacted, all teams undergo a full audit.

Every lead is forced to make a blood contribution to the layoff gods. Politics is at play in these moments. Teams closer to the power will proportionally have to cut less.

It’s almost a satanic ritual. If everyone is forced to cut, all team leads are equally complicit, and no one is the lone bad guy.

The core RIF task force game plans how cuts are to be executed. They think about how, at a holistic level, the maximum number of cuts can be made without degrading the product offering. 

This is a very exclusive crowd of core business stakeholders. A finance guy will be in the room along with the CEO, the CTO, and whoever else has real juice.

The group will debate what teams can be eliminated in totality. They’ll shift the responsibilities of core deliverables. They’ll farm out the duties of expensive resources that in their eyes are not worth the price tag.

A game plan is put in place. Once agreed upon, the kill list is assembled.

A WB Note: One way to get learn early layoffs is to either have a personal relationship with a member of this core group, or one of their confidence.

The metric for who gets let go is Who can we live without?

Your Team Lead makes that decision.

This leader then goes about finding said tributes as they see fit. A good leader will query their lieutenants, and potentially your boss, but that’s no guarantee. It’s not unusual for the Team Lead to unilaterally make the decision.

To avoid the kill list, act before it’s drawn up.

How to Survive and RIF

The time to act is when you first see possible signs of layoffs. Ideally, you do so well before any tense planning meetings are called.

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Are you worried layoffs could be coming for your job?

Want to do something about it?

Book a consult call with bowtiedwhitebelt, who will help you gameplan how to make yourself indispensable to your product org. You’ll leave with actionable steps informed by years of product team leadership.

$249.99 is a cheap price to pay for a call that could, literally, save your job.

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