Comment by snitty
2 days ago
It's not uncommon for companies to be in a hiring mode until they're very much not in a hiring mode any more.
2 days ago
It's not uncommon for companies to be in a hiring mode until they're very much not in a hiring mode any more.
Yeah. I was made a manager in Feb 2022 with 5 directs and 9 headcount to fill. Hired 5, and then by June 2022 all remaining headcount was cut. In January 2023 we had our first-ever layoffs in the company's 25-year history.
It is so hard to fathom that a leader trusted with millions of dollars of other people's money can be so disengaged from recruiting as to not see a hard wall of cash crunch, months if not years ahead.
You can't assume fundraising will always go swimmingly. You have to always be in survival mode, and if that means not hiring aggressively, then you put on the breaks until the money comes in .
Either as a leader you are clueless about your business cash needs, you are clueless about risk management, or you are clueless about the market, all of which make you not a suitable leader for a long-term company.
The issue was interest rates. Money was free in Feb 2022; the interest rate was literally 0%, and so any cash-generating investment at all is profitable. Fed started raising rates in Apr 2022, at which point leaders started freaking out because they know what higher rates mean, and by Jun 2022 the Fed was raising them in 0.75% increments, which was unheard of in modern economics. By Jan 2023 the rate was 4.5%, which meant that every investment that generates an internal rate of return between 0% and 4.5% is unprofitable. That is the vast majority of investment in today's economy. (We also haven't yet seen this hit fully - a large number of stocks have earnings yields that are lower than what you can get on a savings account, which implies that holding these stocks over cash is unprofitable unless you expect their earnings to grow faster than the interest rate drops, which doesn't seem all that likely in today's environment.)
https://fred.stlouisfed.org/series/FEDFUNDS
Now, you'd have a point if you complained about how centralization of government and economic power with the President and Fed chair, respectively, is a problem. That is the root cause that allows the economy to change faster than any leader can adapt. There used to be a time when people would complain about centralization of executive power on HN, but for some reason that moment seems to have passed.
11 replies →
I’ve seen many companies have this problem. They base hiring against planned revenue instead of current revenue. In a sense you have to - if you’re planning on growing 100% for several years on the back of new products and a big sales team you must hire in advance. It’s what the VC model is founded on. The downside is when you miss the revenue, you have to cut deep. And it’s usually worse because your hiring standards dropped in hyper growth.
“It is difficult to get a man to understand something when his salary depends upon his not understanding it.”
If you are the CEO saying 'we are planning for bad things in the future' while every other CEO is saying 'the arrow only goes up' guess which company the stock market punishes and who gets removed by the board versus who's options become worth more?
Not uncommon at all, but perhaps a symptom of poor leadership.