Layoffs as a social contagion

Stanford Professor Jeffrey Pfeffer wrote about the recent layoffs at tech companies, saying that it hurts the company in the long-term, but CEOs can't avoid the pressure to join in.

[CEOs] know layoffs are harmful to company well-being, let alone the well-being of employees, and don’t accomplish much, but everybody is doing layoffs and their board is asking why they aren’t doing layoffs also.

The tech industry layoffs are basically an instance of social contagion, in which companies imitate what others are doing. If you look for reasons for why companies do layoffs, the reason is that everybody else is doing it ... Not particularly evidence-based.

Layoffs often do not increase stock prices, in part because layoffs can signal that a company is having difficulty. Layoffs do not increase productivity. Layoffs do not solve what is often the underlying problem, which is often an ineffective strategy ... A bad decision.

For more on the harm, please see my old 2009 post from the last time this happened, "Layoffs and tech layoffs".