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1041 points mertbio | 1 comments | | HN request time: 0.212s | source
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keiferski ◴[] No.42839412[source]
The thing that bothers me most about layoffs due to “financial difficulties” is when you observe management wasting absurd amounts of money on something in one year, then announcing the following year that they have to make cuts to baseline, “low level” employees that don’t cost much at all.

This kind of managerial behavior seriously kills employee motivation, because it both communicates that 1) no one has job security and 2) that management is apparently incapable of managing money responsibly.

“Sorry, we spent $200k on consultants and conferences that accomplished nothing, so now we have to cut an employee making $40k” really erodes morale in ways that merely firing people doesn’t.

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wisty ◴[] No.42839482[source]
Managers have a budget. They can't save it, and may spend big on consultants to create a buffer for their team when cuts hit. This is especially true in government, and big companies are similar.

There is only one person who really can stop cycles hitting budgets and that is the CEO. IIRC Warren Buffett lamented the fact that the CEO is more of an investor than a manager and that spending budgets as a senior manager gives them almost no experience in setting those budgets.

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iovrthoughtthis ◴[] No.42839756[source]
budget based economics may be the worst thing to happen to large organisations
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bmitc ◴[] No.42841018[source]
I have never even understood the approach. The sub-budgets within an organization seem so arbitrary and become games in and of themselves, often leading to frivolous purchases just to use up the budget and not get your budget slashed.

Does anyone know when this came into favor? What was used before? What are the alternatives?

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1. wisty ◴[] No.42841529[source]
https://en.wikipedia.org/wiki/Principal%E2%80%93agent_proble...

Managers play games because they are looking out for their own team, not the company's bottom line. Budgets constrain this. Overspending is bad, but so is underspending, because they are tying up resources - companies will have a desired internal rate of return (maybe something like 10%) - if they can make 10% on their investments then a manger tying up capital is costing a lot.

Maybe https://www.joelonsoftware.com/2006/08/10/the-identity-manag... is Joel Spolsky's suggestion - get the team behind the goal, keep morale high, and share information. Sharing information at least cuts down on some of the issues. Keeping morale high isn't always possible - you need someone to drive it, a great founder / CEO can do it to some extent (see Steve Jobs) but it has a limit at scale.

Splitting orgs into more or less independent businesses gets done sometimes.

Bezos just turns everything into a clockwork machine, I think.

Ray Dalio has spent half his life and an unbelievable amount of money trying to solve this problem, some would say with very mixed results (see the book "The Fund" - my reading is he basically tried to create a system where everyone is indoctrinated and rated against his principals, but it just doesn't work as well as he hoped).

There's better and worse ways to try to get around the Principal Agent Problem, but it's a very hard problem.