Former CEO of Slack Says Tech Over-Hiring Is All About Prestige

Amidst the spate of employee layoffs by revered companies globally, former Slack CEO Stewart Butterfield claimed the main cause of recent labor defects to be excess hiring during better financial times.

Butterfield: Excess Recruitment Born Out of Need For Prestige Will Trigger Continuous Layoffs

Stewart Butterfield, the former CEO of workplace messaging platform Slack, believes over-hiring is a norm produced out of hunting for prestige which leads to the consequences of layoffs.

As exclusively detailed by the Fortune report, Butterfield’s insights on the issues of over-hiring are geared towards the myriad of layoffs by financial and technology companies.

Popular companies such as Meta, Dropbox, Twilio, Amazon, and Microsoft have released thousands of employees to cut down on costs and generate more profits.

While this may be seen as a strategy aimed at generating commercial ventures for the sustainability of companies and brands, the economic impact of such decisions falls directly on laid-off staff.

According to the former Slack CEO, when companies enjoy financial prowess, they tend to look into hiring more staff as the major propeller for continuous positive numbers in finances.

However, this often backfires due to major losses in the long run, leading to employees losing their jobs over a new structure or a pathway to salvage the company from liquidation.

Slack statement
Source: Pragna Solution

While tech-based companies often make easy profits due to the vast acceptance of several innovations by global industries, under-hiring should be considered a constraint even in a booming economy.

When a manager is hired, the next thought process is to hire other people rather than create a systematic oversight of what the organization needs and channels of solutions to counter challenges.

Butterfield iterated that the reason for this is fueled by a need for “prestige.”

The more people reporting to a manager; the more prestige and power the manager wields within the company.

While this may be seen as basic, Butterfield sees it as a recurring behavior that drives over-hiring in companies that hurts both employees and companies.

He explained that a manager will always strive to advance to the position of senior manager, and when that position is obtained, the next goal is to become a director and so on.

The cycle is powerful and limitless due to man’s insatiable desire for more.

Slack Cut Off 8,000 of Its Workforce in January and Is Considering More Layoffs Soon

The insights on over-hiring shared by Butterfield are also geared at Slack’s recent restructuring of organizational systems to aid better profitability.

Before leaving Slack in January, Stewart Butterfield co-founded the business communication and professional messaging startup in 2009.

He and the founding team saw the messaging app soar in growth which piqued the interest of Salesforce Inc., a reputable customer relationship management (CRM) company.

The CRM firm officially acquired Slack on July 21, 2021, for $27.7 billion.

However, Butterfield left in January 2023, which was closely followed by a layoff of 8,000 staff, approximately 10% of the global workforce, with signs of more layoffs on the horizon.

The recent development has become the norm in top companies and will continue to rise if preventive measures are not implemented.

What Should Be Done About Tech Over-Hiring?

Over-hiring shouldn’t be a globally accepted norm to push effective output and profitability if a company lacks competition, especially if its only driven by a want for more prestige and power.

While this may be far-fetched, as almost every company is met with two or three competitors thriving to be an industry leader in their supposed field of operations, only firms with infinite money should proceed with over-hiring if need be.

Companies backed by renowned and rich venture capitals (VCs) or other forms of trust funds can get rid of the “lack of money” constraint can spend a little more and hire a few too many employees if they so desire.

However, companies experiencing a breakthrough in innovations, finance, market, and more shouldn’t opt to over-hire.

Rather, significant data should be initiated to get a blueprint on functional areas that require qualified staff and not just a sequence of hires just for prestige or expansion’s sake.

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