Stewart Butterfield, former CEO of Slack, on overemployment in technology

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Butterfield co-founded the messaging startup in 2009 and saw its value soar dramatically in the years that followed, with one massive round of funding after another, culminating in its successful IPO in 2019. Foreclosure Then the company acquired Butterfield for $27 billion earlier this year leave the companyHe admitted that he “didn’t do very well” at integrating the two cultures. The billionaire now buys luxury real estate with his wife, Away co-founder Jen Rubio.

So Butterfield knows what the Fed brought about Easy money era was like for tech startups. “Even then it was clear – we said in interviews that it was just zero interest. That’s what’s happening,” he told Bloomberg Odd lots podcast this week.

He noted that when there are no real restrictions on hiring, “you hire someone, and the first thing that person wants to do is hire other people.” The reason, he explained, is that “there’s a very obvious signal, and it is very true that the more people you report to, the greater your standing and power in the organization.”

He continued, “If you’re a manager, you want to be a senior manager. If you are a senior manager, you want to be a director. It’s a very powerful incentive. Any budgeting process is about, “I really want to hire someone,” and that, to me, is at the root of all the excess.”

Employees who “shouldn’t be here”

Butterfield spoke of Slack, but the same phenomenon could have happened elsewhere in Silicon Valley. Certainly technology companies have laid off employees, including Salesforcewhich cut 10% of its workforce in January and is reportedly doing so considers further layoffs. Others include Amazon, Drop box, MicrosoftAnd Facebook parent meta.

“Realistically, there’s probably a lot of people at the company who shouldn’t be here,” Meta CEO Mark Zuckerberg told The Verge last summer reported. Meta then messed around 11,000 workers in November and another 10,000 in March, with Zuckerberg targeting middle management, calling it “the year of efficiency.” (Meta’s stock has soared this year, helping Zuckerberg add more than $45 billion to his net worth.)

Butterfield found that other types of companies were less likely to be overstaffed. “If you’re not under the compulsion, ‘We just don’t have the money,’ you know, if you’re making lysine or something like that, a 70-year-old industry that has a lot of competitors and stuff.” The margins have been taken out, that it does not work.”

But if you have “infinite money, either because you have a monopoly on search engines or because VCs give you a lot of money,” he continued, “you can get rid of that limitation.”

And that, he suggests, poses its own problems.