This is driving me nuts. From the blog of Loic Le Meur (founder of Seesmic)...
As you will no doubt know we are all operating in some very challenging and uncertain times right now. It's never easy to address topics like this but as a company we have felt the need to get Seesmic ready for what most are anticipating to be a bleak economic outlook for the considerable time going forward.
In order to prepare the company and ensure it has as strong a position until we reach to the other side, we have had to make some tough decisions around expenditure - the biggest impact being that we will be cutting 7 positions within the company.
(For the record, the bold was added by me)
First, Seesmic is a pre-alpha startup which means, they weren't making money to begin with. I'm not sure the company's made any money whatsoever at this point. So the idea that they need to cut jobs based on an economic downturn already seems a bit out of place.
But let's move past that for a second and say this is an act of "future proofing." The company assumes there will be a downturn in the future and is planning to need revenue at some point so they are cutting proactively.
Based on this, lets look at the economic crisis as it stands right now.
First, the stock market is down significantly. But in saying that you have to point out that it was up significantly not too long ago. If it can fall 6,000 points in a year it can go up 6,000 points in a year. In fact, today was the first day the Dow Jones has ever spanned 1,000 points in a single day.
In other words, we're looking at volatility more than anything else (and again, that doesn't necessarily mean anything, see here)
Second, all economic indicators we have right now (as I pointed out a few days ago) point to a flat-to-mild downturn. The U.S. isn't even in a recession. In fact, as traditionally defined it's at least 5 months away from one in that a recession is defined as 2 quarters of negative GDP growth and the U.S. reported an increase of 3.3% in GDP for the 2nd quarter of 2008. That was a month ago!
So the economy is not necessarily going in any direction. A Credit crunch will certainly hurt but it will not, in and of itself, cause an economic downturn. Which brings me back to these layoffs and here is where I'm going to go all CAPS out of frustration...
PROACTIVE LAYING OFF DOES NOT MAKE BUSINESS SENSE!
I'm sick of everyone saying "this makes business sense" when it simply doesn't. Employees GENERATE revenue, cutting employees means you are backtracking which is a bad thing. It means your business has started to fail and you can no longer turn your employees efforts into revenue.
IF YOUR BUSINESS HASN'T ALREADY STARTED TO FAIL YOU SHOULDN'T BE CUTTING JOBS
Economics is complicated and it's not unheard of for one sector (banking for example) to crash and burn while others remain untouched. So you can not make wise business decisions based on macro economics.
Let me put it this way. Let's assume Seesmic did an excellent job of picking their employees and it had the very best people suited to make the company successful. Today they cut a bunch of employees. Than 6 months down the line it turns out the current financial situation was just a minor correction or that the advertising sector remained untouched.
Now all those quality employees are off in new jobs and Seesmic has compromised its strategic position based on unsubstantiated fear. That's not good business by anyone's standard.
Addendum: It's been pointed out to me that Seesmic might have been planning to get a third round of funding and that might be why they are having to cut jobs now. That may be true but if that's the case I consider that bad business. If you can't get to profitability with $12 million dollars than your failures aren't the economy's fault. More importantly, if that's the case than you shouldn't be blaming the economy and contributing to what is already an irrational panic.