Why Spotify’s latest layoff will make employees everywhere want to give up

Following up a profitable quarter with a massive layoff round — the third round of the year, no less — is hard for workers to stomach.

The Loch Ness monster. Bigfoot. Employee happiness.

A pair of headphones is dropped into a waste bin.

If you’re placing bets on which of these three fabled things is going to show itself first, definitely don’t bet on the last one — job satisfaction is at a three-year low and still sliding.

But why, executives may wonder? What can be done to get that ever-elusive employee buy-in?

Spotify can tell a lot of this story

The audio giant stumbled earlier this year, with two different rounds of layoffs, eliminating a combined ~800 jobs (or ~8% of its workforce).

But it seemed like the company was bouncing back nicely:

  • Spotify’s most recent earnings report was a winner — its first profitable quarter since 2021.
  • The report shows monthly active users increased 26% YoY to 574m, despite price increases, and a 16% YoY lift in both premium subscriptions and advertising revenue.
  • And for the eighth straight year, the internet fell hook, line, and sinker for the viral marketing powerhouse Spotify Wrapped.

The reward for the hard-working employees who made it all happen? A third round of layoffs for the year, with ~1.5k people getting the boot right before the holidays.

What the hell?

There is, of course, a strong financial imperative here — Spotify, which bloated itself by nearly doubling its head count between 2019 and 2022, is pushing hard for consistent profitability.

  • This is rather normal for a company five years out from going public, as Spotify is. (Across 7k+ IPOs from 1975 to 2011, 60%+ of companies were losing money at the five-year mark, something investors can only tolerate for so long.)

But sound cost-cutting business logic doesn’t do much to alleviate tanking employee morale.

Most professionals have, at some point, been on the receiving end of the executive Mad Libs layoff letter; “We have to become relentlessly resourceful,” marked Spotify CEO Daniel Ek’s version.

And every time another one goes out, it raises one essential question for each worker awaiting their turn: Why try?

If the company fails, you’re on the chopping block; if the company succeeds, sorry — you’re still on the chopping block.

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Topics: Layoffs Spotify Work

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