RJ Lumba’s Post

How Big Asset Managers Influence Layoffs You’ve likely heard about the recent layoffs in the technology and finance sectors. Major companies like Amazon, Goldman Sachs, and Morgan Stanley have cut jobs impacting over 100,000 workers. Naturally, we blame recession fears, inflation, or poor management. But passive investor giants like BlackR and Vang also shoulder blame in driving layoff decisions. These massive asset management funds have exponentially grown, managing a combined $20 trillion in stocks and bonds. As essentially permanent shareholders of every major public company, they exert tremendous sway on corporate policies. Their preference for short-term shareholder rewards over long-term investments implicates them in spurring workforce reductions. How exactly do they encourage layoffs? Their model relies on tracking market benchmarks like the S&P 500 instead of actively picking stocks. To maximize size and mimic indexes, they invest passively across the entire market. But this means they cannot sell underperforming stocks readily. Their primary lever to drive share prices up becomes pressing companies to boost stock buybacks and trim costs -- typically through layoffs. Critics suggest this coercive impact explains why profitable companies also make severe job cuts in tough times instead of preserving talent. The asset giants’ short-term obsession trickles down to corporations fixated on next quarter over next year. Marcel Kahan and Edward Rock of University of Pennsylvania argue that activist funds “have exacerbated short-term pressures on U.S. public companies.” Layoffs should be an option of last resort, not a go-to lever to appease speculative shareholders. But increasingly employees have become collateral damage to asset managers’ single-minded devotion to stock price and dividends above all else. Reform advocates contend these funds must consider their ethical duty alongside returns, and support companies to invest in worker retention and training during downturns. That would require investment against the prevailing winds of shareholder primacy theory. But BlackR and Vang scale could set a socially conscious example and better balance returns with responsibility. So, if you can work with small and mid-sized businesses. In the long run it is way more rewarding and definitely more stable than the big corporations.

Has anyone been part of a company where a Private Equity firm got involved and made a positive impact (in your opinion)? Genuinely curious. Nothing against PE firms, but in talking with candidates they typically seem to have a negative effect on operational efficiency (logic around things like quotas or workflows, etc), employee satisfaction and overall performance. Not to mention the layoffs that they're notorious for. Obviously, their goal is to make a profit on their investment, but I can't imagine how making a business objectively less efficient accomplishes this. That being said... I work with a few clients who partner w/ PE firms and from my perspective they seem to have added a lot of value to business, without any of these aforementioned negatives. What am I missing? 

Social Experiment Saturday: Instead of companies preparing big presentations and videos to investors about how their products & services positively impact the world, they should try something different. Instead-- start your investors call with the # of layoffs you had to perform that quarter. But don't stop there. Show videos of individuals just getting laid off, have them interviewed on what they're feeling. Interview those who were "safe". Maybe follow up on someone who was laid off months before and is now struggling to find employment. It is not that I do not believe in free market capitalism-- I do. But I firmly believe when the economic ideal was created, it was done so at a time when people genuinely believed other people were inherently good and we would take care of each other as a society. But somewhere along the way, our ideas on 'limitations' and 'excess' dissipated as the sounds of money printing grew louder. Too many of us became Josh Brolin from 'Wall Street: Money Never Sleeps'. When asked what his magic number was to retire from it all his answer was simply: More. Is that now the end game? The investor finds themselves in a unique circumstance where what they say can have an impact that affects thousands of individuals. And the best part is they don't have to look any of those thousands in the eye. It would be fascinating to see what, if anything, changes once investors saw the faces and names of those whose livelihood was swapped out for an extra percentage point of profit.

Private equity = more access to money. Let me share with you what my mentor taught me, and that's resources lag revenue. Take things slowly. Use the 3-month rule. Don't make huge decisions in the first month, and don't kill the company culture with layoffs after one bad month! #BillysBlueprints #Scale #PrivateEquity #CompanyCulture #Execupreneur™

Ever wondered why a firm gets the funding and does the Layoffs on the same day? Whom to accuse? The CEO who just fired people over an email or a group call? ▶️ Let’s take an in-depth dive into the backend process of execution of these events. 🔻Assume, an ABC Firm gets funding of X Million Dollars on 1 Jan 2023. This funding comes from a giant Japanese PE Firm. 🔻When the PE fund injects its money into a firm, most commonly, the first thing they do is Restructuring - sometimes it kills the higher officials with fat pay cheques and sometimes the employees. 🔻If you do the maths - A CFO’s salary = 30-40 junior employees. So either the CFO will go or the 40 employees for that matter. 🔻And why does it all matter? One word - Private Equity Investors. 🔻In simpler terms, It is essential to understand that PE firms don’t build businesses; they buy and sell them. 🔻Most PE firms are filled with well-educated spreadsheet jockeys who are fluent in the slang of ROI and IRR but haven’t got a clue as to how a firm’s products get sold to a customer, let alone how or why said customer buys them. They don’t even CARE. 🔻After the laid-off employees have packed cardboard boxes of personal belongings and been escorted off the premises, there is a dead cat bounce to profitability - The ultimate motive for investors! 🔻Sometimes, this strategy fails. What happens then? 🔻The PE brain trust wound up selling off the acquisitions at discounts and eventually selling the main business to – you guessed it – an even more clueless PE firm. At a loss, naturally. They couldn’t very well fire themselves, so they canned all the C-level execs. Take a major Indian IPO in 2022. 🔻If you summarize everything, you must think of PE Firms/people as a villain but that’s not the case always. Sometimes they inject funds into an almost-dead firm and take it to the height of returns where the IRR touches the lifetime high for that firm- Take a few recent IPOs for example. If your firm getting excess funding- you need to analyse the entire flow of business along with forecasting. Money doesn’t always open the brighter door for everyone! #privateequity #layoffs #corporaterestructuring

Have you ever heard the investing advice: “Do something where if you’re right you get rich and if you’re wrong you don’t go broke” I think this applies to your career as well! In my opinion one of the best ways to accomplish that is to join the right tech company! One that is in growth mode, with a great product but even more importantly - one with incredible people! Best case you have a blast, exciting IPO and successful public company and you are paid handsomely. (Remember: an IPO isn’t the end, it’s the beginning!) Worst case you got paid a solid salary, learned a ton, and live to fight another day. #careerdevelopment #careerjourney #sales

Many investors believe that you don't need to dislike your job to start building an additional income stream. In fact, waiting until you're unhappy at work or facing unexpected changes, like layoffs, can be a risky strategy. Instead, consider proactively creating a secondary income stream for more security and freedom in your life. Here’s how a second income stream can benefit you: →Financial Stability: Provides a safety net for your family in case of unexpected layoffs or job changes. →Freedom to Choose: Offers the flexibility to walk away from a job if it no longer aligns with your goals. →Personal Growth: Allows you to take breaks, explore your passions, and pursue new interests without financial stress. It's important to note that financial freedom doesn’t mean you’ll spend your days lounging on the beach. Instead, it empowers you to dedicate time to what truly matters, like your passions, family, and personal development. Ready to start your journey towards financial independence? Here’s how: →Educate Yourself on Investing: Knowledge is power when it comes to making smart financial decisions. →Maximize Your Money’s Potential: Invest wisely to make your money work harder for you. →Network with Experienced Investors: Connect with those who are a few steps ahead in their journey for guidance and inspiration. Taking these steps can pave the way to a more secure and fulfilling financial future. Start building your wealth today, and create the freedom to live life on your terms. Comment #investment to stay updated on our exclusive investment offerings. Together, we can turn opportunities into successes. Website: https://kuberacap.com/

Why are private equity companies more prone to layoffs early in a down economy? The tides of the economy seem to be shifting, making this a time when it is even more critical to focus on culture and employee engagement. Many companies, especially private equity-backed firms, have responded by laying off employees rather than investing in them. I was curious to know, “Why are private equity-backed firms more prone to layoffs in a down economy compared to private or public companies?” I reached out to my network to learn more. I interviewed multiple employees, leaders, and professionals working for private equity, and their consistent answer was that “They are seeking an exit – at any and all costs and that part of achieving an exit is showing numbers that your costs are down and revenues are up.” Ryan, a former VP of Operations, was recently laid off from a private equity-backed firm. He proposed some ways for the company to consolidate its overlapping expenses. They loved the idea so much that after consolidating those expenses they consolidated him…and replaced him with a junior middle manager to take his role at a fraction of his salary. Do you like more topics like this? Schedule a conversation with Garrett to learn more. Click here:https://lnkd.in/eQ89k5Y #leadershipgrowth #executivedevelopment

The investment efficiency ratio per employee in 2022 and 2023 What a benefit layoffs do! 📊💼📉 #Investment #Analytics #BusinessGrowth