What tech layoffs tell us about management

Several sites are tallying up lists of start-ups that are undergoing significant layoffs. (Interestingly, not much noise on that front is coming out of Europe.)

Every day, we're hearing about yet another start-up (or established technology vendor) laying off workers. This may mean that the companies are battening down the hatches in preparation for a nuclear economic winter, but it also likely means that these same companies haven't been prudently managing their VC investments.

It took Sequoia Capital to describe the obvious: we're in a tight, recessionary economy. But any CEO worth her salt should have seen this long ago. I wrote in February about a pending recession and its effects on open-source start-ups like SugarCRM, but I was no prophet: everyone was talking about a weakening economy.

I guess it took the collapse of a few financial institutions to convince us that we actually have to start treating our companies like businesses, not Monopoly games. Perhaps we were distracted by cutesy Web 2.0 names. More likely, we were distracted by the cutesy Web 2.0 revenue models that are long on marketing and short on substance.

At any rate, welcome to the real world. In the real world, CEOs get paid for vision and holding to a budget. In the real world, companies must be managed well to win. Sure, every so often, there's a Google that grows for years without any apparent adult supervision, but for every Google phenomenon, there's a Microsoft, Intel, or IBM that wins because it out-executes the competition.

The next IBM is likely to be born in this recession. You'll know it because it's the one pumping out profits, not press releases.

[WeCanDoBIZ]

I think the clear out is needed. And the reason the same isn't happening in Europe is that it has been harder here to raise funding, meaning that the Dot Com 2.0 businesses with no real plan just haven't got it. There is less dross to clear out. Web 2.0 poster child Xing, the first to go public, is growing strongly and turning in impressive revenue figures. I expect less of a cull there than its equivalent LinkedIn, for exmaple, which, without too much question, is riding a wave of hype over business substance.

Ian Hendry
CEO, WeCanDo.BIZ
http://www.wecando.biz