Corporate cost cutters salivate over working from anywhere. Oh my, the free gourmet cafeteria is gone. Companies already said they’d cut salaries if folks move to cheaper locations.
By Wolf Richter for WOLF STREET.
Dropbox, which offers file hosting in the cloud and is headquartered in San Francisco, and which had announced on October 13 that it was switching to permanent work-from-anywhere, today announced cost cutting moves associated with this shift: laying off 11% of its workforce.
In a new twist that will likely become more common, it specifically cited work-from-anywhere as one of the reasons for these layoffs because suddenly, with people working remotely, there are “teams” that used to deal with those people in the office, and that used to deal with the office itself, that aren’t needed anymore.
In an email to employees, then published as a blog post, cofounder and CEO Drew Houston, who has already bailed out of San Francisco as part of the California Techsodus and purchased a home in Austin for his full-time residence, said that the company made “the difficult decision” to cut its “global workforce by 315 people, or approximately 11% of the company.”
Early on in the Pandemic, as millions of people lost their jobs in a matter of days, Dropbox was one of the tech companies that said that it wouldn’t lay off people in 2020. OK, 2020 is over, it’s now January 13 of 2021, and here come the layoffs.
This cut is “necessary to implement the new strategies we’ve shared over the last few months.” Namely its “remote work policy,” which Drew Houston himself exemplifies. And then he cites this shift to work from anywhere for these cost cuts:
“For example, our Virtual First policy means we require fewer resources to support our in-office environment, so we’re scaling back that investment,” Drew Houston said.
Shifting the workforce to be remote all the time, from the CEO on down, is a radical change for a company, sending all kinds of previously sacred assumptions flying out the window. And it entails some radical shifts in spending, shifts from the company to the employees.
Unneeded office space is going to get dumped, with all the cost cuts associated with it, and the people that take care of it.
But employees have to create an office at home. They need space, furniture, equipment, appropriate broadband service, and they have to drink their coffee at home and go to the bathroom at home, and clean the kitchen and the bathroom, and buy their own toilet paper and supplies and lunches, and pay for the added utility costs of powering a home office all day long.
On the other hand, Dropbox employees could move from San Francisco to anywhere, save an enormous amount of money on housing, and save time and money by not having to commute in the Bay Area. And if you skip out to ski for a couple of hours mid-day, in the brilliant winter sun, you can make up for it by working late. For employees working from anywhere, this arrangement could be a big net benefit.
For companies, eager to cut costs, it’s a huge net benefit. A company can shed much of its office space, and the people that are taking care of that space, and people that are taking care of employees in some way. This could include all kinds of expenses such as the company’s cafeteria. Makes total sense.
There are videos online about the famous Dropbox cafeteria, called Tuck Shop, a gorgeous place at Dropbox’s headquarters. In June 2018, CNBC gushed, “Dropbox’s food makes most nice restaurants pale in comparison,” and it “serves up gourmet food for its employees, making it one of the best cafeterias in Silicon Valley.” It was free for employees, a big perk, and very costly for the company. Well, it closed, staff is gone, and the costs were cut.
Dropbox, like so many of its ilk, has lost money every year as publicly traded company through 2019. But in 2020, over the first three quarters, given the wonders of the Pandemic and working from anywhere, it started making money for the first time.
The job cuts related to working from home come on top of the moves already announced by other companies that have switched to work from anywhere: They would adjust salaries based on where people were working.
Geographic pay scales have long been the rule for big companies with a global workforce, and for the government: pay depends on where you work. If you’re in an office in Tulsa, you’d get paid less than your colleague in the San Francisco office. If you get transferred to the San Francisco office, your pay would be raised based on the company’s geo pay scale.
What’s new is that you’re no longer required to work in a particular office, you can work from anywhere, and eventually geo pay will follow, presumably as long as it’s downhill.
The potential of the shift to working from anywhere is making corporate cost cutters salivate. Cost cuts flow directly to the bottom line. And they’re a big motivation behind the shift, now that companies have become confident that they can actually pull off this shift to working from anywhere for their office employees.
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