Financial Storm Clouds

It's been a while since the Dude has felt the need step up to the soap box and pontificate. Time to dive in!

Our fiscal year begins in August, and right now we are about halfway through the second quarter (mid December, 2025). And we are being squeezed on budgets.

Squeezed hard.

Even though our "group" was well above our commitments in Q1, our budget to spend in Q2 is über tight.

How tight? Like the Dude took his two local employees out to an afternoon of Top Golf, and he wasn't able to expense it even as a team building (total for 2 hours, food and drinks was a modest $160) exercise.

Le sigh. The Dude knows what this means.

The demand to cut costs

Alas, when you are a business unit in a much larger company, your GM is given a directive. That directive is to cut costs. Enough of a cut to be painful.

This is almost always a "gentle" first step, and virtually always the expectation is that you give this money back to the corporation by cutting staff.

Of course, this initial directive doesn't mandate a staff reduction. It is much more subtle. But it is deep enough cut to be nearly impossible to meet without trimming heads.

So, the GM directs their leadership team to cut costs. Travel budgets are zeroed out. Licenses for things like services are canceled (when they are opting to save tens of dollars a month, you know it's gotten ridiculous). Our budget to build the content that feeds our business was cut 40% in Q1, and 52% in Q2.

And, if we're not spending money to build the content that drives our business, that means that people are not as busy as they should be (hint hint).

Still, you cling to the staff.

Next, they tell you to cut the C-workers[1], as they are designed and designated to provide flexible resources for projects that come and to. Yet, your instinct is to play games[2] with this directive.

That shit gets called out, and then you are back to scrambling.

The net-net is that we have about 6 weeks left of the second quarter, so we can weather this belt tightening. But the Executive Leadership Team (ELT) is not going to back off. While it is true our revenues are good, and our profit margin is quite outstanding, it is clear that the ELT wants fewer members of staff.

The delayed pain

The Dude has logged more than 3 decades in corporate America, and he knows the pattern. The ELT wants staffing cuts, and whilst it is admirable that the GM of the business unit is trying to protect all their people, this just means that if the ELT would have been happy with a 3% staff reduction this quarter, they will crank it up the next quarter, and instead will seek 6% reduction in force. It will be impossible to meet the demand without removing staffing costs.

Dude's Axiom: Once a leader gets to the "director" level, they measure themselves by how many souls work for them, and they will NEVER voluntarily reduce their span of control. Indeed, they will fight like hell to keep even the least competent employee if they suspect they can't replace that headcount.

The AI justification

The rise of GenAI, there is a new religion that is coursing through the executive team. There is a belief that a good employee with ChatGPT, and some agents, can deliver 10X the productivity. Thus, ultimately, they expect to be able to reduce staffing by 75% and still be just as effective.

And the Dude has to admit that for some tasks, ChatGPT does amazing things. And when the ELT truly believes that we can outsource the strategy for our biggest domain to ChatGPT[3].

Alas, ChatGPT, like all the LLM's, no matter how much custom RAG you do to it, still doesn't think. It really is only an eerily prescient autocomplete, and no matter how much you are convinced that it "gets you" and is "your friend," it is just a dumb tool.

That's a long way to say that the layoffs are a'coming. The Dude is not worried. And his team is really lean, so he feels good.

1 - C-Workers are contingent workers. They are a special class of contractors, intended to be brought in for a specific project. They are easier to bring on, and to eliminate. The Dude is not a fan.

2 - We have a fairly large block of them that are "access only" in status. That is, their status is to grant them access to email and tools. Since we build and deliver training, and the bulk of the instructors are essentially "day laborers" (albeit very sell remunerated day laborers!) they do not have a contract and thus they are not part of COGS or OpEx.

3 - we do not use ChatGPT, but an internal infosec approved system with OpenAI, Anthropic, and Google chatbots in a variety of flavors. But with guardrails and custom instructions that make them all mid to use. Bleargh.