
Cost Cutting at Dropbox and Silicon Valley Startups - minimaxir
http://www.businessinsider.com/cost-cutting-at-dropbox-and-silicon-valley-startups-2016-5
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krschultz
These articles are always written with a not so subtle level of schadenfreude
by the author.

When companies cut costs they basically have a choice of reducing COGS,
reducing overhead, reducing compensation per employee, or reducing the number
of employees.

Most software companies have relatively low COGS so there isn't much to cut
there. Reducing overhead (office space, events) is the least painful. Cutting
peoples' salaries is basically impossible, so the only lever there is holding
back bonuses. Depending on the company that may be a big cost saver. The last
option is laying people off.

Given those are the only options cutting overhead is the nicest thing to do.
Why is that a bad thing?

~~~
gaius
One company I worked for was very big on breakfast meetings. You would grab a
muffin and a coffee, then go listen to some VP waffle about something.

One day, the muffins were all sliced in half, and a sign up to only take one
half each.

Not long after that the company laid off 6000, including me.

Pay attention to these early warning signs, is my advice.

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rdl
Curious if they've read the classic Steve Blank
[https://steveblank.com/2009/12/21/the-elves-leave-middle-
ear...](https://steveblank.com/2009/12/21/the-elves-leave-middle-
earth-%E2%80%93-soda%E2%80%99s-are-no-longer-free/)

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Joof
As a somewhat frugal person, I feel really uncomfortable when companies buy me
unnecessary things (that could be going into my salary...).

SV sounds like it's becoming a nicer place to work to be honest.

~~~
danieldk
_As a somewhat frugal person, I feel really uncomfortable when companies buy
me unnecessary things (that could be going into my salary...)._

But it wouldn't go into your salary. As far as I've always understood it the
goals of perks is, besides attracting new talent, to keep people on premises
as long as possible.

~~~
rdtsc
It is very impressive to younger college graduates. When you go from eating
cheapest pizza and pinching pennies, something as simple as free dinner sounds
like a lavish perk. Throw in free shuttles, massages, etc, you'd find they'd
be really happy and tell their friends too.

It is probably worth it to the company in terms of keeping people there,
having them enjoy their day etc more than just paying that to each employee as
part of the salary and have them buy their own dinners.

~~~
Joof
That's nice. Everyone is different and different things make them happy.

~~~
rdtsc
I wasn't saying I personally agree, I would rather have that money in my
paycheck. But given their audience and the cost benefits analysis -- it does
seem to make sense.

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patmcguire
The thing that got me was:

"The company wrote in the email that employee perks in total have been costing
Dropbox at least $25,000 a year for each employee. Based on Dropbox's roughly
1,500 headcount, that would translate to about $38 million a year."

That sounds nuts, but do "perks" include health insurance, life insurance, the
usual stuff? Or just the ridiculous stuff that only exists at tech companies?

~~~
HillRat
That's about $100/employee/workday, which is significant but not insane -- a
couple of meals, a few espresso drinks, a massage and some dry cleaning and
you're probably in the ballpark when you consider operational overhead.
Whether they're easy to cut is another matter -- perquisites are considered
more important when they're being removed than when they're instituted. (Plus,
it's a cheap if unreliable signal for financial distress.)

~~~
gaius
There will also be the salaries, offices, etc of the people whose full time
job it is to administer the perks system.

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johnm1019
I completely understand cutting a chrome panda and eliminating open bar on
Friday nights, but things like an employee shuttle seem like a solid use of
company money to increase real productivity. Time spent driving a car or
navigating a few bus/train connections just can't be that productive. A comfy
bus straight to the office (probably with WiFi)? Yes.

~~~
flyt
Dropbox's employee shuttles ran a very limited schedule and only to the Marina
and Mission from their Mission Bay office. When the company was smaller it may
have been more practical but over time as hiring picked up a larger percentage
of employees didn't live in these two areas. Spending so much on a shrinking
percentage of headcount wasn't reasonable especially since the majority of
employees were paying their own commute costs, often from the South or East
Bay.

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jacques_chester
Am I reading correctly that Dropbox management spent a hundred thousand bucks
on a _chrome panda_ in order to get people to think about careful spending?

~~~
rdl
I _think_ what happened is they bought a chrome panda first (probably took a
year), and then more recently decided it was worth having some level of cost
control, but what do you do then -- sell it? remove it? cover it with a tarp?
-- so they put a note on it saying essentially "Never Again."

~~~
popularrecluse
It's a pretty cool panda. I can see why they are keeping it.

~~~
iofj
Apparently this is the thing:

[http://imgur.com/gallery/yp7wIRV](http://imgur.com/gallery/yp7wIRV)

I'd ask why, but if there was an answer to that question it wouldn't be half
as cool.

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kayman
The question before cutting each cost: Will this help my staff be more
productive and happy?

The assumption being a happy and productive staff creates better products.

Panda? Maybe not.

Free soda? Keeps our engineers from being thirsty! Yes.

Bring all you mates to friday open bar? Maybe not

Bring your closest mates to drink beer and talk shop? Yes.

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maxaf
Just because investors are no longer willing to blindly shovel cash into the
furnace that is SV's pointless startup culture, doesn't mean they will
similarly slow down investments into innovative technology companies that have
promising products, real revenue and strong visions.

Press loves to generalize. Doesn't make it true.

~~~
hyperbovine
> innovative technology companies that have promising products, real revenue
> and strong visions.

How many of today's startups does that describe? Like 1 in 50, maybe? The past
three years have felt an awful lot like the late 90s, and I think the next
three are going to be a lot like the early 2000s.

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rajacombinator
Frivolous office decorations and perks can be tolerated so long as one avoids
frivolous business decisions and products that are doomed to failure from the
start.

