Unity's Shrinking Growth Strategy

Recently, Unity announced its third round of layoffs in under a year, affecting 600 employees, or about 8% of its workforce. The company also plans to close half of its global offices, reducing its network from 58 locations to fewer than 30. According to Unity CEO John Riccitiello, the goal is to "set ourselves up for higher growth." However, it is unclear how laying off employees will contribute to this growth, as it may not encourage more creators to use the engine or increase the development and monetization tools offered. The layoffs are intended to flatten the corporate hierarchy and eliminate "middle managers," but this may not necessarily lead to a more nimble organization. Riccitiello has previously stated that the way to support growth is to hire more people, but now the company is taking a different approach. Unity has reported its first profitable quarter, but with an asterisk, as the non-GAAP income was $13 million, while the GAAP net loss was $288 million. The company's shareholders may be looking for more significant strides towards profitability, and cutting headcount is one way to achieve this. However, the costs saved will be passed on to the remaining employees, who will be asked to take on additional responsibilities. This approach raises questions about the company's growth strategy and its impact on employees. The layoffs may make the existing business more profitable in the short term, but it is unclear how they will contribute to long-term growth. The company's focus on growth, even at the expense of profit, is a common trait among publicly traded companies. Unity's situation is not unique, but its approach to achieving growth is noteworthy. The company's CEO has to pretend that the layoffs will lead to growth, even if it is not entirely clear how. The costs associated with the layoffs, including severance payments and employee transition costs, will be significant, and it is unclear how they will be offset by the expected benefits. Ultimately, the success of Unity's shrinking growth strategy remains to be seen.