We have normalized layoffs to the point where they are treated as a standard operational adjustment rather than a significant organizational failure. When Canva recently announced it was letting go of 22% of its workforce, the narrative quickly defaulted to the familiar script: “aggressive growth,” “over hiring,” and “market correction.”
But if we stop accepting this script at face value, we start asking better questions. Why do companies consistently overshoot their hiring targets? And why does corporate accountability so rarely extend beyond the executive suite when those targets are missed?
I’ve spent over two decades working in regulated technology environments, managing workforce planning, and building support systems in growth SaaS companies. From that vantage point, the Canva situation, and dozens like it, looks less like an unfortunate market shift and more like a predictable failure of incentives and operational discipline.
The website, SkillSyncer has Tech Layoffs Tracker that has some interesting statistics on the layoffs that happened in 2026 (I don’t see Canva on there yet). You can view it here: https://skillsyncer.com/layoffs-tracker.
The Official Narrative vs. Operational Reality
Canva’s leadership addressed employees directly in a team update published on their newsroom. The message acknowledged the difficulty of the decision and cited the need to align the organization with current realities after a period of rapid expansion.
This is a reasonable explanation on the surface. During growth phases, demand escalates faster than internal capacity can scale. Companies hire externally because they cannot fill roles internally fast enough, or because existing teams are already stretched thin. They expand into new markets, launch new product lines, and build features to capture user attention.
But here is what the official narrative rarely captures: the structural incentives that make overhiring the rational choice for executives, even when it is irrational for the organization.
Having worked through these cycles myself, I’ve found that five specific factors consistently drive this pattern. They explain why layoffs feel inevitable, even when they shouldn’t be.
1. The Principal-Agent Problem
Executives are rarely incentivized to optimize for sustainable efficiency; they are incentivized to optimize for growth metrics that drive stock price or valuation.
- The Incentive: A VP of Engineering gets a bonus for shipping features fast and hitting user growth targets. They do not get a bonus for maintaining a lean, efficient team structure that might slow down feature velocity by 10% but save 20% on OpEx long-term.
- The Result: Leaders rationally choose to overhire because the personal risk of under-hiring (missing targets) is higher than the personal risk of over-hiring (which can be fixed later with layoffs).
2. Zero-Based Budgeting vs. Incremental Budgeting
Most companies do not re-evaluate their entire org chart every year. They use incremental budgeting (“Last year we had 50 engineers, we grew 20%, so we need 60”).
- When growth stalls, they don’t naturally shrink to 40; they just stop hiring.
- The layoff becomes the only mechanism to force a “zero-based” reset because middle management will almost never voluntarily reduce their own headcount or scope without top-down mandate.
3. The “Maintenance Mode” Fallacy
You mentioned that once features are built, they move to maintenance and require less expertise. This is true technically, but often false organizationally.
- Technical Debt: Rapid hiring during growth phases almost always accumulates technical debt. The “maintenance” phase often requires more senior engineering time to refactor what was rushed, not less.
- Context Loss: When you shuffle people around or cut the original builders, you lose institutional knowledge. The remaining team often spends more time figuring out how things work than they would have if the original team stayed. Layoffs often create a net-negative productivity impact that takes years to recover from.
4. Financial Engineering Over Operational Reality
Sometimes, layoffs aren’t about operational right-sizing at all. They are about signaling to Wall Street.
- If a company misses earnings by 2%, but announces a 10% RIF (Reduction in Force), the stock often goes up.
- In these cases, the layoff is a financial transaction, not an operational correction. The employees are being used as a lever to adjust EBITDA margins to meet analyst expectations, regardless of whether the team was actually overstaffed operationally.
5. The Cost of Churn
Your model assumes that cutting costs = saving money. But it ignores the hidden costs of the layoff itself:
- Severance packages
- Legal/HR overhead
- Loss of morale/productivity among survivors (“survivor syndrome”)
- Re-hiring costs when growth eventually returns (often at a premium)
These costs are real, measurable, and almost never included in the press release.
What Sustainable Scaling Actually Looks Like
Having worked through growth cycles at companies like PageFreezer and InComm, I’ve seen what disciplined scaling looks like. It means resisting the urge to scale headcount linearly with revenue. It means investing in automation, QA frameworks, and process maturity before hiring bodies. It means having the courage to tell investors that sustainable growth is slower but more durable.
Most public companies simply cannot afford that discipline quarter-to-quarter. The incentive structures are too entrenched, the market rewards too short-term, and the accountability too asymmetrical.
Canva’s team update was honest about the pain of the decision. But honesty about the consequences is not the same as accountability for the causes. Until we start questioning why these layoffs were necessary in the first place, and holding leadership accountable for the decisions that made them inevitable, we will keep normalizing a cycle that treats people as adjustable line items rather than the foundation of any sustainable organization.
What’s your take? Have you lived through this cycle as an employee, a manager, or both? I’d love to hear perspectives from others who have navigated hypergrowth and its aftermath. Drop a comment below, reach out directly or drop me a note on LinkedIn (link on the side panel).