Exploring a world without layoffs: Understanding their preventability in game development | GI Sprint
Contrary to popular belief, letting employees go isn't a necessity.
Jesse Schell, a seasoned designer and writer behind Schell Games, which hasn't had a single layoff since its inception in 2002, argues that the gaming industry's cycle of hiring and firing fosters a culture of anxiety and disrupts team cohesion.
Through the GI Sprint series, featuring various media on creating games more efficiently, Schell outlines his approach to sustaining a resilient business amid turbulent times.
Watch the complete discussion below, download the audio, or access it on your preferred podcast platform.
Adapt business strategies without downsizing staff
Schell explains that the primary reason why many companies resort to layoffs is due to the inherent risk they accept when starting a project. "Companies often say, 'We'll fund this game, and if it's successful, great. If not, we'll have to let people go,'" Schell remarks.
He finds this norm toxic, having observed its negative impact on employee morale and the business overall. Schell believes studios should focus on their workforce over profitability.
Enhance workplace culture for better team retention
Schell emphasizes that long-term collaboration enhances both skills and team relationships. Retaining employees isn't just about keeping their expertise but building stronger interpersonal bonds within the team.
"Losing a team member means losing the accumulated experience and synergy. The longer a team stays together, the stronger it becomes," Schell notes. He mentions his company's approach of mixing contract work with their own intellectual property to bolster stability.
"We prefer to risk capital, not jobs. Even if our IP generates no revenue, our team remains secure as we pivot to other projects," he adds, highlighting a deliberate choice to safeguard employment over financial metrics.
However, Schell admits they're ready to part ways with underperforming or disruptive employees, but only after fostering a desirable long-term workplace culture.
Make swift, informed decisions
Handling six to eight projects simultaneously, Schell Games could increase its output by expanding the workforce, but Schell points out that simply scaling up can lead to more miscommunication and confusion.
"Seasoned developers can estimate project needs, though it's challenging. Recognizing its difficulty is crucial, and planning must be iterative," he states.
"Projects evolve. Agile development, with its iterative scheduling and adjustment, is vital as it helps in responding to developments and lessons learned during the course of work."
"Effective planning, respecting its complexity, and focusing efforts on timely, budgeted, and quality outcomes is an art form," Schell concludes.
Short-term outsourcing versus long-term risks
Although Schell understands why studios opt for freelance or outsourced work to minimize costs, his approach is different.
"We'll risk cash on a game, but not jobs"
"Freelancers are often unknown quantities without built trust," Schell says. "While straightforward tasks are manageable, innovative projects require nuanced communication which is harder with contractors."
He adds, "Occasionally, someone from Hollywood tries to apply their methods to gaming, claiming to know better. However, they usually retreat quietly after a short stint."
Exploring alternatives to layoffs
Schell Games has gone through tough periods and faced threats to its stability, but they have consistently found ways to avoid letting go of their employees.
"We never sought external investment," says Schell. "We've been a self-funded studio, initially taking on contract work where clients paid for game development, and we delivered the final product. Naturally, these projects had to be at least break-even or profitable, and we succeeded in that regard for a lengthy period."
With profits from these contracts, Schell Games invested in developing their own intellectual properties. According to Schell, "they weren't always profitable games," but the studio persisted regardless. "We kept going."
"Layoffs resemble an avalanche. If layoffs become necessary, it’s strategic to do them when many other companies are doing the same. Then it becomes clear that it's not just us, but rather the economy..."
"At present, we balance our operations with 50% of our own IP and 50% work-for-hire, and it’s working out well," he continues. "Everything feels stable. However, the 2012 recession was a daunting experience. Projects were getting canceled, acquiring new projects was tough, and we had to hustle nonstop to secure work.
"During those tough times, we didn’t offer raises for a while. We had to be cautious. I recall someone quitting during the recession over the lack of raises. He later joined a big game studio but got laid off a year later.
"Part of managing through these periods involves adjusting expenditure," Schell elaborates. "This might mean reducing bonuses, halting raises, or cutting back on various types of spending. Flexibility is essential, but it’s crucial to anticipate these needs. We tightened our belts this past year too, as we foresaw challenges ahead. A significant project, which had made us decline other opportunities, collapsed suddenly after six months of preparation.
"Managing such situations requires careful, thoughtful action. Business offers no guarantees, but with a focus on stability and ample consideration, you can maintain a solid footing."
Be honest and pragmatic about risk mitigation
Commenting on industry trends, Schell notes that the spate of layoffs across the gaming and tech sectors over the past two years is largely a reaction to the pandemic.
"With the pandemic, everyone started working from home," he explains. "This allowed people to work from any location, leading to the Great Resignation, with employees quitting in large numbers. Companies responded by raising salaries and hiring aggressively out of fear.
"Layoffs are like an avalanche," he reiterates. "When a company must cut staff, it's advantageous to do so when others are also doing it. Then it doesn’t appear as an isolated issue but rather a broader economic trend. This current wave of layoffs is part of that cycle, though hopefully, stability will return soon."
Schell believes this "boom and bust" cycle is common, affecting not just entertainment but technology sectors as well. He points out that layoffs often stem from poor risk management by leadership and a failure to plan for adverse outcomes.
"If minimizing layoffs is a priority, you can achieve it"
"You have to consider worst-case scenarios and think about risk mitigation seriously," he advises. "What if a deal falls through? Business can be like chess; some entities may intentionally put you in a tight spot to renegotiate terms. I’ve seen this happen to numerous studios when negotiating with publishers."
Therefore, Schell suggests that studio leaders always have contingency plans and prioritize their employees.
"I received valuable advice from Ted Price, CEO of Insomniac Games, as our studio was growing past 40 people. I was unsure about how to manage the expansion and needed to add management layers,” Schell recalls.
"Ted told me: 'You care about these issues and give them your attention. Because of that, you'll solve them. It’s those who ignore these challenges and hope for the best that run into trouble'.
"My core advice is simple: if minimizing layoffs is a priority for you, you can achieve it."
