# Chang rejected layoffs based on performance reviews

Markdown copy of https://realalpha.app/s/chang-rejected-layoffs-based-on-performance-reviews/ on Real Alpha, the best minutes from long interviews with the people building AI. Cite and link the page, not this copy.

- Speaker: [Morris Chang](https://realalpha.app/people/morris-chang/) · Morris Chang is founder of TSMC. · Founded TSMC in 1987 and pioneered the pure-play foundry model behind its rise to a global chip giant.
- Host: [Ben Gilbert](https://realalpha.app/people/ben-gilbert/) · Co-founder & co-host, Acquired · Ex-Microsoft engineer turned investor at Madrona and Pioneer Square Labs.
- Host: [David Rosenthal](https://realalpha.app/people/david-rosenthal/) · Co-founder & co-host, Acquired · Former Madrona venture capitalist; leads Acquired's company histories.
- Show: Acquired
- Episode: [TSMC founder Morris Chang](https://realalpha.app/v/FZItbr4ZJnc/), Jan 27, 2025
- Moment: 15:11 to 21:08 of the episode (6 min), playing on https://realalpha.app/s/chang-rejected-layoffs-based-on-performance-reviews/; the episode from there: https://realalpha.app/v/FZItbr4ZJnc/?t=911

## Quote

> “So if you need the people back, **within a year**, you shouldn't lay off.”
> — [Morris Chang](https://realalpha.app/people/morris-chang/) at [20:39](https://realalpha.app/v/FZItbr4ZJnc/?t=1239) · Acquired

## Takeaways

1. Performance reviews are too subjective to decide who gets laid off.
2. A layoff can cost about six months of pay in separation expense.
3. If you need people back within a year, don't lay them off.

## About this segment

Morris Chang explains why he opposed firing hundreds of employees based on subjective reviews during a downturn. He argues layoffs make little sense if you need to rehire and retrain people within a year.

From “TSMC founder Morris Chang”, Jan 27, 2025. [Watch the full episode](https://realalpha.app/v/FZItbr4ZJnc/)

## Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

[15:24](https://realalpha.app/v/FZItbr4ZJnc/?t=924) Another problem was the immediate one that triggered me to retake the CEO ship because the previous CEO had laid off, except he didn't use the term laid off, you know. He used the bad performance review, the worst performance review people, and there were about 600 or 700 of them, you know. And he laid them off on the basis of their poor performance review. Well, we never did that, you know. I mean, the worst we would do was to put them on, place them on probation.

[16:17](https://realalpha.app/v/FZItbr4ZJnc/?t=977) six months. And quite often, you know, at the end of the six months, everybody would go back to his or his or her old job. And some of them would get transferred because they were in the wrong jobs, you know. So some of them would get transferred. But we almost never really fired people even after the probation period. So under your watch, you never did a layoff and you never looked at performance reviews, which are meant to help coach people as the means to determine who to lay off.

[17:01](https://realalpha.app/v/FZItbr4ZJnc/?t=1021) That's right, yeah. And I actually, you know, have told the managers that. And, well, in 2008, of course, there was a financial crisis. And the semiconductor business, in fact, got affected. And our revenue dropped. Our business dropped pretty seriously. I was not a CEO. I was a chairman. But I just knew that anyone, any general manager, any CEO, general manager, without very much experience, what he or she would do in a situation like that.

[17:58](https://realalpha.app/v/FZItbr4ZJnc/?t=1078) It's kind of a knee-jerk kind of reaction. Oh, he says, oh, this is my test. I got to save all the money possible, and I got to lay up people. But this is the semiconductor industry, and Moore's Law means no matter what happens, you will always need people. Well, I know, I know. But semiconductor industry people actually think the same way as I described, you know what I mean? They are lay-off, they are lay-off people too.

[18:35](https://realalpha.app/v/FZItbr4ZJnc/?t=1115) Now, I had a lot of experience at Texas Instruments, but at Texas Instruments, I was not a CEO. I was just one of the top managers under the CEO level, and when the company decided to have a layoff, the CEO conferred with the top managers who included me, and their first reaction was exactly the same, and I'm talking about the 70s, early 70s, their first reaction on who to lay off was exactly the same as what our TSM CCO did in late 2008, 2009, which was, you know, go by performance.

[19:29](https://realalpha.app/v/FZItbr4ZJnc/?t=1169) Well, now I was the only one at Texas Instruments in the early 70s that said, no, that would not be a credible way of doing it. People would not respect us if we lay off by performance ratings. And why is that? Because it's very subjective. Performance reviews, the performance ratings are done by everyone's own supervisor. So 700 was performing people in the company. And who gave the... 700 people, the bad ratings, 700 supervisors, you know, very subjective.

[20:24](https://realalpha.app/v/FZItbr4ZJnc/?t=1224) It's not something that people will respect. If in a year you have to hire people back, you have to hire the laid-off people back, then you shouldn't lay off because the layoff, the separation expense is usually half a year, about half a year. And it takes at least half a year to train a person. So if you need the people back, within a year, you shouldn't lay off.