· 4 min read
Can we finally retire the “We’re a family” description of a company’s culture?
Executives conducting recent tech layoffs have cited a variety of reasons: outsized expectations of pandemic recovery, economic headwinds, revenue-goal misses, or “a confluence of negative economic developments,” as Crypto.com’s CEO Kris Marszalek put it. But promoting a culture of unconditional, family-like loyalty has led to some laid-off employees feeling “betrayed.”
By referencing external forces, companies may have the cover, some have argued, to push workers to be less demanding, all while reducing labor costs. While this could be an attractive option for CEOs and CFOs looking at their business’ balance sheets, HR leaders may also consider how these actions may affect the company’s employment brand, employee morale, and talent strategy in the future.
Tech layoffs, explained. “We find that three characteristics are common to many of the companies that have recently announced a large number of layoffs,” Goldman Sachs chief economist Jan Hatzius wrote in a recent client note:
“First, many are in the technology sector. Second, many hired aggressively during the pandemic—on average, their headcount grew 41%—often because they over-extrapolated pandemic-related trends…Third, they have seen sharper declines in their stock prices, which have fallen 43% from their peaks on average, and in some cases appear to be responding to investor demand to cut costs by shrinking their workforces rather than to a worsening in the demand outlook.”
Shedding staff has led to a stock price resurgence at some large tech firms, like Alphabet, Microsoft, and Amazon. Jason Schloetzer, associate professor at Georgetown University’s McDonough School of Business, told HR Brew, that could have influenced other companies.
“Managers, board members, and executives notice that the market reacts positively in terms of short-term stock price to the layoff announcement,” he explained. “These other organizations see this, and they think to themselves: ‘If the market is rewarding this…then I can imitate that behavior in the short term and I can announce some layoffs.’”
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No worker is safe. Schloetzer said financially sound companies typically make cuts in a principled way by thinking about the “adjustment cost,” or the cost of filling the roles being vacated.
From multiple sources, including Schloezter, Layoffs.fyi, and analysis from Andy Karr, director in Gartner’s HR practice, via PR rep Mary Baker, it would appear that all kinds of roles, from tech and engineering to HR and finance, have been impacted by reductions.
The fact that technical workers like programmers and developers were among the layoffs, however, “suggests that there’s a whole new type of worker, that we’ve kind of glorified as being difficult to find, a rare talent, special folks, and that maybe that’s not the case anymore,” Schloetzer said, referring to the way in which global talent markets have driven their wages and bargaining power down.
Reporting from journalism nonprofit Rest of World suggests that US employers have increasingly sought to hire remote workers from less expensive, international markets, such as Mexico, Peru, and Uruguay.
Market corrections. Ultimately, the 59,000 workers laid off by Alphabet, Microsoft, Salesforce, Amazon, and Meta since November 2022 represent less than one-thousandth of a percent of the total US labor force. US unemployment is low, and job listings are high.
Layoffs of between 5% and 7% indicate a “surgical” approach to force reduction, Dan Kaplan, senior client partner at Korn Ferry, recently told HR Brew, which is dissimilar to layoffs in 2008 or 2020. This has caused some to view the moves as opportunistic or hypocritical.
HR leaders may choose to advocate for more people-centric actions than reducing headcount, if they can tie HR strategy to company success, or, if layoffs are necessary, for executive sacrifices, as in the cases of Intel or Zoom.—AK