Tech Company Layoffs: What is going on with tech companies and the extensive layoffs in the recent past?
Meta, Microsoft, Amazon, Alphabet, Spotify, Yahoo, Twitter, and Zoom have all laid off 5-20% of their employees. And the list becomes longer and longer by the day.
With the shift to remote work, many businesses have had to look at ways to reduce costs, resulting in difficult decisions to lay off employees. The layoffs have had a devastating impact on many tech workers, who are now left without jobs in an already challenging job market. These layoffs also have a ripple effect on the tech industry, as the loss of talented employees could have a long–term impact on the sector.
Although the layoffs are unfortunate, many tech companies are offering severance packages, career counseling, and other forms of support to laid–off employees. This can help employees find new jobs and provide them with a better understanding of the current job market.
However, they are continuing with the layoffs since it is acceptable to let rid of a few employees to increase the bottom line.
But why is this taking place?
There are numerous theories. According to one view, these businesses are ready for the worse. So to say, a recession. When that day arrives, they want to be as quick as possible. To withstand the winter, trim the fat, remove the surplus, and manage a lean organization. But there’s another possibility.
A theory contends that tech companies are merely acting in this manner because they can. After all, some of these corporations have gobs of cash and could survive the crisis if necessary.
Consider the consequences of layoffs for both employees and the organization.
- According to one study, being given the pink slip is the seventh most stressful event in a person’s life. Going through such a horrible event destroys trust. And this could have an impact on the pool of high-quality potential candidates looking to join these organizations. They’ve seen how staff are handled and don’t want to go through the same thing.
- Then there are the company’s immediate costs. The cost of layoffs at Alphabet is expected to be over $2.5 billion. Meta and Microsoft will each contribute approximately $1 billion. This is because most employers offer regular severance payouts. Unused vacation days are repaid in cash. And a host of other things that cost more money.
- Finally, consider the long-term consequences. Visier, a human-resources analytics firm, discovered that when employees are let go, the likelihood that their coworkers will also quit rises by roughly 8%. When employee turnover grows, businesses must find replacements. It can also cost nearly twice as much as the employee’s annual income. Other costs include training costs and a myriad of other factors.
Even survivors see a 20% drop in productivity and performance. They grow dissatisfied with their work. This could stifle innovation and new product development in tech firms. At least, that’s what research suggests.
So the single question is whether layoffs genuinely boost profitability.
See, capitalism changed permanently in 1976. During that era, professional managers in charge of businesses were solely concerned with themselves. They were unconcerned about the true owners – the shareholders.
CEOs who were just beginning to imprint their influence. They all vowed on their lives that the most essential thing a company could do was maximize shareholder wealth.
In any case, because a substantial portion of CEO compensation is related to stock prices, they, too, make decisions based on this single statistic. Those who are always short-sighted. Layoffs, for example, give an optical illusion of efficiency but do not appear to help in the long run. And when shareholders rejoice and stock prices rise in response to such statements, they believe it was the right decision. Even if hard evidence suggests otherwise.
Even though the United States was about to enter a recession, less than 5% of Fortune 100 corporations declared layoffs in 1979. However, nearly 45% of these employers issued pink slips in 1995. CEOs were simply concerned about the possibility of a recession. Even though it never happened.
The practice is still going on today.
Conclusion
The future is uncertain. You over-hired and must now trim the surplus. And you don’t have actual evidence to convince you that if you fire x% of your people, everything will be OK. As you glance around, you notice that your contemporaries, the tech behemoths, are laying off 5-7% of their employees. You believe that the ‘sweet spot’ exists. So you do it as well.
So there you have it. Shareholder capitalism and social contagion could be the dark secret behind these layoffs!
