Background
It has been only 43 days into 2023, but more than 340 technology based companies have already laid off more than 101,807 employees across the world! These numbers have been collated and reported by Layoffs.fyi, a personal project by Roger Lee that’s tracking all tech layoffs since pandemic situation. By itself the number many not mean which until you frame the consideration that this is almost 64% of the employees that were laid off for the entire year in 2022, while a pandemic was on-going! Just in Australia, more than 42 companies have laid off couple of thousands of workers this year and some have even entered administration laying off their entire staff. Again this may not seem much of problem in tech industries that have been plagued by layoffs over the years, but when you consider that these same companies had received more than $5 billion worth of cash injection in recent months, then the emerging picture starts to become worrisome raising many pertinent questions.
What has been the trend for last 2 years ?
While 2021-22 had proved to be very beneficial for tech companies, with record of number of hiring, revenues going up in consumption of tech services, cash injections via investments and funding rounds, there was also good news for employees as most of them were high in demand and could draw above industry benchmark salaries (probably unheard of in the industry’s past). Some of the techies were so much in demand that many of them started Moonlighting (working on multiple jobs) without necessarily getting approvals from their employers. It is quite unclear why the tech companies thought that the situation that existed during pandemic would become the new normal and why they went on such a spending and hiring spree, but end of 2022 did signal a change in scenario. Although many people still continued to work in flexible arrangements, most people preferred going to offices, meeting people beyond the confines of their screen monitors in virtual meeting settings and attending universities than taking Zoom classes! The buying habits of people also started to go back to normal as can be deciphered from people reducing their consumption of tech services whether be it fast food deliveries or watching movies online.
Where did the companies go wrong?
The main job of board of directors and upper management is to assess risks and also predict/plan the maximization of the returns of investment for their shareholders. There could be many reasons why this set of people have now decided that the only way to maximize the returns is by laying off their employees or even shutting down their companies (specially after receiving multiple rounds of cash injections in the recent months). Accountability for this situation lies with the decisions that were made (or not made) as the situation around the world started to return to normal. In many cases the layoffs were not even based on performance but seemed more like random draw (or dare we say AI based algos?). While some leaders (like Zoom) have taken accountability for their wrong decisions by reducing their own salaries and bonus, others have taken the moral high ground and blamed it on all the markets, recession, while pocketing their bonus. The layoffs have not been in just IT sector, but also spread across multiple sectors that relied on technology services. Some reasons for the layoffs could be:
- Betting on initiatives that have not delivered the returns that were expected or are no longer generating the projected revenue (e.g. Twitter, Metaverse, Buy now Pay later, Autonomous cars, Digital Twins, Amazon robot deliveries )
- Unable to provide services at competitive prices (Deliveroo struggling against Uber eats and others)
- Unable to anticipate the changing behaviour of tech users (Netflix, Zoom facing challenges with subscribers)
- Growth of AI related tech needing less employees to do the same job (Microsoft, Google)
- Share buy back options requiring capital that makes it difficult to keep so many employees (Meta)
- Claw back some of the losses from the unprecedented salary hikes in the last 2 years
What does the future hold for employees?
The tech industry tends to be union agnostic, as the employees are not considered not to have the same insecurities as blue collar workers. On the other hand, the recent layoffs have surfaced a new risk for employees where they might be seen as commodities or cogs in the wheel than valuable components in the delivery of service to customers. This LA Times article mentions that this level of synchronized layoffs are a means to claw back some negotiation power from the employees, while increasing the percarity in the minds of employees about their job security. Many employees were stuck by the randomness of the layoffs with good performers, people with good standing with management, employees who were specially flown in from other countries for skill gaps, teams working on product lines that were projected to be key focus areas all being laid off at the same time!
Many of the layoffs were almost clinical, lacking any human interactions and employees only finding out because of their accesses being cut off, or ID cards not working or just emails informing them that their services are no longer required. Many of the employees strongly felt the need for support and a community where they could reach out and seek guidance. Many have turned to to Discord and Slack groups such as Alphabet Workers Union (AWU) and Amazon Labor Union (ALU) to find guidance, support and new jobs! One would have expected that better support could have been provided by the tech companies who have spent millions of dollars in the past convincing their employees that they are “part of a family” and then suddenly “They ain’t family“!
Conclusion
Many in the tech business would call this a “nothing burger” and opine that this is part of the technology company lifecycle while many who have been impacted would strongly disagree and call this a “game changer“. Having worked in the tech industry for many decades, it is prudent to say that companies do go through challenging times due to revenue or profitability or capital challenges, but the scenario that we are in now, where the companies have had serious amount of cash injection are failing to deliver and require employees to be laid off is indeed a “Black Swan” moment. Employees will never look at their employment the same way and no amount of “Kumbaya” HR offsite will convince them to change this new skepticism. The likelihood of employees being better organized to deal with such scenarios under the banner of unions specially in the tech sector is going to be very high. Maybe there is a silver lining after all from this situation!
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