So you’ve all heard about the massive layoffs in the Tech industry right? Hopefully you are all reading this at work - some of you are quietly quitting, I bet :) The reasons given are that times are tough and the economy is entering a recession phase.
With the latest economic numbers this does not make any sense: Market is up over 10% YTD. Lowest unemployment rate in the last 50 years. Consumer demand is strong (retail, travel, and luxury). The companies that laid off thousands of employees (Microsoft, Meta, Google, etc..) are all making profits. Quite a few are making record profits.
So what gives? Why are these companies laying off employees in what appears to be a random / unclear pattern? It really doesn’t matter regarding performance, seniority or group. Reading LinkedIn posts it appears that 14 year old veterans of Google as well as new hires are being let go. And let go in the most inhumane, insensitive ways. You would think a company that proclaims to “Do No Evil” would know better.
Jeffrey Pfeffer, a professor at Stanford Graduate School of Business, answers this very question in an excellent interview by Melissa De Witt:
Why are so many tech companies laying people off right now?
The tech industry layoffs are basically an instance of social contagion, in which companies imitate what others are doing. If you look for reasons for why companies do layoffs, the reason is that everybody else is doing it. Layoffs are the result of imitative behavior and are not particularly evidence-based.
I’ve had people say to me that they know layoffs are harmful to company well-being, let alone the well-being of employees, and don’t accomplish much, but everybody is doing layoffs and their board is asking why they aren’t doing layoffs also.
Do you think layoffs in tech are some indication of a tech bubble bursting or the company preparing for a recession?
Could there be a tech recession? Yes. Was there a bubble in valuations? Absolutely. Did Meta overhire? Probably. But is that why they are laying people off? Of course not. Meta has plenty of money. These companies are all making money. They are doing it because other companies are doing it.
Bingo. In the current business environment, it’s fashionable to dismiss employees. I can’t help to think 6-12 months from now you are going to see a hiring frenzy by these same companies. Except this time, future candidates will think twice about drinking the kool-aid. And no amount of fancy slogans or advertisement will change that.
Which begs the question: Why are CEOs who openly claim responsibility are not facing any accountability?
The cuts will affect jobs globally and across the entire company, Chief Executive Officer Sundar Pichai told employees in an email on Friday, writing that he takes “full responsibility for the decisions that led us here.
There is no way you can convince me that any CEO who is worth his job would allow 12000+ people that are not needed to be hired. That to me is an admission that the CEO neglected his fiscal management duties.