Big Tech Layoffs May Have Increased The Chances Of Recession
The year kicked off with new layoff announcements on top of the ones already due. Pichai's Google, Zuckerberg's Meta, Bezos' Amazon may have started a vicious cycle.
Layoff season is underway and it’s looking bad for Big Tech employees. Now, before we drill deep into the atrocities of the mass firing, rampant in the news today, we must tell you—layoffs may be vile but they’re not unnecessary, especially when it comes to the financial stability of a company. They must be avoided at all costs but when push comes to shove, they need to be done.
The tech industry has gone through rigorous tests like the dot-com bust and the Great Recession of 2008 but it has stayed fairly resilient, due to its fluidity, size and universal presence. Never before has it slashed payrolls and left its employees fending for themselves. It’s a first and it’s historic.
Layoffs haven’t unearthed recently. Downsizing is a common occurrence, mainly because a company’s financial health, but they have a structure to it which allows for the systemic removal of employees. Companies like Meta, Alphabet and Microsoft, which boast significant revenues and profits, announcing layoffs one after the other, is what took everyone aback.
The industry is confronting one of its worst contractions in history with Meta, Google, Microsoft and Amazon all announcing mass layoffs over the span of a few months. According to tech job tracker layoffs.fyi, there have been more than 200,000 tech jobs lost since the start of last year.
By no means is the tech industry in trouble.
In 2020, the pandemic coaxed the bigger companies to get into a hiring spree, in order to sustain the requirements of the booming tech industry. Companies like Amazon and Meta doubled their workforce to cope with the needs of the consumers, who had recently adopted the new normal—work from home. With everyone operating online, the hiring made sense, especially since no one wanted to miss out on the golden opportunity (unfortunately, Skype did).
But the enthusiasm has faded and the world is slowly returning to its old ways, even with WFH still popular amongst the younger workforce. Big Tech companies are looking to offload some passengers from their overladen boat.
Why did all of them announce layoffs at the same time though?
Everyone is forecasting an economic downturn this year—everyone is predicting a recession in the near future. Rumors and whispers have become stronger and companies are hoping for the best but preparing for the worst. What companies do not realize is that when you’re pessimistic about the future, you take actions to prepare for it. And actions taken with pessimism in mind, i.e. the laying off, lead to negative outcomes, i.e. recession, that you then claim to have predicted all along.
The vicious cycle will, indefinitely, lead to recession.
But since several companies have taken the unapologetic approach, let’s talk about it. Frankly, there’s no way right way of dismissing employees but there are several wrong ways.
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Layoffs are all about the way you do it. Firstly, an email to layoff 12,000 employees, i.e. merely 6% of your workforce, looked callously convenient—even though it may not have been the intention—for Sundar Pichai’s Google. The technology giant had the bandwidth to conduct in-person or even solo video call layoffs (for remote employees), but chose to go the email route. To the outside world, that doesn’t sit well; for a company that’s going to head-to-head with OpenAI’s ChatGPT (backed by another mammoth, Microsoft), in a few years, the layoff surely looks like a step in the wrong direction.
A part of growing a company, or maintaining the image of a company is having a tough conversation. Shying away from the one of the toughest conversations there are, doesn’t portray strong leadership. A face-to-face conversation enables the processing of emotion, allowing employees to ask questions, seek feedback and feel secure in their abilities. The impact of layoffs is devastating—we’ve highlighted a section below that talks more about that.
On top of that, they botched the announcement.
I am confident about the huge opportunity in front of us thanks to the strength of our mission, the value of our products and services, and our early investments in AI. To fully capture it, we’ll need to make tough choices. So, we’ve undertaken a rigorous review across product areas and functions to ensure that our people and roles are aligned with our highest priorities as a company.
Granted, layoffs are done in the best interest of the company but to highlight that as a reason for the layoffs in an email is just rubbing salt in the wound. Google is a profitable company, it has been for a very long time and there are no signs that projects the possibility of it facing a crisis anytime soon. But again, Google was one of the biggest recruiters during the pandemic, and the realization that they had more than they needed had to strike soon. They had to offload. At least, they didn’t do it like Better.com.
The online mortgage lender, Better.com, has to go down as one of the worst examples when it comes to handling layoffs. Towards the end of 2021, CEO Vishal Garg laid off 900 employees on Zoom! Right before Christmas! A day after receiving $750 million in funding from SoftBank and Aurora Acquisition! “If you’re on this call, you are part of the unlucky group that is being laid off,” Garg said on the video call, which quickly became viral on social media.
It was dramatic, despicable and inhumane.
But that’s not all. After taking a short hiatus from being CEO, Garg returned and craftily began another round of layoffs, this time with more caution.
According to New York state law, by not laying off more than 250 people at a time, Better.com is not required to pay out 90 days’ severance as would have been mandated by the state.
(Credits: Tech Crunch)
And Garg’s Better.com used that to their advantage, letting go of 249 or fewer employees at a time, avoiding the 90 days’ severance in the process. In 2022, more than 3000 employees at the company were axed.
Although the second round of layoffs didn’t receive the same level of flak as the appalling Zoom call before, the damage to the reputation of the firm was sizable.
The Impact of Layoffs
Layoffs can have a negative impact on the mental health of both affected employees and those who remain employed. Studies have shown that people who lose their jobs, especially unexpectedly, can experience depression, anxiety, and other emotional problems.
The impact of layoffs can be felt long after the initial event. Studies have shown that employees who experience layoffs are more likely to suffer from long-term unemployment and have a harder time finding new jobs.
The negative effects of layoffs can extend beyond the individuals directly affected. Communities and even entire regions can be impacted by job losses, as local businesses and other industries may suffer as a result of reduced consumer spending.
When companies conduct layoffs, they may also lose valuable talent, knowledge and experience. This can lead to a loss of productivity, lower morale among remaining employees, and difficulties in maintaining customer relationships
Layoffs can also lead to a decrease in employee engagement and motivation. Remaining employees may feel less secure in their jobs and less invested in the company's success, which can lead to a decline in productivity and employee retention.
We’ll come clean, the above was generated by ChatGPT. It’s amazing what the platform can do.
Believe it or not, the only way to prevent layoffs is hire in the right manner. If you’re unsure about how, this might be of some use to you.
Before we bid adieu, we want to ask you something.
Do you think a recession is around the corner?
Until next time,