The Real Reason behind Big Tech&#8217;s Recent Mass Layoffs
Recently, several big tech companies, including Google, Amazon and others, have been laying off a significant number of employees. While some, like Paytm and Dropbox, cite AI advancements as a reason for layoffs, this isn’t universally the case, and sometimes it is because of quarterly-driven results for cost-cutting and restructuring. Citing Salesforce’s layoff strategy, Zoho chief Sridhar Vembu said that such companies are constantly engaged in hiring and firing sprees driven by short-term, quarterly financial goals. He noted that this approach is common in publicly traded companies, which focus on immediate cost-cutting and restructuring, often leading to a volatile employment environment. Quarterly-Driven Layoffs At the start of 2023, Salesforce announced a 10% layoff of their workforce, which resulted in more than 7,000 employees losing their jobs. The two quarters following the firing showed promising numbers. Technology advisor and writer Gergely Orosz observed that post the firing of employees and posting good quarterly results, the company underwent a hiring spree. Shortly after, they went on a hiring freeze, preluding how Q4 2023 must have fared for the company. Recently, Citigroup said it would be cutting 20,000 jobs, which is about 10% of the workforce, owing to a disappointing net loss in the fourth-quarter results. The CEO of Citigroup, Jane Fraser, had announced a restructuring in September, which would contribute to job cuts. The bank is trying to cut over $50 billion of expenses and believes the layoffs will save about $2.5 billion this year. This is the same for Indian IT as well. At TCS’ recent earnings call, the company confirmed hiring a number of freshers in the previous quarter. They will also go ahead with their plan of hiring 40,000 freshers in 2024. However, Milind Kakkad, chief HR officer of TCS said, “Depending on the overall condition and [in order to] drive efficiency, if the headcount needs to be reduced, then so be it.” Similarly, American multinational investment management corporation BlackRock had announced its plans to lay off 3% of its workforce, i.e. 600 employees, so as to defend their profit margins. However, the publicly-traded company also said that they will continue to grow their workforce Situational-based Hiring and Firing When the pandemic led to many losing their jobs globally, specific domains thrived in the situation. With the high digital economic boom during the period, a number of corporations working in the relevant sectors resorted to mass hiring, and in many cases, over-hiring. With the pandemic waning, many companies then had to let go of their employees to sustain. Venture capitalists and investors also stepped up the pressure on their invested startups to either reduce their headcount or slow down the hiring process in order to conserve cash. Interestingly, the founder of Dukaan, a DIY e-commerce platform, got infamous last year for firing 90% of its support staff owing to an AI chatbot. Though the founder Suumit Shah claimed that an AI chatbot has replaced the support workforce, the company had already faced two rounds of layoffs before he could attribute it to AI. Not all job losses could be attributed to AI, as author and founder Dave Birss said, “AI is a fantastic scapegoat for unpleasant business decisions.” Lean wins Unlike other venture capital or investors-backed companies, Vembu’s bootstrapped company Zoho does not succumb to external forces that would dictate the firing demands. By adopting an agile and lean methodology, the company has been able to duck the mass layoff trend. In an earlier exclusive interaction with AIM, Vembu said that Zoho will never resort to layoffs, but only internally repurpose their employees. However, it will caution their employees on new technologies. Hiring pattern in big tech companies. Source: PragmaticEngineer An engineer from Apple had mentioned that despite Apple being understaffed in almost all teams, the employees had to learn to achieve their tasks with the current workforce. The company also did not cave into giving high salaries owing to resignation pressures. Apple has been synonymous for having not resorted to any form of mass hiring or firing based on company results. Tim Cook had previously mentioned that layoffs are the last resort – an approach that is independent of quarterly results.
A result-driven, volatile hiring process has consistently resulted in mass firings
A result-driven, volatile hiring process has consistently resulted in mass firings.
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As a rare blend of engineering, MBA, and journalism degree, Vandana Nair brings a unique combination of technical know-how, business acumen, and storytelling skills to the table. Her insatiable curiosity for all things startups, businesses, and AI technologies ensures that there's always a fresh and insightful perspective to her reporting. She now hosts her tech segment 'Point Break' on AIM Tv.