The unprecedented wave of layoffs in the technology sector has disrupted the lives of thousands of employees worldwide, with Indian startups and global tech giants alike facing the consequences of their miscalculations.
The first four months of the calendar year saw Indian startups shedding over 25,000 employees, projected to double in the coming months. Globally, around 600 tech companies, including industry leaders like Salesforce, Google and Amazon, have laid off approximately 1.8 lakh employees over 12 months. While the number of employees being retrenched is obviously huge and perhaps the highest ever among tech companies, what is becoming clear is that these tech giants completely misjudged the post-COVID scenario.
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In a statement, Meta founder and CEO Mark Zuckerberg wrote that the world rapidly moved online at the start of COVID, and the surge of e-commerce led to outsized revenue growth.
“Many people predicted this would be a permanent acceleration even after the pandemic ended. I did too, so I decided to increase our investments significantly. Unfortunately, this did not play out the way I expected. Not only has online commerce returned to prior trends, but the macroeconomic downturn, increased competition, and ads signal loss have caused our revenue to be much lower than expected. I got this wrong, and I take responsibility for that,” Zuckerberg said. As a result, Meta cut 10,000 jobs over the course of a calendar year.
What went wrong
In the wake of the COVID pandemic, the world witnessed a rapid shift in how businesses functioned. Technology was pivotal in this transformation, with tech companies soaring to new heights and posting exponential growth.
The pandemic fuelled a belief that the massive shift to remote work, digital learning, and e-commerce would be permanent. This led tech companies to focus on enhancing their products and services to cater to a world where face-to-face interactions would be minimal.
However, as societies gradually reopened, it became evident that the human need for in-person interactions persisted. As a result, the demand for digital services waned, and tech companies needed help to maintain their growth momentum. Consumers, more than ever, relied on technology for their daily needs during the pandemic. Tech companies raced to address this increased demand, focusing on short-term solutions to pandemic-related problems. Unfortunately, many companies failed to anticipate consumers’ shifting needs as the world began to recover from the pandemic. This lack of foresight led to declining demand for certain tech products and services.
It was a misstep, Alphabet and Google CEO Sundar Pichai readily agreed. “Over the past two years, we’ve seen periods of dramatic growth. To match and fuel that growth, we hired for a different economic reality than the one we face today,” Pichai said after his company fired 12,000 employees.
While tech leaders admit that their forecast went southwards and have taken steps to ring fence their companies, thousands of employees face an uncertain future. Their skill sets built over the years are not robust enough to sustain their jobs.
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But layoffs are not always the best-case scenario for companies and, at best, are short-term reactions and, in some ways, a case of imitating the rest. So, while Zuckerberg and Pichai might confess that they committed a blunder, sacking employees, especially those who have been part of building what a Meta or a Google is today, shows the value and ethics these companies espouse almost in every forum are more a smokescreen.
While employees get sacked, what kind of price do the heads of such organisations pay? Writing for Harvard Business Review, Sandra J Sucher and Shalene Gupta pointed out that in a 2012 review of 20 studies of companies that had gone through layoffs, Deepak Datta at the University of Texas at Arlington found that layoffs had a neutral to an adverse effect on stock prices in the days following their announcement. Datta also discovered that after layoffs, most companies suffered profitability declines, and a related study showed that the drop in profits persisted for three years.
And a team of researchers from Auburn University, Baylor University, and the University of Tennessee found that companies with layoffs are twice as likely to file for bankruptcy as companies that don’t have them. Moreover, while short-term productivity may increase because fewer individuals are required to cover the same amount of work, this growth comes at a cost— not just to the workers. According to Michael Quinlan’s research at the University of New South Wales, quality and safety suffer, and staff burnout and turnover rates shoot up. In the process, innovation becomes a casualty, Sucher and Gupta wrote.
However, employees now have no option but to embrace the new normal. In other words, they should normalise layoffs, embrace change and build the resilience needed to navigate the post-layoff scenario. With tools like ChatGPT and Generative AI rearing their heads, employees might find themselves more in a corner than in corner rooms.
What employees can do
To navigate this maze, employees should prioritise continuous learning by attending workshops, webinars, and online courses to enhance their skill set and stay relevant in the job market.
Diversify skill set: To improve job security and reduce the likelihood of being laid off, employees should develop a diverse skill set transferable across industries and job roles. Acquiring skills in high-demand areas, such as data analysis, project management, and digital marketing, can increase an employee’s value and employability.
Network and build relationships: A solid professional network can provide invaluable support during times of uncertainty, such as layoffs. Therefore, employees should actively engage in networking opportunities, both online and offline, to stay informed about job openings and industry trends, as well as to build relationships that can help them navigate potential career transitions.
Plan for the unexpected: While it’s impossible to predict when a layoff might occur, employees can take proactive steps to prepare for the unexpected. This includes building an emergency fund, regularly updating their resume, and researching potential job opportunities.
Develop a side hustle: To mitigate the impact of potential layoffs, employees can explore side hustles that align with their skills and interests. Developing a side hustle can provide an additional source of income and serve as a potential fallback option in case of job loss.
While companies focus on short-term benefits during a crisis, their inability to trust their employees can lead to long-term consequences. Therefore, instead of reflexively implementing layoffs, it is preferable for all businesses to plan thoughtful workforce changes in response to technological disruptions and escalating competition.