Meta's Flattening Strategy: Can It Save the Company's Reputation?

Meta faces several significant hurdles. These include an increasingly competitive digital advertising market, Apple's unforgiving privacy policy and ByteDance's TikTok taking hold.

Meta is cutting middle management positions to lower costs and boost productivity, but this strategy could backfire. Here are four signs investors should watch out for.

Management Changes

Last week, Meta CEO Mark Zuckerberg informed employees in an internal memo that Meta will cut 10,000 jobs within six months, mostly targeting middle management roles as part of an effort to flatten out its management structure after years of rapid hiring. The move comes at a time when many tech firms have decreased or frozen their hiring plans.

An internal survey Recode conducted in October revealed that some employees are fearful for their job security and morale is low at Meta. An internal poll Recode conducted showed only 28 percent of employees responded positively when asked about trust in leadership team compared to 56 percent responding positively the year prior.

But Meta believes its changes will help it become more efficient and effective as it focuses on priorities like artificial intelligence. They also hope to speed up innovation; by having fewer managers can reduce decision-making times as well as risk aversion; thus freeing teams up to invest in more promising projects.

Changes to its structure come amid challenges that threaten its long-term growth plans, including declining digital advertising revenues and competition from emerging technologies that demand riskier investments. As a result, it has begun scaling back ambitions and cutting employee perks, including restricting what employees can say publicly about the company.

Sources familiar with the matter revealed that it announced this year a freeze on new positions and reduced some work from home options for some employees, according to sources familiar with the matter. Furthermore, during performance reviews this year some executives issued tougher directives than usual and labeled more employees as lower performers than usual, according to these same sources. Expect layoffs to occur soon following its annual review process rather than on an individual case-by-case basis, according to these same sources who suggested any job cuts will be implemented in a deliberate and thoughtful fashion like in November's massive round of layoffs were announced last November.

Recruiting

Meta's damaged reputation poses a serious challenge, potentially leading to advertisers departing and making recruitment harder for this tech giant. Therefore, Meta must focus on improving its culture and reputation rather than just recruiting more talent.

To achieve its goals, Meta must undergo a fundamental transformation in its management structure. Recently, CEO Mark Zuckerberg issued an ultimatum to middle managers: either give up their managerial responsibilities and move into non-management roles or leave. This move forms part of an effort by Meta to "flatten out" its organizational structure.

As the flattening begins, employees are nervously watching events unfold. Rumors swirl that some employees could receive subpar performance ratings that signal layoffs; others feel the effects of tightening belts: In recent days, the company stopped providing free laundry services and reduced food options available in its micro-kitchens - some employees even complained in internal chat groups that such changes make packing meals for their families harder.

The company is also taking an in-depth look at its real estate expenses, paying early to end some leases in offices around the Bay Area. Furthermore, it attempts to limit how many foreign workers it brings into the country by hiring only for roles which require outside expertise.

Though Facebook employees remain optimistic despite these setbacks, morale among employees has hit new lows recently according to results of an internal employee "Pulse" survey: only 39 percent felt optimistic about its future while just 42 percent expressed trust in leadership.

Analysts warn that, without proper consideration to morale issues at the company, its reputation could never fully recover and that may explain why some investors are starting to distrust it.

Culture Changes

Meta's culture shift has been met with mixed reviews among employees. A source close to the company stated that many employees have become anxious over their job security; yet one former employee told The Verge it will make Meta more agile in handling an ever-evolving tech landscape: flattening allows Meta to take on additional work more easily while offering greater quality in return.

The company is working to cut costs by cutting employee perks spending and travel expenses, in an attempt to increase profitability and cut back its costs. Over the last year, they reduced or eliminated free laundry services and decreased cafeteria meal offerings, prompting workers to complain in internal chat rooms about these changes. They have also adjusted dinner service hours such that workers cannot take food home for dinner service later and reduced snack restocking in micro-kitchens.

Additionally, they halted free beverages in their offices and reduced the availability of alcoholic beverages in its bars, asking employees to spend less money on company events and parties. It remains unknown exactly how much this reduction in perks will save the company but is expected to be significant.

Wall Street has responded favorably to Silicon Valley tech giant Qualcomm's focus on efficiency; their stock has surged nearly 58% year-to-date. But some employees say the company is forgoing creative innovations that made it a favorite among technologists and investors.

Some employees have expressed displeasure with Meta's leadership, saying management incentives have historically focused on headcount rather than performance of teams they manage, current and former employees tell Insider. These factors, combined with a lack of transparency about financial matters at Meta, has had a devastating effect on morale among staffers at Meta.

Managers have begun approaching many middle managers who oversee multiple employees and ask them either to return to individual contributor roles or leave, according to people familiar with the matter. It is anticipated that managers will share this news with affected workers within weeks - separate from Meta's annual review process.

Reputation Changes

Employee morale can be greatly improved when they observe that their company is taking steps to strengthen its image, yet this has proven a difficult feat for Facebook (now Meta). Recently voted the worst company of 2021 by Yahoo Finance poll, Meta has experienced financial challenges this year due to new competition such as TikTok eating into user growth.

Analysts often believe that Facebook (now Meta) could make an effective comeback by altering public perception of its leaders as responsible corporate citizens and showing commitment to user privacy and security.

Rebranding is just one way that the company is seeking to achieve this objective, along with cutting back its perks such as free laundry and dry cleaning services, dinner offerings and employee perks. The goal is to reduce costs while decreasing staff numbers at the company so it can focus on its core business more easily.

Meta is also striving to change its image by shifting its focus onto the metaverse. At its major product event this month, it displayed social, gaming and workplace concepts for virtual world. While this endeavor may sound ambitious, remember that Meta already faces competition in this space from Google Daydream VR and Apple ARKit ARkit; therefore it must demonstrate its vision of the metaverse is unique enough and compelling enough to draw users.

Rebranding strategies may work to some extent in helping Meta to turn around its reputation, but they will not suffice on their own. Meta will need to make serious commitments to its users, be transparent about how their data is utilized and demonstrate that its products are supported by research and development efforts.

Cambridge Analytica will need to do everything it can to avoid further scandals and PR disasters, specifically regarding how it used its user data for political influence, while failing to protect users against radicalization on its platform.