The Much Talked About Salesforce Layoffs!

The recent announcement of layoffs by Salesforce, the leading CRM provider and the largest private employer in San Francisco, has come as a surprise to many. It is unexpected to read Salesforce and layoffs in the same sentence.??

So, what went down? How did Salesforce end up here? Is it the first time Salesforce has announced layoffs??

Let’s find out!?

Why did Salesforce announce Layoffs?

The layoffs were prompted by a challenging environment and slowing growth. This is not an isolated incident as many tech companies are facing similar challenges. In the face of decelerated growth, rising interest rates, and a potential recession, these companies are turning towards shrinking their workforce.??

But how did Salesforce and the likes end up here??

A Case of Overhiring?

The layoffs are the largest in the company's 23-year history and follow a trend of over-hiring during the pandemic.??

During the pandemic, many technology companies, including Salesforce, saw an increase in revenue as remote work led to a greater reliance on technology for remote collaboration. This led to Salesforce hiring too many people, leading to an economic downturn. The company’s workforce grew from 49,000 in January 2020 to almost 80,000.?

According to the CEO of Salesforce, Marc Benioff, customers are now being cautious in their approach towards making purchasing decisions. This has directly hit their revenues and leaves them with no choice but to let go off employees. In addition, there were concerns about productivity in parts of the sales organization, with Benioff stating that about half of Salesforce account executives brought in more than 95% of deals.?

A Case of Over Acquisition too??

Salesforce has made heavy acquisitions in the past five years, buying companies such as MuleSoft, Tableau, and Slack. These deals have resulted in huge cash outflows and an increased operational burden, leading to a growth in headcount without a corresponding return on investment.??

Tableau, for instance, reportedly took a big hit during the layoffs, as it has trailed the rest of the company in sales growth since the acquisition, and its revenue has been called a low-growth area. Additionally, Tableau includes a lot of similar functionality to other Salesforce products, making it an easier target for layoffs.?

How is Salesforce now reducing Overall Costs??

Salesforce has announced layoffs and office closures in an effort to reduce costs and improve margins. The company plans to shut down certain offices, which are expected to be completed by 2026, according to a filing with the Securities and Exchange Commission (SEC). The layoffs and office closures are aimed at reducing operating costs and allowing for profitable growth.??

Anshu Sharma, CEO at startup Skyflow, said the move will also help Salesforce grow free cash flow and keep investors happy. The company estimates the changes will cost up to $2.1 billion and will provide U.S. employees with a minimum of five months of pay, health insurance, and career resources.?

Conclusion

In conclusion, it is unfortunate to hear about the layoffs at Salesforce, however, it is reassuring that the company is providing support to the impacted employees. We hope for the economic conditions to return back to normalcy soon!?