What's Behind the Tech Layoffs? Let’s Decode!

Over the past few months, I’ve been reading up on the news about tech layoffs almost every day. While layoffs by established companies aren’t something new, we were hoping that this trend might end along with the COVID-19 pandemic. In 2020, Boeing announced that it would lay off about 12,000 employees due to the COVID-19 pandemic's impact on the aviation industry. This step was followed by several other known companies like Uber, Airbnb, Disney, Chevron, and Marriott International with a total layoff percentage of 14% to 25%. As shocking as it was to witness these layoffs, it was also the only practical way for these giants to sustain themselves through the economic tornado.

However, it seems like the layoff trend has returned, and this time with a different set of reasons that may or may not work for businesses. Here are some of my observations.

Layoffs and stock buybacks: the new normal

Back in the day when Silicon Valley resorted to layoffs and buybacks, they were referred to as ‘short-term’ tactics that would destroy innovation. Today, it seems more common than ever for companies to announce mass layoffs to buy back their stocks. While buying back company stocks may not be the only benefit, another major benefit here is increased productivity. Layoffs can help companies refocus their efforts on their core business activities and eliminate distractions that may be hindering growth.

Here is the list of companies that recently announced layoffs and their reasons.

-???????Yahoo has revealed its intentions to lay off 20% of its employees, with a large number set to be let go by the conclusion of the week. An official representative of Yahoo communicated to CNBC that "We will be decreasing the workforce of the former Yahoo for Business division by almost 50% by the end of 2023 due to the new emphasis of the Yahoo Advertising group."

-???????Zoom has declared that it will be laying off approximately 15% of its employees, which amounts to 1,300 staff members. Throughout the pandemic, Zoom witnessed a remarkable surge in popularity, becoming a household name in the field of web conferencing. Nevertheless, the company is now taking measures to reduce expenses, attributing it to the "uncertainty of the global economy," as stated by CEO Eric Yuan in an official release.

-???????Dell, the technology corporation, has announced that it will be laying off more than 6,000 employees, accounting for approximately 5% of its entire workforce. According to Dell Co-Chief Operating Officer, Jeff Clarke, "market conditions continue to deteriorate with an uncertain future," despite the company's recent cost-cutting actions, such as implementing a hiring freeze.

-???????Groupon has commenced its "second phase of restructuring," resulting in the termination of 500 of its employees. These job losses are projected to be finalized by Q2 of 2023. This declaration is the company's second significant layoff in under six months, with the previous one also affecting 500 staff members in August 2022.

-???????Following ongoing speculation, Microsoft has officially confirmed the elimination of 10,000 jobs within the organization. CEO Satya Nadella communicated to the staff via email that the impact would be less than 5% of the total workforce, and that employment would continue in important strategic domains. The corporation attributes the job reductions to "macroeconomic conditions and shifting customer preferences."

It is important to note that layoffs are not inherently "good" for a business, as they can have negative impacts on employee morale, productivity, and the overall reputation of a company. However, in certain circumstances, layoffs may be necessary for a business to remain financially stable and competitive in a changing market.

Why layoffs are not good for the business

While we’ve discovered why layoffs may be necessary for a business, let’s try and understand how layoffs can have negative impacts on the business. In the first two months of 2023, 435 tech companies laid off about 121,000 workers, according to data from Layoffs.fyi.

Layoffs can damage a company's reputation, especially if they are not handled correctly. News of layoffs can spread quickly through social media, leading to negative publicity, loss of customer loyalty, and decreased sales.

Additionally, layoffs can create an atmosphere of fear and uncertainty among remaining employees, leading to lower morale, decreased motivation, and higher turnover rates. Employees may also lose trust in the company's leadership and feel less committed to its goals and objectives.

However, the trend seems to continue and we may also witness a new set of layoffs (there is hearsay about another round of META layoffs) in the coming days, so yes, brace yourself!