Tech Layoffs | It’s not just spring cleaning, it’s future-proofing as well

With increased commercialisation of AI tools, these tech firms are undergoing a mid-life existential crisis

Meta (or Facebook as earlier known) laid off 11,000 employees in November. This week, it announced additional cuts of 10,000 jobs. Ironically, Meta has themed this year for them as ‘Year of Efficiency’. With Mark Zuckerberg claiming that Meta’s latest transition is to make it a better technology company, does it mean that more of these tech giants will use technology to reduce human need?

These layoffs across tech giants have come at a time when each of these giants have also announced billions of dollars of investments into newer technologies, especially AI. It is obvious to wonder if these tech giants, despite their vast resources of finances and talented people, do not understand the basics of talent-hiring or business management? Or is it a hire-use-throw-fire model?

Is there a tech recession? Not really. Is there a valuation bubble for tech sector? Yes, in parts. Are these large tech firms broke? Not at all; they have hugely cash surplus. They are announcing layoffs, also because other companies are doing it.

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Yet, at the same time, the era of cheap money with the start of a tighter monetary policy cycle, indicates a change in business sentiment. In the United States, where the FAANG platforms are primarily situated, tech companies represent only 2 percent of all employment in the country, compared to larger sectors which are still hiring. So, tech firings cannot be seen as economic slowdown yet for the US.

FAANG, represents Facebook, Amazon, Apple, Netflix, and Google (now Alphabet). Suddenly, one wonders if these stocks, with their newly-announced intent to run efficient-business, will they be seen as Manaa (Hindi for forbidden?

Temporary Spike

During the COVID-19 pandemic, the tech sector benefited from the global surge in digital usage. With work moving remote, more people went online, and for longer durations. With that, social media usage and e-commerce adoption also grew. With this multi-fold growth, almost overnight, tech companies (including the small ones) went on a quick hiring spree, and at high salaries.

Tech firms also benefited with increased revenues, and the concept of ‘new normal’ was built into the business planning assumptions. That was the mistake, especially now that the hyper-growth has slowed down.

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With increased commercialisation of Artificial Intelligence (AI) tools, these tech firms are undergoing a mid-life existential crisis. Their business models, including right-fitting relevant talent, and developing newer monetisable products, need a newer enterprise vigour and organisational culture. That’s where layoffs help.

Nearly quarter of all jobs cut in the past few months in the tech world are from human resources. One, it indicates that companies could have lesser recruitment in nearer future. Second, but critical: commercially available AI-based HR solutions have automated tasks related to the entire hiring cycle, on boarding talent including background checks and HR compliances, and even conduct performance management.

What’s the implication on human talent? The key function where the hiring-firing-hiring cycle is expected to continue for next few years is the technology skills. With emerging technologies, and evolving-regulatory-framework (especially around data and consumer protection), newer skills will be demanded by these tech employers, making older tech skills redundant.

Shareholder Sentiments

The larger worry is that large, listed entities would continue to face stakeholder questions around profitability. Simply put, that is the aim of for-profit business entities. To make monies for its shareholders. Despite some of the tech giants facing revenue slowdown, they remain large and profitable. So, the relevant optics of trimming the workforce, and claiming improved efficiency and profitability does send confidence to their shareholders. This is important as share price is one of the performance-reward-metric for CXO compensation, as well.

Layoffs in the tech industry will a regular feature, as these entities must remain competitive and continuously profitable in a sector that is routinely being disrupted with emerging technologies. Thus, the entities would rather disrupt their organisational structures quicker than they can get disrupted. As for the war for talent, it never goes away in the tech area. This is not just right-sizing, but right-stocking of talent.

(Srinath Sridharan is an author, policy researcher, and corporate adviser. Twitter: @ssmumbai.)

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH