Tech Layoffs | It is not only spring cleaning, but also security for the future

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

These layoffs at the tech giants come at a time when each of these giants has also announced billions of dollars of investment in emerging technologies, particularly artificial intelligence. It’s obvious to wonder if these tech giants, despite their vast financial resources and talented people, don’t understand the basics of talent recruitment or business management? Or is it a rent-use-throw-away model?

Is there a tech recession? Not really. Is There a Valuation Bubble for the Tech Sector? Yes, in parts. Are these big tech firms broke? Not at all; they have a huge cash surplus. They announce layoffs, and because other companies do.

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However, at the same time, the era of cheap money with the beginning of a tighter monetary policy cycle indicates a change in business sentiment. In the United States, where the FAANG platforms are primarily located, technology companies represent only 2 percent of all employees in the country, compared to larger sectors that are still hiring. So the tech layoffs cannot yet be seen as an economic slowdown for the US.

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

Temporary spikes

During the COVID-19 pandemic, the technology sector benefited from a global surge in digital usage. As work moves remotely, more people are online, and for longer periods of time. Additionally, the use of social media and the adoption of e-commerce has also grown. With this multiple growth, almost overnight, tech companies (including small ones) were hiring fast, and at high salaries.

Technology firms have also benefited from increased revenues, and the concept of a “new normal” has been embedded in the assumptions of business planning. That was a mistake, especially now that the hyper-growth has slowed.

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With the increased commercialization of artificial intelligence (AI) tools, these tech firms are going through an existential midlife crisis. Their business models, including matching the right talent and developing new monetizable products, need a new enterprise strength and organizational culture. That’s where layoffs help.

Nearly a quarter of all job cuts in the past few months in the tech world came from human resources. First, it indicates that companies may have less hiring in the near future. Second, but critical: Commercially available AI-based HR solutions have automated tasks that address the entire hiring cycle, talent onboarding, including background checks and HR compliance, and even performance management.

What are the implications for human talent? A key function where the hiring-firing-hiring cycle is expected to continue over the next few years is technology skills. With new technologies and an evolving regulatory framework (especially around data and consumer protection), these tech employers will demand newer skills, making older tech skills redundant.

Shareholder sentiments

The larger concern is that large listed entities will continue to face stakeholder questions about profitability. Simply put, this is the goal of for-profit business entities. To make money for its shareholders. Despite some tech giants facing slowing revenue, they remain large and profitable. Thus, the relevant optics of workforce reduction and the claim of improved efficiency and profitability send confidence to their shareholders. This is important because stock price is also one of the performance award metrics for CKSO compensation.

Layoffs in the tech industry will be a regular feature, as these entities must remain competitive and continuously profitable in a sector routinely disrupted by new technologies. Thus, entities would prefer to disrupt their organizational structures faster than they could be disrupted. As for the war for talent, it never goes away in the field of technology. This is not only the right size, but also the talent.

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

Disclaimer: The views expressed above are those of the authors. They do not necessarily reflect the views of DH