As the year 2022 approaches its end, the annual traditions surrounding the holidays can be expected. But one trend that looks to be pervasive in some sectors currently involves employee layoffs. Workforce reductions and downsizing are affected a variety of industries, and the impact looks to be significant. As part of a strategic workforce planning initiative, companies see layoffs as a necessary tool. And in the majority of cases, they’re absolutely right!
The most recent companies making layoff headlines involve both Twitter and Meta. Elon Musk’s Twitter takeover resulted in a tremendous house-cleaning with roughly half the staff let go. This has now been followed by sizable layoffs being announced by Mark Zuckerberg at Meta. But the technology sector isn’t the only one being affected. Real estate, ride-sharing services, and even some retailers are also planning workforce reductions and downsizing. In short, these decisions are simply a sign of the times and ones that are required for long-term survival. It may not feel good, but unfortunately, it’s just a part of strategic workforce planning.
(Take a look at Bold’s Twitter changes wish list here.)
“We’re restructuring teams [at Meta] to increase our efficiency. But these measures alone won’t bring our expenses in line with our revenue growth, so I’ve also made the hard decision to let people go.” – Mark Zuckerberg, CEO of Meta
Layoffs in the Technology Sector
During the pandemic, it seemed that companies in tech could do no wrong. Ecommerce boomed as lockdowns forced online shopping increases. Other companies like Netflix and Peloton gained millions of new subscribers. And at the same time, social media companies like Twitter and Facebook continued to coast along with notable growth. But in the last year, these trends have shifted in a major way, requiring a new look at strategic workforce planning. And for many of these companies, the only choice to make ends meet is through workforce reductions and downsizing.
This past month, Zuckerberg held a Zoom company call announcing Meta would layoff 13% of its employees. Effectively, this equals about 11,000 jobs, which is noteworthy since the company increased its employment by 28% over the last year. At the same time, Musk immediately pursued workforce reductions and downsizing at Twitter affecting half the company. The reason? Plain and simple, revenues for social media companies are down. Prepandemic trends did not persist, and the landscape has changed thanks to TikTok and Apple. TikTok gained market share thanks to short form videos. And Apple reportedly cost Facebook $10 billion in ad revenues based on its new privacy policies. Without a quick fix to these problems, strategic workforce reductions offer the smartest strategy to pursue.
(Short form videos are hot right now–read more in this Bold story.)
“A layoff is awful but we [at Redfin] can’t avoid it. We plan to keep increasing our share of the market, but that market in 2023 is likely to be 30% smaller than it was in 2021.” – Glenn Kelman, CEO at Redfin
Broader Effects Triggering Layoffs
For social media companies, technology shifts, advertiser preferences, and competition reflect key pressures. These have forced strategic workforce planning considerations until more lasting changes can be made. But larger pressures exist that are affecting other sectors as well. As inflation increases and a recession looms, industries impacted by interest rate increases are also vulnerable. Specifically, real estate, automobile, and even some ecommerce retailers have had to implement workforce reductions and downsizing. Companies in these fields have realized that sustaining existing employee numbers are not feasible. And in order to make investments in more profitable directions, the only solution is to reduce staff.
Several companies in the real estate sector have made recent decisions about workforce reductions and downsizing. Redfin, Zillow, and Opendoor all recently pursued sizable lay-offs and either shut down or cut back their home-flipping services. With higher interest rates, demand is less and house prices have declined. As a result, Redfin cut 13% of its staff while Zillow released a quarter of its employees. Lyft also recently laid off 13 percent of its staff as part of its strategic workforce planning. And even retail giant Amazon announced a hiring freeze until the end of the year because of unstable and unpredictable markets. Certainly, tech company layoffs are getting the most attention. But it’s a down economy that’s encouraging workforce reductions and downsizing as current company strategies.
“Not only has online commerce returned to prior trends, but the macroeconomic downturn, increased competition, and ads signal loss have caused our revenue to be much lower than I’d expected. I got this wrong, and I take responsibility for that.” – Mark Zuckerberg
Layoffs as a Growth Strategy
As has been evident at Meta and other companies announcing layoffs, the subject is definitely an unpleasant one. Other efforts were made in most instances to avoid workforce reductions and downsizing. But ultimately, the smart choice was to reduce staff in an effort to cut costs and redirect plans. Why? Because a business is a lot like a rosebush–sometimes, to enable the rosebush to most effectively grow, you have to prune it extensively. For a company, this “prune and grow” strategy translates into cutting a percentage of the workforce that doesn’t quite meet performance expectations, as well as carving out redundant functions (and positions). (Read more about prune and grow, and Musk’s use of it, in this Bold story.)
The bottom line: sometimes workforce reductions are neccessary for growth!
