- Layoffs are hitting workers at some tech giants like Google, Microsoft and Tesla.
- Job cuts can hurt morale, decrease productivity and discourage potential new hires.
- The impact may offset some financial savings benefits, affecting reputation and employee engagement.
“We only shoot thousands a week.”
The recent joke on Blind came from an employee at a major tech company commenting on news of further job cuts at Google.
There’s no doubt that for some tech workers, this gallows humor seems perfect after waves of layoffs at some of the industry’s biggest names, including Google, Microsoft and Tesla.
Elon Musk told staff last month that Tesla would lay off 10% of its employees. Then, in early April, it reportedly cut an additional 500 positions in its Supercharger division. Google removed about 12,000 people in 2023, then added more in early 2024, then came back last week with plans for a small number of people. additional discounts.
CEO Sundar Pichai recently told Bloomberg that the search giant was methodical in its handling of workforce reductions – “taking the time to do it right and do it well,” he said. Pichai also said layoffs at Google could slow down in the second half of the year.
But while this scalpel versus ax approach seems reasonable, layoffs in general – especially in small increments – come at a cost. Even at big-name companies that will likely never need new resumes, cutbacks can hurt morale, hurt productivity, drive away top workers and prevent at least some top talent from joining the organization, analysts said. labor market experts at Business Insider.
In short, the effects of layoffs can counteract the financial benefits of expenses charged to the income statement.
“It’s still people working together, and the idea that they can somehow absorb this loss like it’s nothing just shows a lack of understanding of how human psychology works.” , Sandra Sucher, professor of management practices at Harvard Business School, who has studied layoffs, told BI.
The cost of not doing business
Even when executives deem layoffs necessary to cut costs, organizations that make those cuts suffer the consequences, according to Wayne Cascio, professor emeritus of management at the University of Colorado Denver, who has studied downsizing. In the enterprises.
“You wonder when the ax will fall again,” he told BI. This causes remaining workers to start looking around, especially if layoffs continue without the company’s green light. “They’re spending a lot more time surfing the web, updating their CV, networking – and that’s hurting their productivity. There’s no way around it,” he told BI .
Cascio said that in organizations that lay off workers, the proportion of those who leave voluntarily typically increases by about 50% the following year. And often, those who leave are those who are “the most marketable,” he said.
Take Tesla, which recently lost several high-profile executives. One of the newest, Rich Otto, the former head of product launches, said Wednesday that he decided to resign amid the massive cuts.
“The recent layoffs which are shaking the company and its morale have unbalanced this harmony and it is difficult to envisage sustainability,” he wrote on LinkedIn.
Most job cuts at tech companies come even as the companies are doing well overall. Still, executives may feel the need to lay off workers for reasons such as pleasing Wall Street, operating more efficiently, focusing on new efforts like artificial intelligence, and generally getting by in a growth environment slower caused, in part, by interest rates. which are much higher than just a few years ago, as BI has previously reported.
One reason cuts don’t always come all at once is that companies try to make changes where they think they’re needed rather than making across-the-board cuts, Harvard’s Sucher said.
It’s hard to recruit with a reputation
Silicon Valley’s most prestigious names may have an easier time making routine cuts because they have a consistent supply of people wanting to add a prestigious logo to their LinkedIn profile.
“They think their brand is bulletproof,” Cascio said, referring to big tech companies. “To some extent it is, but it is not the case for most employers – by far the majority of employers.”
But even for the biggest names in tech, there can still be problems at the margins when it comes to recruiting top talent, he said. Those who might accept multiple offers will think about areas where there have been reductions and will often opt for the company that has never experienced layoffs rather than one that has experienced multiple cycles, Cascio said.
“This is going to be a tiebreaker,” he said.
And Gen Zers entering the workforce prioritize job security, knowing that even if their job changes within an organization, they still have a role there, Cascio said.
Caroline Ogawa, director of HR at research firm Gartner, said that while the white-collar job market is improving, many workers have yet to let go of the sense of power they developed there. a few years ago. during the Great Resignation. This means many remain demanding about where they work.
“Even though candidates received fewer offers, their expectations remained firm,” Ogawa said. “With this level of candidate agency, it’s going to be difficult to replace these employees.”
Dumping on your former employer
Social media makes it easier for laid-off workers to speak out about how their former employers handled a layoff, Cascio said. This is a risk that didn’t exist years ago and that even large companies face when it comes to recruiting for the next promising positions.
“It’s so easy to tarnish a company’s reputation,” he said.
Gartner’s Ogawa also told BI that when employers lay off workers, those who remain are often forced to take over work once done by their former colleagues. This can lead to burnout and even disengagement, leaving some to question what their purpose within the organization is.
It is therefore important that managers explain why they are making these reductions and how workers can return to their jobs.
“Fear is managed through transparency,” she said.
Harvard’s Sucher also said it’s critical to offer workers a rationale for budget cuts, not only for those who are laid off, but also for those who remain.
“‘What is the reason?’ And, ‘How plausible is the reason?'” she said. “It matters when you’re communicating externally, but it matters a lot when you’re communicating internally.”
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