Tech HR departments are overwhelmed. After years of throwing money at anyone with a computer science degree or background, companies need to get rid of employees instead.
Amazon and Meta, which owns Facebook, lead the pack in the scale of job cuts, with more than 10,000 planned each, while Twitter grabs headlines for brutality and incompetence. New owner Elon Musk fired around 3,700 employees via email and immediately tried to rehire some of them, claiming they were fired in error.
The wave of layoffs goes beyond the big names: Nearly 800 tech companies have announced layoffs since January, shedding 120,000 jobs, including 25,000 this month alone, according to layoffs.fyi, a tracking site.
With the exception of a few veterans who survived the dotcom crisis, tech workers have never seen anything like it. How the cuts are handled could shape the culture of the sector for years to come.
Normally, innovation and rapid growth require technology employees to keep faith. They often work long hours and solve seemingly impossible problems while waiting for financial rewards that can take years to arrive. Unexpected job losses, especially if treated cruelly, undermine any sense of sacrifice shared not only by those who have died, but also by those left behind.
Tech companies facing their first big showdowns should keep this in mind and learn from other industries. The banking sector is known to attract many employees who are primarily concerned with immediate personal gain. This is why the reforms put in place after the 2008 financial crisis aimed to force staff to worry about the consequences several years in advance.
This short-termism was a natural consequence of decades of cyclical hiring and firing that undermined any sense of institutional loyalty. Banks have spent decades recruiting staff in good times only to swing the ax indiscriminately in bad times. And many of them did it in particularly unpleasant ways. In 2012, Swiss bank UBS made it clear how little individual feelings matter. Around 100 London-based fixed income traders were told they had lost their jobs when they arrived at the entrance turnstiles and found their access passes disabled.
The post-Covid version, as practiced by Twitter and others, is to disable someone’s Slack work and email accounts before telling them they’re being fired. Heartlessness sends the message that workers are replaceable, so why should they exert effort that will not directly benefit them?
At the same time, businesses that exercise basic decency can reap the benefits. When pandemic travel bans hit the US airline industry, Delta handled its financial crisis primarily with voluntary buyouts and unpaid furloughs, while American and United announced mass layoffs. When air travel returned last summer, Delta had fewer problems with canceled flights, in part because the Atlanta-based carrier was able to replace staff more quickly.
Although the other carriers reversed most of their job cuts after receiving government assistance, their former employees took advantage of the boiling labor market and opted to go elsewhere. (Loyalty doesn’t go that far: Delta’s pilots’ union recently voted to strike to protest long delays in contract talks.)
While it’s ideal to avoid mass layoffs, many tech managers believe it’s not possible. Yet some ways are clearly better. Patrick Collison, chief executive of payments company Stripe, recently won praise for his admission that he made a mistake and for his generous severance packages, while Brian Chesky provided outplacement assistance for workers who were leaving as part of Airbnb’s 2020 job cuts.
Management experts say it’s best to have a big streak of cuts, with appropriate outplacement benefits, and to make it clear to employees why the losses are necessary and when they will stop. Being human and accessible helps. But don’t overdo it. Braden Wallake, chief executive of marketing agency HyperSocial, has become a fun figure online after posting a selfie of himself crying over layoffs.
Above all, says Bob Sutton, an organizational psychologist at Stanford University, don’t pretend you’re just getting rid of the bad guys: “Everyone knows that’s bullshit and in the future you might see them again. You might even want to hire them again.
Tech leaders may also want to learn from professional services firms, which have decades of experience helping people, due to their “up or out” employment structures. For many law firms and consulting firms, alumni networks are a source of referrals. Sometimes being nice pays off.
brooke.masters@ft.com
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