Facebook parent Meta is doing layoffs all wrong

When Meta, formerly Facebook, laid off 11,000 workers in November, it was in the shadow of Elon Musk’s brutal and chaotic shooting on Twitter. By comparison, the way Meta CEO Mark Zuckerberg carried out layoffs – saying he took responsibility for growing the company too quickly, showing what other cuts the company made first and offering a generous severance package – seemed human.

But this week, Zuckerberg announcement plans to lay off another 10,000 workers and will do so piecemeal over the next few months. People working in recruitment will be immediately impacted, those in tech will find out in April, while corporate employees will learn their fate at the end of May. Moreover, Zuckerberg had been hinting at these layoffs for weeks, further prolonging the air of unease within the company.

It’s the wrong way to go about layoffs, which experts say should be minimal, compassionate and clearly communicated. Doing this little by little will leave workers nervous and alienate the people Meta wants to keep, and it’s also likely to hurt the company’s growth in the future.

“We just extended the window for people worried about layoffs until the end of May now. How is it supposed to be effective? a Meta employee, who asked to remain anonymous so as not to jeopardize his job, told Vox.

In his post, Zuckerberg said, “I recognize that sharing restructuring and layoff plans months in advance creates a difficult time. But last fall we heard comments that you wanted more transparency earlier in any restructuring plan, so that’s what I’m trying to provide here.

All of this is happening as tech workers have seen their job prospects reverse. Tech companies that made unprecedented hiring at the start of the pandemic are now – some for the first time – cutting staff as ad dollars plummet amid a potential recession and users do things in addition to hang out online. It has meant a false semblance of perceived power among tech workers who are used to big benefits and big pay, but are now worried about having a job.

Layoffs in general are a bad way to run a business. In addition to encouraging people to voluntarily leave the company, layoffs undermine the morale of those who stay and reduce their productivity. This effect is worse if these layoffs occur slowly and without clarity from management, as is the case with the last round of Meta. If companies have to make layoffs, they should let everyone know ahead of time and offer retention bonuses to those who stay through their layoff date, according to Robin Erickson, vice president of human capital at Conference Board, which studies the behavior of companies in the event of a crisis.

Moreover, research show layoffs don’t really save companies a lot of money. Salary savings are mediated by severance pay, not to mention the lost productivity and knowledge these workers take with them.

“What happens in the short term is that the corporate bean counters say, ‘Well, if you get rid of that many people, you’ll save that much,'” Erickson said. term, layoffs hurt businesses. Period.”

So why do Meta and other tech companies keep laying off employees?

One reason is that companies like Meta are looking short term stock market gains. Investors have been calling for Meta to tighten its belt, and in this case, announcing layoffs paid off. Shares of the company jumped 7% on the latest layoff news, closing at its high point in more than eight months.

“They like cost cutting because the effects are clear and immediate, and the employees are expensive, so cutting them cuts a lot of costs,” said Peter Cappelli, professor of management and director of the University’s Center for Human Resources. from Pennsylvania to Wharton. School. “They also can’t see the downsides of firing people, at least immediately – what happens to those people’s work, what are the ripple effects on teams, turnover of others, etc.”

At Zuckerberg’s announcement about the most recent layoffs, the excuses for causing the mess in the first place are over. Instead, there are details of his Wall Street-friendly “efficiency year” plan, which includes cutting many middle-management jobs and operating with fewer people overall. He used the word “skinny” or “skinnyer” eight times.

To be fair, Meta had double its employee base since 2020 to the point where some of its own employees found the company too bureaucratic. Like other giant tech companies, Meta was looking for ways to get back to her scrappier roots when he first considered laying off some employees. But the endless layoff cycle he’s embarked on now could end up being an over-correction that hurts the company in the long run.

Another reason for so many tech layoffs? Apparently everyone the fact — Amazon, Alphabet, Microsoft, Salesforce. Jeffrey Pfeffer, professor at Stanford Business School, has called the series of technological layoffs, mainly a “social contagion”.

“If you’re looking for the reasons why companies are laying off, the reason is because everyone is doing it,” Pfeffer told Stanford News in December. “Dismissals are the result of imitative behavior and are not particularly evidence-based.

There’s also a more everyday reason for layoffs: accounting magic.

Wharton Hats argue that accounting rules require companies to treat employees as current expenses that can be reduced rather than as assets, which have value. This causes companies to use layoffs as a way to improve their balance sheets, even if it doesn’t help the company in the long run. He notes that many companies often end up swapping full-time salaried employees for relatively expensive contract workers, simply because it makes their numbers better for Wall Street.

“Some of the important financial accounting metrics are reported on a per employee basis, so as soon as we lower that denominator, metrics like revenue per employee improve,” he explained. These measures, of course, do not take into account things like the loss of institutional memory and the decline in morale and productivity caused by layoffs.

None of this seems like particularly holistic thinking that will really lead to Zuckerberg’s stated desire in his laid-off position to “Build a better tech company.” It looks more like a short-term fix that won’t necessarily solve the underlying business problems.

As economic uncertainty lingers in Silicon Valley, there’s a good chance layoffs will continue across the tech industry. They’re an obvious way to try to save money and show investors that they’re course-correcting, but they also run the risk of sabotaging those businesses in the future.

Shirin Ghaffary contributed reporting for this story.

Update, 1 p.m. ET: This story has been updated to include additional comments on Mark Zuckerberg’s layoff announcement.

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