Google, Microsoft, Tesla to Continue Layoffs

The most recent jab on Blind came from a worker at a prominent IT company responding on news of more job layoffs at Google

Undoubtedly, this gallows humour resonates with certain technology employees after mass reductions at some of the industry’s most recognizable companies, such as Google, Microsoft, and Tesla.

Elon Musk informed employees last month that 10% of Tesla’s workforce would be laid off. It reportedly eliminated 500 positions at its Supercharger division in early April.

Google reduced its headcount by approximately 12,000 individuals in 2023, implemented additional reductions in early 2024, and finalized plans for a limited number of extra reductions last week.

Recently, Google CEO Sundar Pichai told Bloomberg that the search colossus was approaching workforce reductions methodically, “taking the time to do it correctly and well,” he said. Pichai has also suggested that reductions at Google may decelerate during the latter half of the year.

However, although this scalpel-versus-axe comparison may appear rational, redundancies incur expenses in general and the drip-drip method in particular.

According to labour market experts who spoke with Business Insider, headcount reductions can negatively impact morale and productivity, deter prime employees, and prevent at least a portion of top talent from joining, even at renowned companies likely to face difficulties recruiting new employees.

In summary, expenses subtracted from a P&L may be offset by the negative financial repercussions of layoffs.

“The notion that these individuals can accept the loss as inconsequential demonstrates a disregard for the workings of human psychology,” Sandra Sucher, a Harvard Business School professor of management practice who has researched unemployment, told BI.

The expense of abstaining from conducting business

Wayne Cascio, an emeritus professor of management at the University of Colorado Denver who has researched corporate cutbacks, asserts that organizations suffered even when executives deemed layoffs essential for cost reduction.

“You’re wondering when the axe is going to fall again,” he indicated to BI. This compels remaining employees to begin their job search, particularly if the company continues implementing cutbacks without providing a complete severance package.

“They devote significantly more time to online activities, updating their resumes, and networking, all of which reduce their productivity.” “That cannot be avoided,” he informed BI.

Cascio stated that in organizations that fire employees, the percentage of employees who depart voluntarily increases by approximately 50% the following year. And frequently, the departing is the “most marketable,” according to him.

Consider Tesla, which has recently lost several prominent executives. Rich Otto, the former chief of product launches and one of the most recent, announced his resignation amidst the widespread reductions on Wednesday.

“The recent layoffs that are rocking the company and its morale have thrown this harmony out of balance, and it’s hard to see the long game,” he wrote on his professional website.

Many of the reductions in the workforce at technology companies are occurring despite the overall success of the organizations. As BI has previously reported, leaders may feel compelled to lay off employees for a variety of reasons, including satisfying Wall Street, enhancing operational efficiency, concentrating on more recent endeavours such as artificial intelligence, and generally surviving in a slower-growth environment exacerbated in part by interest rates that are significantly higher than they were a few years ago.

Sucher of Harvard University explains that companies attempt to resolve changes where they believe they need them before implementing reductions everywhere. This is one reason why cuts are only sometimes implemented simultaneously.

It is difficult to recruit individuals with a negative reputation

Operating under the most esteemed brands in Silicon Valley may be easier than eliminating routine tasks, given the consistent influx of individuals interested in adorning their LinkedIn profiles with a prominent logo.

“They believe their brand to be bulletproof,” Cascio said of prominent technology companies. “To some extent, it is, but that’s not true of most employers — by far the majority.”

But even for the most recognizable names in technology, recruiting top talent can still be fraught with risk, he said. Cascio stated that those open to multiple proposals will consider companies where layoffs have occurred and will frequently choose the one that has never experienced layoffs over the one that has gone through various rounds.

“That’s going to be a tiebreaker,” he indicated.

Cascio further stated that Gen Zers entering the workforce place a premium on employment security, recognizing that they retain a role within an organization even if their positions are relocated.

According to Caroline Ogawa, a director in the HR practice at the research firm Gartner, despite the potential softening of the employment market for white-collar workers, a significant number of employees have yet to relinquish the sense of authority they acquired during the Great Resignation, a few years ago. This means that many continue to be selective about their workplaces.

“Although candidates may receive fewer offers, their expectations have held firm,” Ogawa reported. “With that level of candidate agency, it’s going to be hard to replace those employees.”

Abandoning a former employer

Cascio stated that social media facilitates rejected employees’ attempts to criticize how their former employers conducted layoffs. Even the most prestigious organizations encountered this risk, which only existed several years ago when recruiting the newest popular job candidates.

“It’s so easy to tarnish a company’s reputation,” said the executive.

Additionally, Ogawa of Gartner told BI that when employers cast off employees, those left behind are frequently required to assume the responsibilities of former coworkers.

This may result in fatigue or disengagement, which may cause individuals to question their continued relevance within the organization.

Therefore, executives must effectively communicate the rationale behind the reductions and guide how employees can regain interest in their work.

“Fear is managed through transparency,” she indicated.

Sucher of Harvard University added that it is crucial to provide employees with an explanation for layoffs, not only for those who are being let go but also for those who remain.

“‘What is the rationale?'” “Moreover, she inquired, ‘How plausible is the reason?'” The distinction is significant “when you’re communicating externally, but it matters hugely when you’re communicating internally.”