- Pandemic impact. The tech sector has been hit hard by layoffs in recent years, due in part to changes in consumer behavior brought about by the pandemic, which led to an increased reliance on online shopping and remote work.
- Impaired CX. Layoffs can have a negative impact on the customer experience, as service quality can suffer when there are fewer employees to share the load. Brand perception is also impacted by employee layoffs, with consumers paying more attention to news coverage and authenticity in how companies handle these situations.
- No end in sight. Despite signs of improvement in the economy, it is likely that layoffs will continue in the tech sector for the foreseeable future, as businesses adjust to new market conditions and changes in consumer behavior.
Many experts have predicted that there will be a recession this year, but even so, the number of layoffs in the technology sector is baffling — and they don’t seem to be going away any time soon. Headlines over the past few weeks, and even as far back as July of 2022, read like the prequel to a depression:
- Salesforce slashes 8,000 jobs
- Coinbase cutting nearly 1,000 jobs, citing rough cryptocurrency climate
- Microsoft Cuts Jobs in HoloLens, Surface, Xbox as Layoffs Continue
- Boeing to Cut 2000 Jobs in Finance and HR
- EBay will slash nearly 200 Bay Area jobs as tech layoffs worsen
- Zoom to Lay Off 1,300 Employees
- Google cuts 12,000 jobs
- Github to Lay Off 10% of Global Workforce in Latest Tech Cuts
- Yahoo to lay off more than 20% of staff as it shrinks ad biz
- Dell to lay off 6,650 workers, or 5% of its workforce
- Cloud leaders Amazon, Google, Microsoft show once-booming market is slowing down
- Meta laid off over 11,000 employees in November, with more to come
Why so Many Layoffs in Tech?
The pandemic caused consumers to rapidly change their buying behaviors and the way they interacted with businesses. Business closings, lockdowns and social distancing made public gatherings unpopular if not illegal. People avoided situations that would place them in close proximity to other shoppers, and online shopping took on a much higher level of importance.
Consumers began to shop online and have food and other products delivered, or they placed their orders online and picked up their goods at the curbside, minimizing contact. Brands began to focus on health, safety convenience and speed. Improving the customer experience became a core goal as brands struggled to remain operational, let alone profitable.
Between 2019 and 2022, as businesses began moving to a remote workforce, the demand for consumer electronics, streaming services and online conferencing exponentially increased, all of which encouraged tech brands to hire more employees to keep up.
According to a recent report by USA Today, in the fall of 2020, about the time that stimulus checks were cashed and spent, the economy began to improve, and the larger tech businesses began to hire more employees. During that period, the number of Amazon employees grew by 93%, Microsoft increased by 53%, Meta by 92%, Apple by 20% and Alphabet by 60%.
In March 2022, inflation grew, so in a move designed to get inflation under control, the Federal Reserve began to hike interest rates. As a result, the tech industry felt more pain than other sectors due to its reliance on outside funding. During that same period, consumer spending began to slow, and people started to return to pre-pandemic behaviors. This resulted in businesses taking a close look at their bottom line, cutting costs and laying off employees.
Mark Zuckerberg told investors recently that 2023 will be the "year of efficiency," a sideways reference to the more than 1,000 tech companies that have laid off over more than 265,000 people since 2022 according to Layoffs.fyi. Additionally, Meta said it "may incur additional restructuring charges as we progress further in our efficiency efforts." Amazon, Google, Meta and Microsoft each cut more than 10,000 jobs, and Twitter has cut at least 50% of its workforce since Elon Musk bought the company.
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Layoffs Impact the Customer Experience and Brand Perception
One only has to look to the past to see how mass downsizing can affect the customer experience. In 2009, a Harvard Business Review report stated that “When there are fewer employees to share the load and those employees are anxious and demotivated after seeing their colleagues laid off, service quality can suffer, prompting customers to leave you for a competitor.”
One of the key takeaways from the report is that when businesses are forced to lay off employees, they should do it with the customer experience in mind. It has already been reported by Insider Intelligence that Amazon’s layoffs could cause its customer experience to suffer.
Brand perception is also impacted by employee layoffs. A December 2022 survey by Allison+Partners revealed that 31% of Americans say news coverage of a company’s layoff has directly impacted their perception of the brand. The report also indicated that more than a quarter of those polled said that they pay more attention to the news now given the recent influx of layoffs.
Additionally, the report showed that authenticity is important when it comes to layoffs. For instance, 45% of consumers said that their view of brand’s core values and mission would be negatively impacted if a company releases a public statement that feels inauthentic following its layoff. Approximately 40% indicated that they would have a negative view of the brand’s leadership if employees are laid off in a manner they feel is improper.
Consumers notice when a brand is insensitive in their layoff procedures. Both Amazon and Google recently made the news for laying off employees via email. Jeremy Joslin, a former Google employee, tweeted that being laid off via an email message was a “slap in the face” after working for the company for over 20 years. Since posting about his experience, the tweet has been viewed more than 6 million times. The issue has come up often enough that The Wall Street Journal published an article that suggested that laying off employees via email is both impersonal and insensitive.
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More Layoffs to Come?
Tech layoffs began in 2022, and have only increased this year, a trend that isn’t promised to stop with a likelihood of a few more quarters of slow growth in tech. As brands adjust to new market conditions, rising interest rates and changes in consumer spending, layoffs are likely to continue.