The Real Reasons Behind Recent Mass Layoffs at Major Tech Companies

Recently, many large technology companies, including Google and Amazon, have laid off a large number of employees. While some companies, such as Paytm and Dropbox, cite the advancement of AI as the reason for the layoffs, this is not always the case. Sometimes, it is simply a result of cost-cutting and restructuring driven by quarterly goals.

Referring to Salesforce's layoff strategy, Zoho CEO Sridhar Vembu said that such companies are constantly caught in a cycle of hiring and firing driven by short-term quarterly financial goals. He pointed out that this practice is common among public companies, which focus on immediate cost-cutting and restructuring, often leading to an unstable employment environment.

Technical consultant Gergely Orosz observed that after laying off employees and announcing good quarterly results, companies conducted large-scale hiring. Soon after, they implemented a hiring freeze, predicting the performance of the company's fourth quarter in 2023.

Recently, Citigroup announced that it will lay off 20,000 employees, approximately 10% of its workforce, due to disappointing net losses in the fourth quarter. Citigroup CEO Jane Fraser announced a restructuring in September, which would result in layoffs. The bank is trying to cut costs by over $50 billion and believes that layoffs will save approximately $2.5 billion this year.

US multinational investment management company BlackRock announced plans to lay off 3% of its employees, or 600 employees, to protect their profits. However, the publicly traded company also stated that they will continue to grow their workforce.

Situation-based Hiring and Layoffs

While the pandemic has caused many people to lose their jobs, certain sectors have thrived in this situation. During this period of prosperity in the high-tech economy, many companies working in related fields resorted to large-scale hiring, often resulting in over-hiring. As the pandemic subsided, many companies later had to lay off employees to sustain themselves.

Venture capitalists and investors have also increased pressure on the startups they invest in, demanding these companies to reduce headcount or slow down the hiring process to preserve cash.

Interestingly, Dukaan, a DIY e-commerce platform, became notorious last year when its founder fired 90% of the support staff due to AI chatbots. Although founder Suumit Shah claimed that AI chatbots had replaced these positions, the company had already conducted two rounds of layoffs before attributing the layoffs to AI.

Not all job losses can be attributed to AI, as founder Dave Birss said, "AI is a great scapegoat for unpleasant business decisions."

Lean and Agile Success

Unlike other venture capital or investor-backed companies, Vembu's self-funded company Zoho does not succumb to external forces that may require employee layoffs. By adopting agile and lean approaches, the company has been able to avoid the trend of large-scale layoffs.

Vembu said that Zoho will never resort to layoffs, but will only internally reassign employees. However, it will alert employees to new technologies.

An Apple engineer mentioned that although Apple is understaffed in almost all teams, employees must learn to accomplish tasks with the existing workforce. The company also does not succumb to high salaries due to resignation pressure.

Apple has never adopted any form of large-scale hiring or layoffs based on company performance. Tim Cook previously mentioned that layoffs are a last resort - a practice unrelated to quarterly results.