After laying off more than 70,000 employees, what can tech companies learn from this moment?

Amazon, Alphabet (Google’s parent company), Meta, Microsoft, Netflix, Tesla, Twitter, Salesforce, and Shopify were some of the companies that, since 2022, have already cut almost 70,000 jobs (69,150 until the closing of this story).

• Alphabet: 12,000 jobs cut
• Microsoft: 10,000 jobs cut
• Amazon: 18,000 jobs cut
• Salesforce: 7,000 jobs cut
• Meta: 11,000 jobs cut
• Twitter: 3,700 jobs cut
• Shopify: 1,000 jobs cut
• Netflix: 450 jobs cut
• Tesla: 6,000 jobs cut

IT companies have always been considered a great chance to get a job. From 2020 to 2022, the number of job opportunities has skyrocketed. Many companies increased the number of people in the sector to handle the many projects. Even the support area has increased due to the change of companies from face-to-face to home office. New computers, tablets and smartphones were purchased. Everything in the IT area had more prominence.

However, as Covid-19 was controlled with more vaccines, the need for many IT professionals was reduced. The profits from this business were reduced. And the horizon demanded measures: layoffs.

Covid-19

According to Sergio Frias, CEO of CX HUB (a consulting company focused on customer service experience), the layoffs since 2022 reflect the pandemic crisis. From 2020 to 2021, at the height of the Covid-19 crisis, the companies were forced to significantly accelerate their digitalization journey to cope with the new demands for remote work and the immediate availability of solutions to migrate the in-store experiences into an attractive and effective online solution. “As fundamental providers of services that serve not only as the infrastructure but also as the front-end solutions to address marketing, sales, logistics and many other challenges, the big tech companies were required to multiply their outputs overnight. This is the reason for the massive demand and consequent shortage of professionals during the pandemic,” said Frias.

Frias said that the problem is that after the pandemic got under control and the businesses started to open up, the need for in-store purchasing, which was strangled, began to materialize, which eased the demand for growth of online services. “Coupled with that, fueled by the supply chain gaps and mishaps, the war in Ukraine and the consequent inflation, some markets experienced unemployment, followed by employment with lower wages, which caused the Consumers, globally, to have fewer resources to spend, reducing the demand for virtually everything,” told Frias.

So, according to Frias, the demand for the Big Tech companies automatically reduced, and as their staff was based on the ever-growing demand seen during the pandemic, there is a surplus of the workforce to support their operations at this point. “It is definitely not a matter of planning, but a matter of following the required demand to support their customers properly. They hired when the workforce was needed, and now they must adjust the business to the current market demand. These cycles happen, and for the good of their customers, they can’t simply hire under the fear of letting people go later. Customers need to be taken care of when the demand materializes, and the business needs to shrink accordingly when the demand is no longer there,” concludes the CEO of CX HUB.

More cuts in the horizon

About more cuts throughout 2023, Frias agrees. But he also said that it all depends on the demand for new tech solutions coming from the market. “If the demand keeps going down, more cuts may be needed. In my opinion, if more cuts happen, they may not be as significant as today,” said Frias.

The CEO said that the companies usually try to avoid multiple rounds of layoffs to avoid insecurity in the workforce, which tends to demotivate the teams, reduce their performance, and push the best employees to find other opportunities where they will feel safer. “I believe the current adjustments, which may take a couple of more months, will likely be followed by a period of stability, and towards the end of 2023, when companies will probably know more about the future demand, they will be less conservative and may start hiring again.
Most companies I talked to lately said 2023 is a year to be conservative, not to take any significant risks, until they know better,” said Frias.

Lessons

For Frias, companies will need to develop more effective ways to find, attract, hire, onboard, train, develop, manage and retain talent, particularly with speed and lower cost. “When a sudden demand materializes, the professionals become scarce and expensive, even if not qualified enough. The companies will have to find ways to manage those surges of demand with quicker, cheaper and more effective solutions to gain traction and adapt to market fluctuations with more agility, impacting less the society and the customers they serve,” said the CEO.

AI and jobs

Alcely Barroso, director for business development at FCBB (Federation of Canadian-Brazilian Businesses) and Academic Manager at the Toronto Business College, said that AI could enable companies to make better decisions by looking at factual data and insights uncovered by the technology. “Advances in AI studies will continue to benefit organizations by allowing them to optimize processes in many business functions and industries, such as financial services, healthcare, retail, and others. This is one side, but there is another side. Increased automation, made possible by AI systems, will continue to cause profound impacts on the labour market. The skills companies need now are different than 5 years ago. And I suspect that in another 5 years, we will be seeing even more change in the skills and abilities companies look for,” said Barroso.

The Academic Manager thinks that it is not a question of technology cutting jobs. She believes there is a lot of influence from economic expectations and the moment of the business cycle we live in today. “It is simplistic to think that layoffs signify that future generations will not have jobs. We know that a new growth phase will come after periods of slowdown and recession.” Alcely said.

The FCBB director believes that companies that are prepared to take advantage of the next period of growth will be more successful. “I believe companies with a strong technological base can differentiate themselves, act more quickly and capture new business opportunities. Future generations should work to prepare themselves with the right technical and soft skills, such as analytical and critical thinking, teamwork and creativity,” she said.

Automation

Another reason behind many companies can be automation. More and more manufacturing processes and process control in warehouses can be automated. Robots and programs are evolving; companies should reduce manual work and generate more automated processes.

According to the Wall Street Journal, Amazon revealed in November 2022 that it has some robots that can replace humans in typical jobs, such as allocating items within the warehouse.

Tye Brady, the chief technologist at Amazon Global Robotics, said to The Wall Street Journal that the idea of automation is to reduce human injuries and turnover in warehouses because robots are good at repetitive tasks. Amazon already has three robots operating in warehouses: Robin, Cardinal and Proteus. The first two are responsible for package selection—the third for moving carts weighing up to 800 pounds in places full of humans. Proteus has the technology to dodge humans and other obstacles inside the warehouse and get the carts to the right place. The robot still being tested in the warehouses, the Sparrow, is still unable to handle more than 65% of the products stored there. But, in the future, he will be ready to replace humans in collecting items. In theory, humans who previously performed such functions will move on to different tasks. Logically not all. The tendency is for many layoffs due to automation.

The truth is that Amazon wants to save billions of dollars in benefits and wages with automation. Fewer humans, fewer problems. To end this article with a contradiction. Amazon’s robotics division will be responsible for more layoffs. But even this sector in the tech giant has yet to escape lost people. A company spokesperson told the Wall Street Journal that 2% of workers in Amazon’s robotic division would lose their jobs.

Regarding Amazon’s automation process, Frias said there is pressure to automatize many warehouse processes to increase speed, reduce the number of mistakes and reduce transactional costs. Replacing humans, in certain functions, with robots, automated processes, and other technological solutions can improve all those aspects. However, there will be a need for more people, particularly tech-savvy, to create, implement, operate and manage the new solutions. “There will be an increase in other functions where people can do a better job than computers (for now), especially in Customer Services, Customer Care, Customer Support and designing better Experiences for Customers. It is a shift from traditional manual labour to specialized labour, adding value where value is more needed,” concluded the CEO.