HRCap [에이치알캡] Addressing the Noise Behind Loud Layoffs

5 Organizational Strategies for Avoiding Future Layoffs

Written by HRCap

December 8, 2022

 

Close to 147,000 employees have been laid off globally at over 900 tech companies in 2022.

 

The total number of employee layoffs from tech companies in the U.S. alone is close to 100,000. As seen in our graph, the most layoffs have occurred in New York, California, and Washington – states with the highest volume of start-ups and big-name tech companies including Meta, Tesla, Microsoft, and Amazon.

 

Total Number of U.S. Employees Layoffs (2022 to date)

With the news of such tech companies laying off employees, many employees may be wondering if they will be impacted by the layoff as well. However, before jumping to conclusions, they should first understand the events that unfolded before the “Loud Layoffs” to know why this is occurring and how this affects the current job market.

 

Reasons Behind the Loud Layoffs

Due to the COVID-19 pandemic restrictions, many people were stuck at home which increased their use of technology and online services, and thus dramatically increased the revenue of tech companies. To capitalize on the demand and expand the growth of business during the pandemic, companies began to hire more employees. After the initial, exploding success during the early pandemic phase, many CEOs believed that their revenue growth trajectory would continue to increase in the next couple of years, so they continued to hire qualified employees at a competitive rate (WSJ).

 

However, contrary to many CEOs’ predictions, the market started to correct itself as the COVID-19 pandemic began to ease down. Many people started to spend more on services and less on goods with the looming threat of an economic recession, which led to a decrease in many tech companies’ revenue growth.

 

Another event that took place is Apple’s changed privacy policies, which required apps to ask whether users would like their activities to be tracked. This affected a key component of many tech companies’ digital ad-focused revenue models. According to CNN, Meta’s ad revenue took a $10 billion hit from the privacy update last year.

 

Taking all of this into consideration and seeing the possibility of an economic recession, tech companies are cutting costs with layoffs, which are proactive measures to reduce the risk when there is a recession. However, there are preventative measures and alternatives that companies can take to avoid layoffs in the future.

 

 

Organizational Strategies for Preventing Layoffs

 

Although layoffs may help companies in the short term, layoffs have long-term negative effects on the companies’ reputation, profits, and employee morale. According to a 2002 study, after a layoff, the remaining workforce experienced a 41% decline in job satisfaction, a 36% decline in organizational commitment, and a 20% decline in job performance, which led to an overall decline in productivity, profitability, and innovation. Therefore, companies should carefully consider the following preventative measures.

 

1. Practice Disciplined Hiring

Companies should practice disciplined hiring to avoid overhiring during growth and reducing staff when a recession hits. Therefore, it is important to hire the right leaders who know how to mitigate risk and make the right decisions that will benefit the company and its employees.

 

However, in the case when the business is not doing well and there is a need for restructuring, companies should institute a hiring freeze to assess the needs of the workforce and understand which roles are essential and which roles can be consolidated or shared between employees.

 

 

2. Evaluate Employees Consistently

 

To properly assess the needs of the workforce, companies should regularly evaluate their employees with strict performance standards. Implementing systematic performance evaluations will ensure a strong organization with high employee performance.

 

As a result, companies can also have a better understanding of which employees are performing well and which employees need to improve.

 

 

 

3. Compensate Competitively yet Conservatively

To retain high-performing employees, companies should properly compensate their workforce. By regularly evaluating employees and conducting market research, companies can strategically give adequate bonuses and raises to employees that deserve them. Even when it comes to attracting new employees, employers should carefully craft a conservative, yet competitive, compensation package that does not exceed the designated budget.

 

When the business is not doing well and there is an economic downturn, companies can consider temporarily withholding promotions and raises instead of laying off employees. Some companies have gone as far as reducing pay for employees. For example, Hilton reduced executive committee salaries by 50% during the pandemic.

 

 

4. Train Employees Proactively

Companies should also consider the future needs of the business to properly prepare employees for when changes occur. One reason that layoffs happen is that the workforce becomes no longer relevant or necessary due to technological advancements, automation, or organizational restructuring. In fact, the World Economic Forum 2022 research shows 66% of workers believe they need to develop new skills to stay employable. Therefore, companies should consider how to properly upskill and reskill employees so that they have a competitive edge and are relevant in the future.

 

For example, in 2013 AT&T saw that 100,000 jobs would no longer be relevant in a decade. Instead of laying off employees, the company decided to retrain all workers by 2020 to use them within a different department that will be relevant in the future. As a result of reskilling the employees, AT&T’s revenue increased by 27%.

 

 

5. Consider Constructive Alternatives to Layoffs

Companies should always consider different options before deciding to lay off employees. One alternative solution is a furlough, which is a temporary, unpaid leave of absence or reduction in hours. This allows the company to keep employees on staff while reducing costs. An example of this is Honeywell, a manufacturing and technology company. During the Great Recession, Honeywell furloughed employees for one to five weeks, which saved an estimated 20,000 jobs.

 

Although employees do not get paid during a furlough, they often get to keep their health benefits and can apply for unemployment benefits, in most cases. By furloughing employees, the company can reduce additional costs that come with hiring and training new employees.

 

In the event that layoff is inevitable, companies should provide support and new opportunities through transition programs. In 2011, when Nokia needed to restructure which would result in layoffs, it developed Nokia’s Bridge program to prepare employees for a new opportunity. This program provided new internal jobs, outplacement services (career coaching, career fairs, and networking events), and training programs.

 

Conclusion

During an economic downturn, companies must take into consideration not only their business but also their employees who are their biggest assets. Instead of resorting to just one measure of cutting costs, employers should choose alternative organizational solutions to layoffs and execute preventative measures for the future. By implementing these 5 strategies, companies will better maintain their reputation and build a stronger, adaptable workforce.

 

HRCap is actively providing our services and resources to help those that have been laid off recently. If you know anyone who has been affected by recent layoffs, please have them contact us at career@hrcap.com.

 

                                        [Related: [HRCap Outreach] Resume Review and Career Services]

 

 

 

Source: HRCap, Layoffs.fyi, WSJ, Business Insider, CNN, HBR, World Economic Forum, Bamboo HR