- Meta, the parent company of Facebook, could go through another round of layoffs, according to reports.
- CEOs often see layoffs as a way to solve a company’s problems, but layoffs can cause lasting damage.
- Making layoffs more than once can look like managerial incompetence, an expert told Insider.
Recent reports that Meta CEO Mark Zuckerberg is considering another round of mass layoffs likely sparked an unsettling sense of déjà vu among employees—and for good reason.
Just a few months ago, Meta went through its first round of mass layoffs. The parent company of Facebook, Instagram and WhatsApp said in November that it would lay off about 11,000 employees, or 13% of the company.
Now, more cuts may be in the works. Insider reported that a common expectation within the company is that about 10% of the workforce — about 7,500 people — will be laid off, perhaps this week. In February, Zuckerberg said 2023 would be the company’s “year of efficiency.”
Meta wouldn’t be the only company to cut its workforce more than once in a short period of time. Twitter’s workforce is about a quarter of the size it was when Elon Musk bought the company last year and began rolling out layoffs.
CEOs often see layoffs as a quick fix to a company’s problems, but employee purges can cause lasting damage, including lower employee productivity and engagement and reduced innovation. Multiple rounds of layoffs only exacerbate those results, management experts told Insider.
Layoffs redux: Why did leaders miscalculate?
While a company’s motivation for multiple cuts often stems from a desire to fully expose its fiscal responsibility to investors, this strategy can backfire. Instead, the move looks more like managerial incompetence, said Dana Sumpter, a former HR executive who is now an associate professor at the Pepperdine Graziadio Business School.
“Companies are racing to the bottom trying to impress their shareholders and their boards and show how cost-conscious they are,” he said. “Even when investors react positively to a layoff announcement — ‘Good for Meta, they’re being conscientious’ — if the company has to do it multiple times, the question can be asked, ‘Do they have their act together?’ ?”
Employee salaries and benefits are typically one of a company’s biggest expenses, accounting for up to 70% of total business costs, according to Paycor, an HR software company. And at a time when high interest rates, high inflation and uncertainty continue to weigh on the economy, reducing the number of funds makes some economic sense.
The problem is that when companies shed workers to cut costs and create efficiencies in the short term, they tend to overlook the negative long-term consequences of the move, Sumpter said. That may be especially true today, when a number of high-profile companies have announced mass layoffs and others are making the proverbial wave, he added.
“These companies want to be part of the headlines. They want to show that they are fiscally prudent and frugal and that they, along with their colleagues, are making these tough decisions and cutting costs,” Sumpter said.
Cutting for the second time in a short period of time likely stems from the same impulse, he told Insider. However, as a strategy, it is likely to backfire and leave investors confused as to why leaders miscalculated.
“They wonder how effective they are and do they know what they’re doing?” Sumpter said.
A period of layoffs dents morale; a second can be disastrous
It’s unusual for a company to go through multiple rounds of layoffs, according to data from Crunchbase. Last year, about 9% of the 433 tech companies it tracked laid off workers more than once.
That may be because it’s generally considered bad practice to make a lot of rounds, said Kerry Sulkowicz, the managing director of the Boswell Group, which advises CEOs and boards on people and culture issues. “Dribbling layoffs creates volatility,” he told Insider.
“When a CEO does this, it’s important to communicate that this is a difficult decision and, to the extent possible, to do so.
A period of layoffs can leave a dent in employee morale. a runoff can be disastrous. Surviving employees often mourn the loss of their co-workers and feel guilty for being spared.
They’re also likely to feel extra nervous about their job security: Instead of focusing on their work, they’re looking over their shoulders, which isn’t good for their productivity or sanity, Sulkowicz said.
“They’re constantly asking themselves, ‘Is there another round coming?’ Am I next?”