Digital transformation expert on mass layoffs: I would have expected more from tech
- Reference: 1684753270
- News link: https://www.theregister.co.uk/2023/05/22/interview_digital_transformation/
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But mass layoffs are hitting mid-career tech pros and harming the businesses who make them, she told The Register in an interview last week, implying the current trend of mass layoffs is a logical misstep.
"I would have expected more from the tech industry that is supposed to be one of the most innovative, comparatively. I feel these tech companies are taking steps backwards, particularly with the dismantling of the departments and structures they had put in place for future growth."
[Mass redundancies are] an outdated and traditional practice that most companies turn to as a first resort to create liquidity
Lardi says that most of the people impacted by layoffs have "approximately 10-11 years of experience" and so are "not really junior staff that are easily replaced," noting there would be "a loss of skills and knowledge in these companies."
She is also concerned over loss at the technical and software engineering layer – where diversity is already a major issue – with execs looking to build and develop technology using AI systems that are known to have biases, trained on data that is limited.
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Over the years, Lardi has worked across industries and regions, and has found that over 70 percent of digital transformation initiatives either fail or don't achieve intended outcomes. One of the elements that make or break digital transformation, which is "often ignored," is the "people element."
Copycat tech
"In my view, the companies seem to be copying each other," says Lardi, who sees them as taking the opportunity to shed some of the "excess" they took on board during a pandemic-induced hiring spree, when so many thought that the future was a long, interminable corridor of Zoom sessions and [2]peripherals makers were making money hand over fist.
Today, however, many of the companies who saw unprecedented revenue increases during global lockdowns have embarked on mass job cuts. [3]Layoffs.fyi has pulled in data showing 693 technology businesses shedding 197,945 employees in the year so far – which is not even halfway through – compared to 164,591 laid off by 1,056 companies in the whole of 2022.
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Lardi quoted Henry Ford's aphorism – "Thinking is the hardest work there is, which is probably the reason so few engage in it" – saying that mass redundancies were "an outdated and traditional practice that most companies turn to as a first resort to create liquidity."
Shareholders, profits, and the bottom line
[6]Echoing Gartner , Lardi said: "Layoffs don't really impact profitability and impact is not visible in the short term due to increased expenses and high severances (3-6 months) typically that have to be paid out.
"I feel these tech companies are taking steps backwards, particularly with the dismantling of the departments and structures they had put in place for future growth.
"Additionally, this is rather short-term thinking, rather than focusing on sustainable strategies for the digital future."
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Lardi, who recently wrote a book titled [8]The Human Side of Digital business Transformation , notes that while companies are laying off people, they are investing billions in AI and automation, citing the $1 billion+ Microsoft has [9]sunk into OpenAI so far.
[10]Microsoft offers electrical engineers a lifeline as it pursues custom cloud silicon
[11]AI is great at one thing: Driving next waves of layoffs
[12]Australia asks Twitter how it will mod content without staff, gets ghosted
[13]Tech companies cut jobs to chase growth, but watch out for those shareholder returns
Earlier this year, Microsoft said it planned to [14]shed 10,000 jobs (4 percent of the company's staff) in the wake of Satya Nadella's comments on the need for productivity boosts. It wasn't the only one, of course. [15]Salesforce , [16]Amazon , [17]Google , [18]Meta , and others are also cutting excess staff hired during COVID lockdown-inspired growth.
On the company's most recent earnings call [19]last month , Nadella noted: "During the pandemic, it was all about new workloads and scaling workloads. But pre-pandemic, there was a balance between optimizations and new workloads. So what we're seeing now is the new workloads start in addition to highly intense optimization drive that we have."
CFO Amy Hood then quickly responded to this, stating the company had "been through almost a year where that pivot that Satya talked about, from [here] we're starting tons of new workloads, and we'll call that the pandemic time, to this transition post, and we're coming to really the anniversary of that starting.
"And so to talk to your point, we're continuing to set optimization. But at some point, workloads just can't be optimized much further."
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Not singling Microsoft out specifically, but speaking to the point of moves made by tech companies in a "maturity phase," Lardi said that investors were now "assessing them based on different KPIs such as revenue per employee." She said that "layoffs have high impact on this KPI, even though these companies may have large reserves" making them a "quick way to rightsize for investors and share prices."
But is it sustainable?
We asked Lardi about the [21]unprecedented cuts made at Twitter when Elon Musk came on board.
She said: "I find it hard to believe that 30 percent of the organization was running the entire structure, and even so, it would take time to assess the structure, shift roles and responsibilities and implement transformation to become more efficient. The loss of the workforce in a few weeks causes concern, and I believe we will see the top layer peel off with the new CEO.
"Based on what I have seen him post online, I am concerned about the values and direction that tech leaders like him propagate."
On the other hand, those whose skills are lost to the tech industry now have options to create financial independence, and might not return to traditional roles in companies. Still others are finding work as contractors, where technically skilled people balance more than one full-time job enabled by remote work.
Ultimately, the tech industry is "not really in a dire situation financially," she says. While it "might have some loss of revenue [it is] not in the red yet. Layoffs should be last resort in truly bad financial situations, rather than first resort in slightly uncertain conditions."
Among other solutions, she says, is for companies to push back on doing what they see others around them doing, and instead "address the people element" and get buy-in from investors and others to focus on the longer term, not the short term. And this means building "an ecosystem of stakeholders (internal and external)." ®
Get our [22]Tech Resources
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[2] https://www.theregister.com/2020/10/21/logitech_breezes_past_1bn_sales/
[3] https://layoffs.fyi/
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/personaltech&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZGuRp7sQesKs@l-XgUx2uAAAAEg&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
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[6] https://www.theregister.com/2023/05/15/redundancies_do_not_improve_shareholder_returns/
[7] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/personaltech&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZGuRp7sQesKs@l-XgUx2uAAAAEg&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[8] https://www.amazon.com/Human-Side-Digital-Business-Transformation/dp/1119871018/
[9] https://www.theregister.com/2023/01/10/microsoft_openai_investment_google/
[10] https://www.theregister.com/2023/05/19/microsoft_hiring_chip_designers/
[11] https://www.theregister.com/2023/05/18/register_kettle_ai/
[12] https://www.theregister.com/2023/05/17/twitter_australia_regulation/
[13] https://www.theregister.com/2023/05/15/redundancies_do_not_improve_shareholder_returns/
[14] https://www.theregister.com/2023/01/18/microsoft_job_cuts/
[15] https://www.theregister.com/2023/01/04/salesforce_7000_job_cuts/
[16] https://www.theregister.com/2023/01/20/amazon_job_cuts_costs/
[17] https://www.theregister.com/2023/01/20/google_to_chop_12000_employees/
[18] https://www.theregister.com/2023/03/14/meta_10000_jobs_cut/
[19] https://seekingalpha.com/article/4596556-microsoft-corporation-msft-q3-2023-earnings-call-transcript
[20] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/personaltech&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZGuRp7sQesKs@l-XgUx2uAAAAEg&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[21] https://www.theregister.com/2022/11/04/twitter_layoffs_email/
[22] https://whitepapers.theregister.com/
What are CEOs paid for?
When you see them just copying each other. 1 CEO makes a decision, whether it's right or wrong and the rest of the industry just copies with no due diligence.
Wait a couple of years and they'll all be complaining about the lack of available staff. The loss of expertise and you'll see more incursions, more outages, more customer issues.
Re: What are CEOs paid for?
I don't think it is just the CEOs making the decisions. The industry has to move as one to keep the investors happy. The likes of Chris Hohn pulling strings to ensure his money bed constantly gets larger are not going to be happy if another company does something different causing the company he's invested in to drop in value.
If say just Meta shed staff then the investors might think that Meta is in trouble and move away making the issue worse. If all the big players do the same then it is 'market forces' or other such rather than the reality which is Meta hired far too many much too overpaid people during covid as well as betting the farm on the metaverse.
Why plan for the long term when your bonus is dependent on the quarterly stock price? Layoffs also keep the peons docile, none of that work-life-balance and work-from-home thing. You'll get a foosball table and free caffeinated water and like it when you're back to being in the office 13 hours/day, afraid to be next.
Sack 100% of the staff...
... for infinty profit!
The eternal circle of greed
This is a constant in every industry and is mostly driven by shareholder greed. They got a 23% dividend last year so now they want that EVERY year and preferably MORE! So, to achieve that next dividend the CEO lays off 10% of the staff, and because of the nature of such things the really good people often jump ship rather than get laid off. So, you lose people you wanted to keep and your overall skill set decreases, and whilst the next dividend is on target or better, the one after that is not so good, and the one after that is ****ing awful. So, the greedy shareholders get the CEO replaced and the new CEO spends a couple of years building the company back up again, but all too soon the dividend demands start mounting again and the cycle repeats. Of course nobody at the shareholder/CEO level gives a flying **** that in the process John Doe lost his house due to being unemployed for a year, or that Jane Smith's marriage has disintegrated because of the stress of unemployment.
Anyone think it may be the Activist Investors...?
Maybe the wrong article for this one, but I get the feeling this downsizing is a reaction, at least for some businesses (Salesforce, I'm looking at you), to the tactics employed by these "activists".
Just because you don't like how a business is run and have a wodge of cash to invest somewhere doesn't mean you should behave this way. It impacts real people who are actually trying to do a good job for the business, themselves and their families. Speaking from a position of ignorance, I doubt that's the motivation for "Activist Investors". While regular working folk can benefit (from improved shareholder value) via pension funds, it seems to me there are too few beneficiaries for this sort of behaviour. They come over as bullies and should be treated that way, IMHO.
Just my tuppence.
"Layoffs should be last resort in truly bad financial situations, rather than first resort in slightly uncertain conditions. "Hear hear. The era of cheap money is over, but these companies are still making a big mistake. Doing the right thing is ultimately going to help many to retain the kind of talent that will never trust Google, Twitter etc al again. And that includes access to their intellectual ability and ability to create new technology.