A New Stage of Tech Layoffs: Targeted Reductions and Fewer Layers

Last year, Mark Zuckerberg declared 2023 to be “the year of efficiency.” Soon thereafter, Meta laid off one-third of its employees while Amazon, Google, and Microsoft also reduced employee numbers significantly.

Their lives were not derailed, nor were their companies punished; indeed, some divisions became more productive, and companies such as X, formerly Twitter, which has recently reduced staff by nearly 80 percent, continued operating normally.

Chief executives took note. A month into 2024, tech companies have entered a period of cost cutting.

After last year’s widespread layoffs, Amazon, Google and Microsoft have recently implemented smaller and targeted job cuts while prioritizing key products like artificial intelligence. Some tech start-ups such as Flexport Bolt Brex have even made deeper cuts to avoid potential extinction; all with one mandate in mind: do more with less.

“Laid off workers fall into three general buckets,” according to Nabeel Hyatt, general partner of Spark Capital – an investment firm focused on tech companies – which invests. These include “big, fat tech oligopolies looking for growth and profit; medium-size companies which overhired during boom times; and smaller start-ups trying to gain runway for survival.”

These new layoffs represent yet another correction following years of an expanding global economy and low interest rates, which allowed tech companies to splash around cash to attract top talent in an ever-increasing digital marketplace. Many hired thousands more workers during that period to meet digital demand.

Recent years have caused tech executives to adjust their thinking. After lockdowns were lifted and people returned from hiding, use of tech products declined compared to pandemic highs. Furthermore, over 1,000 tech companies eliminated upward of 260,000 jobs by 2023 according to data collected by Layoffs.fyi which tracks job cuts throughout the tech industry.

Cutting tech work forces would have been seen as shocking in Silicon Valley only recently. Tech culture had long favored managers whose status was determined by how many people reported to them and how well companies competed against rival recruitment efforts; executives often saw recruiting the next generation of computer scientists as an all-out competition.

But now the stigma associated with layoffs has diminished; more executives at tech companies have admitted to overhiring during the pandemic. Large companies are making strategic cuts in areas where they plan to invest less, or where certain jobs no longer need doing; smaller firms which could readily raise capital only years ago now resorting to cutting in order to remain solvent.

Layoffs.fyi reports that during the first 30 days of this year, approximately 100 tech companies experienced 25,000 layoffs. Microsoft, Google, Apple, Meta and Amazon will all give more insight into the current state of tech when they release quarterly financial statements later this week.

Sheel Mohnot, partner at Better Tomorrow Ventures. “When one company in your space or nearby does it, it gives another cover to do it too,” said Sheel. “It becomes easier for companies to claim, ‘It’s not us; it’s the industry.'”

Meta, which owns Facebook and Instagram, provides an example of layoffs.

Last year, Mr. Zuckerberg initiated cuts he described as “managers managing managers.” This year, Instagram has taken more targeted steps, specifically cutting back the number of “technical program manager” roles across Instagram according to two individuals familiar with its plans. A T.P.M oversees various projects within their department while keeping teams on schedule – an ideal middle manager role Mr. Zuckerberg was looking to eliminate.

Business Insider reported on Meta’s decision to reduce her role. Unfortunately, she refused to offer comment.

Amazon also cut hundreds of jobs at their streaming arm this month, such as Prime Video, MGM Studios, and Twitch. Google made thousands of cuts across different areas such as YouTube and the hardware division that manufactures Pixel phones, Fitbit watches and Nest thermostats. According to an internal memo obtained by The New York Times, Sundar Pichai, Google’s chief executive officer suggested there would be no imminent end of its ongoing layoffs and more “layers will be stripped away to simplify execution and drive velocity in some areas” of their business.

Mr. Pichai wrote, “Many of these changes have already been announced; however, to ensure a smooth transition process throughout 2019, some teams will make specific resource allocation decisions when necessary and may impact certain roles.”

Medium-size startups employing hundreds of workers are also cutting back. Some may face an initial public offering and have taken an introspective look at their finances in preparation. As Mr. Mohnot stated, such companies “know they must get their balance sheets in order. The market values profits.”

Particular areas have been hard hit this month, including the video game industry. Companies including Unity Software, Riot Games, Eidos-Montreal and Microsoft’s Activision Blizzard and Xbox have downsized in recent weeks.

Joost van Dreunen, an analyst who keeps tabs on the sector, attributes these cuts partly to studio consolidations. Following last year’s string of blockbuster game debuts and releases, more subdued releases can be expected this year with less workers needed for production of titles, according to van Dreunen. Consumers and coders alike are waiting for new consoles like Nintendo Switch 2 which might lead to immediate declines in customer spending and new title development.

Discord, the popular social networking and group chat app favored by gamers, has announced this month a reduction of 17 percent of staff – or 170 jobs – after increasing its workforce fivefold since 2020.

“Over time, our company took on more projects while becoming less effective at operating efficiently,” wrote Jason Citron, Discord’s Chief Executive in an internal memo addressed to employees.

Few anticipate any letup in the consolidation waves anytime soon. Tech industry members joke about “ZIRP companies”, or Zero Interest Rate Phenomenon companies — describing start-ups who wouldn’t have been able to raise capital without access to cheap venture funds.

Many start-up companies that had difficulty attracting venture investments as interest rates increased have decided to cut staff and concentrate on offering fewer products or services.

Mr. Mohnot suggested that they may have attempted multiple approaches in search of an effective business model; now is the time for reckoning and assessment.

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