Tech Layoffs: What Do They Mean for the Rest of Us?

By HPA Partner Richard Berger

In addition to a slew of hiring freezes and job retractions across the Tech Industry, anywhere from 34,000 to 45,000 tech employees have reportedly lost their jobs over the past few months. Companies like Oracle, Robinhood, Tesla, Intel, Meta, Peloton, Google, Apple and many many…many more have either slammed the brakes on hiring or slashed jobs, in some cases, massively. And it’s not limited to one type of tech company, either. Technology businesses across the board are taking to the proverbial chopping block: crypto, FinTech, Big Tech, startups, and a host of companies that made a killing because of – not in spite of – the pandemic. Unfortunately, all signs are pointing to this trend not ending any time soon. The fun…never…ends.

So, what’s going on, exactly?

Before we despair over this wave (more like tsunami) of layoffs, it’s worth noting there’s no single cause at the root of technology’s mass jobletting. When you get past the shocking headlines and scratch the surface a little, there are a variety of (mostly) compelling causations to which the ongoing layoffs can be attributed. Here are the top seven reasons I’m seeing:

1) A recession is (very probably) coming.

According to a great many economic and non-tech business leaders, when it comes to a recession, it’s not a matter of if but when. Echoing this are claims of layoffs being in preparation for a very likely recession among tech leadership. You can read about what businesses should be thinking and doing in light of the imminent recession in (A Different Kind of) Winter is Coming; Prepare Accordingly from HighPoint Associates’s own VP of Talent, Theo Song.

2) It’s just a garden variety “realignment.”

If a handful of high-profile tech companies are to be taken for their word, these layoffs are simply a long-overdue realignment of their workforce, one that’s a normal part of the employment cycle the tech sector goes through every five to ten years. Upon news of their recent round of layoffs Microsoft stated: “Like all companies, we evaluate our business priorities on a regular basis, and make structural adjustments accordingly.”

3) Could be a Great Resignation backlash.

Nothing makes you question just about everything quite like a global pandemic. And that’s exactly what millions of people did during the COVID-19 crisis, choosing work-life balance and non-traditional jobs over the 9-to-5 humdrum. It’s not a huge leap to assume at least some of the mass tech layoffs are a direct result of the Great Resignation, which resulted in companies having to inflate their compensation packages to attract talent – which, let’s be honest, has been pretty grim for a lot of industries that past couple of years.

4) Investors are putting on the pressure.

With news of a recession, investors are demanding tech companies pull back the reins on spending and to take headcount-reducing measures. As reported in the Washington Post, “Tech has been signaling to investors for months that the boom times are ending — Amazon was one of the first tech giants to warn earlier this year that it had hired too many warehouse workers and had overbuilt anticipating higher customer demand that instead began to wane as coronavirus lockdowns were lifted and habits shifted out of pandemic modes.” While this is a bit of a chicken-egg scenario, it shows Big Tech is taking steps to tighten their belts so they can conserve cash and keep investors from totally losing it.

5) Strategic overhead reduction is a thing.

Then there are those companies that make it a regular practice to layoff lots and lots of people as a short-term downsizing measure. While it’s frequently timed in advance of earnings reporting, what better way to avoid bad PR than to layoff when a bunch of other tech companies are laying off, too.

6) Consumers are pulling back on spending.

With the word “recession” being bandied about, households are also taking a serious look at their spending, causing a dramatic shift in market demand. Companies like Netflix and Peloton are two obvious examples of businesses that spiked during the height of the pandemic but are now seeing reduced consumer spending ding their bottom line. Each has laid off thousands of their full-time employees, globally.

7) Supply chain issues remain in play.

A friendly reminder: We’re still very much in the midst of a global pandemic. And with this latest wave of COVID and China’s ongoing lockdown, supply chains are still taking a hit. In fact, Intel recently instituted a hiring freeze due to the great chip crunch. Like many companies taking these kinds of HR measures, there are a variety of issues – namely, supply chain kerfuffles and reduced consumer demand – inciting them. Regardless of the cause, a slowdown in computer demand is often a reliable signal to consider.

Here’s the rub…

Despite the tens of thousands of tech employees having been laid off (so far) in 2022, a good number of highly optimistic tech recruiters still claim it’s a robust hiring market. Whether I personally believe that to be the case versus it being in their best interest to insist it’s the case is another story.

While most of the initial layoffs come from the tech sector, other non-tech firms like Walmart (HQ staff reductions due to changing consumer purchasing habits) and Ford (8,000 layoffs) have also announced significant staff reductions. My sense is that the high-tech sector is just the early mover here. While I hope the recession proves to be short and atypical (high inflation but with a stable unemployment rate), firms should start now (if they haven’t already) to make no-regrets moves such as improving operational efficiently and doubling down on delivering consumer value. These moves and others position companies for long-term success whether we have a short or prolonged period of economic instability. Further, the balance of power between employers and employees is likely to reset to a pre-Covid environment, except for those with truly unique skills.

Richard Berger is a Partner with HighPoint Associates and runs the firm’s East Coast office. He joined HighPoint in 2008 and since has worked with clients across industries to solve problems, elevate conversations, and deliver breakthrough results. Prior to joining HPA, Richard spent nearly 20 years in a variety of consulting, operating, and start-up leadership positions. Richard is particularly passionate about helping clients improve and differentiate the customer experience.