There is no doubt that we are experiencing a wave of layoffs around the world.
As we celebrated May Day, IBM announced that it was suspending 26,000 back-office jobs, and 7,800 jobs would be replaced by artificial intelligence in the next five years.
On May 9, Paramount, which has produced "The Godfather" and "Forrest Gump", announced layoffs, cutting 25% of its cable network and shutting down MTV news. The company mentioned in the statement that it will reduce costs by eliminating and streamlining some organizations.
On almost the same day, Ford China was also pondering "streamlining". The company is said to be about to lay off workers, affecting up to 1,300 employees.
In just a few months, the storm of layoffs has gradually blown from the technology field to the financial circle, retail, automotive and other industries.
Factory employees once advertised themselves and the company as "blind date and loving family", but in the middle of the night, a blunt e-mail, or a text message from an unfamiliar number, these "family members" became passers-by.
Layoffs are like a slap in the face, shattering the sense of security of white-collar workers, however, can large-scale layoffs really "reduce costs and increase efficiency"?
Going to work is like a box of chocolates, and you never know when you'll get a layoff. (Photo/"Forrest Gump")
Immortal Company, suddenly not fragrant
"In the future, companies will cut more than 13% of employees, and may even be as high as 40%-50%!" Silicon Valley investor Elad Gil tweeted on May 9 to predict future corporate trends. Musk ran to the comment section and added a knife: "I hope you are wrong, but I doubt you are right." ”
"Canary in the coal mine" refers to a harbinger of danger. (Photo/Twitter)
On November 9, 2022, Facebook's parent company Meta officially announced the layoff of 11,000 employees, taking the lead among many technology giants to pick up the big knife of "reducing costs and increasing efficiency".
The Silicon Valley giants in the United States switched the "winter mode" synchronously, laying off one round after another, first touching upstream and downstream chips, games, then peripheral finance and consulting, and then spreading to consumption and manufacturing.
In January alone, Amazon laid off 18,000 jobs, Google's parent company Alphabet by 12,000, and Microsoft by about 10,000. By mid-March, Meta laid off another 10,000 jobs, becoming the first major tech company to announce a second round of massive layoffs.
At the same time, small and medium-sized factories followed the footsteps of large factories and broke their arms to survive. Zoom founder Yuan Zheng once advertised "making employees happy to work" and dared to promise not to lay off employees, but the next year he beat himself up and laid off 15% of employees.
According to data from Layoffs.fyi, a US employment information website, about 190,000 people were affected by the global layoff plans announced by tech companies in the first five months of this year, and the number was about 160,000 in all of 2022.
In the past year and a half, U.S. technology companies have laid off jobs. (Photo: Layoffs.fyi)
Consulting companies teach large enterprises to "cut people" while preying on their own people. In March, consulting giant Accenture announced 19,000 job cuts. In April, KPMG cut nearly 2% of its workforce in the U.S., followed by about 3,000 layoffs at EY.
White-collar workers in industries such as consumption and entertainment are feeling the "chill" one after another. U.S. retail giant Walmart announced 2,000 layoffs, and media and entertainment giant Disney cut 7,000.
Disney's streaming media Hulu's Beijing research and development center was not spared. Hulu Beijing's layoffs exceeded 90%, affecting more than 300 people. It has always been a "fairy foreign company" known for its high welfare. It's a pity that the patents on the walls of the company's corridors cannot prevent the "fairies" from being expelled from the "fairy tale world".
At present, Disney layoffs have entered the third round, and Hulu Beijing has fallen in the second round. (Photo/Screenshot of Little Red Book)
In a slowing economy, the first layoffs are often in capital-intensive industries, such as construction, followed by industries with a lot of cheap labor, such as retail, hotels and restaurants, and finally the knife of layoffs will be "killed" to white-collar workers.
Data from the U.S. Department of Labor shows that during the recessions of 1990, 2001, 2008 and 2020, blue-collar workers had higher unemployment rates than white-collar workers. However, the main force that has suffered from layoffs in the past two years is white-collar workers.
In just three months, Amazon has streamlined 27,000 people, most of whom are white-collar workers, concentrated in cloud technology, human resources, advertising and retail, and hundreds of thousands of grassroots warehouse employees are almost unaffected.
In addition to reducing labor costs, breakthroughs in automation technology have also become one of the reasons for giants to lay off employees.
During the May Day holiday, IBM executives announced that artificial intelligence and automation tools would replace about 7,800 jobs in the next 5 years. Simple tasks such as providing proof of incumbency or employee transfers between departments will soon be fully automated.
In the past, automation has replaced some blue-collar jobs, such as robot sweeping instead of cleaners cleaning hospital wards. This time the wheel of automation has been rolled over to higher-paying white-collar workers.
In science fiction movies, AI systems can write love letters. (Photo/"Her")
Generative AI systems such as ChatGPT further blur the professional boundaries between AI and humans. In addition to IBM, many companies are also trying to replace white-collar jobs with AI.
Abroad, Microsoft News tried to replace dozens of editors at once with an AI newsgathering system. The AI system evaluates the topic, opinion and freshness of the news, and traditional editors can only give AI a hand.
In China, AI painting software subverted the original painting industry overnight. According to the Beijing News, some domestic game companies have sharply reduced the team of original artists. Original artists who have studied painting for more than 10 years originally earned 20,000 yuan a month, but now they either cannot receive work assignments or become retouchers for AI pictures.
According to a report released by investment bank Goldman Sachs at the end of March this year, generative AI technology will lead to the automation of 1/4 of jobs in the United States and the euro area, and 300 million full-time jobs worldwide will be at risk of being replaced by AI.
According to the judgment of Kai-Fu Lee, former president of Google China, white-collar jobs that are biased towards quantitative analysis will be easier to be taken over by AI than blue-collar jobs that require hand-eye coordination.
Ready to work with AI? (Photo/"I, Robot")
Christopher Pissarides, a Nobel laureate in economics, has predicted that the progress bar for job automation will accelerate after the pandemic, reducing reliance on manual labor. Some netizens joked that in the past, large companies assigned a person to each computer, and in the future, they may assign an administrator to the AIs who operate the computer.
The former "immortal company" has laid off employees significantly, the future AI is grabbing jobs, and the current white-collar workers are caught in the battle of the enemy. American venture capitalist Jason Caracanis predicts that the "white-collar recession" is coming and will continue to intensify.
The pandemic is over, businesses are busy "reducing costs"
Layoffs are mainly divided into economic layoffs and structural layoffs.
Economic layoffs refer to the company's own business crisis, hoping to reduce costs and reverse losses through layoffs. The layoffs involved in the bankruptcy of multinational investment bank UBS fall into this category. Structural layoffs refer to changes in the company's main business, and some employees are inconsistent with their work content, and need to be optimized and adjusted.
In fact, tech giants are nowhere near the point of survival, and their 2022 revenue has declined, but overall it is still relatively flat. Compared to fiscal 2021, Meta's profit fell by 55% in 2022, but total revenue fell by only 1%. The "wave of layoffs" since last year is more inclined to structural layoffs.
During the pandemic, everyone stayed at home, working, studying and playing online. Science and technology giants staged a "robbery war", hoarding "people" like hoarding daily necessities.
In March 2020, Amazon had approximately 628,000 employees worldwide. During the pandemic, Amazon employees surged to 1.5 million, driven by online business. According to Goldman Sachs, the number of employees of technology giants such as Google and Facebook increased by an average of 41% during the epidemic.
In the three years of the pandemic, the number of Amazon employees worldwide has more than tripled. (Photo/WSJ)
Towards the end of the pandemic, tech giants turned back, found more recruits, and began to find ways to cut labor costs in response to investors' desire for corporate profits. In November 2022, after the news of Meta's layoffs was announced, Meta's share price soared 7.25%, creating a new high in the nine months before the announcement.
The real reason for layoffs by US tech giants is not so much external factors such as the Federal Reserve's violent interest rate hikes, the global economic slowdown, fierce market competition, and reduced consumer spending, but rather "market demand has not soared according to my script."
Jeffrey Pfeffer, a professor at the Stanford Graduate School of Business, denounced the "social contagion" behind the similar layoff announcement: big companies are copying answers from each other.
Stanford professor Jeffrey Pfeiffer believes that the layoffs of tech giants are a contagious act of blind copying. (Photo: Nancy Rothstein)
"Everyone is laying off employees, why don't I do it?" No matter how wise the head is, it is often difficult to escape the clutches of the herd mentality. In fact, in order to accurately calculate the manpower needs of a company, it is necessary to first have reasonable human efficiency standards, and then reverse how many people a department has to arrange according to the performance achievement. Those layoff figures that do not have a fraction look like a "one-size-fits-all" for enterprises.
The strange thing is that whoever has the audacity to cut such a "knife" may reap huge personal rewards. Google's parent company Alphabet laid off 12,000 employees while paying the company's CEO an annual salary of 226 million US dollars (about 1.5 billion yuan), which is 800 times the average annual salary of ordinary Google employees.
Academic research shows that there is no necessary causal relationship between layoffs and cost savings. Large-scale layoffs in legal compliance are inherently costly.
Meta's "redundancy package" includes a severance package of 0.5n+4, 6 months of employee health insurance, and other compensation in accordance with laws and practices. According to public data, the actual cost of Meta's average layoff of an employee is about 88,000 US dollars (about 610,000 yuan).
Former Honeywell CEO Dewei Goldwell calculated a "redundancy account": each employee who was laid off received a severance package equivalent to six months' salary. For businesses, this means that it takes 6 months to really start saving money. Recessions typically last 12-18 months, after which demand increases, and apparently companies hire again a year or so after massive layoffs.
Layoff cost = severance cost + handover cost + recruitment cost + training cost + adaptation cost + opportunity cost (Figure/"In the Cloud")
Cutting in one move can cost more time and money, plus new employees need to pay for training before they can become productive.
Given all these costs, layoffs may not save money and are more like the irrational act of buying high and selling low in the stock market. According to consultancy Bain Research, "The cost of layoffs may outweigh the benefits." ”
Cost reduction and efficiency increase, may reduce loneliness.
The myth of layoffs, advise you not to believe
So, can layoffs increase efficiency? Rounds of layoffs have cut the company to pieces, and the company's performance has automatically reached its peak? Such a layoff myth, advise you not to believe.
Jeffrey Pfeiffer and colleagues have studied numerous examples of layoffs and hiring at companies around the world over the past 40 years and found multiple misconceptions about layoffs.
Jeffrey Pfeiffer points out that layoffs often don't cut costs, and there's no empirical evidence that layoffs help improve profitability. Layoffs solve the people who do things, but they don't solve the problems of the business itself. Many of the employees who were laid off will continue to work for their original companies as outsourced employees.
Some evidence suggests that layoffs actually hurt profitability. After the 911 terrorist attacks in the United States, almost every airline was laying off employees, except Southwest Airlines. By the end of 2001, Southwest Airlines quickly resumed operations with an uncompromised team and grabbed market share from rivals.
Retain the core strength of the team and seize the opportunity when the economy recovers. (Photo/"Unnatural Death")
As competitors shrink their workforce, service and innovation tend to shrink and slow down. Statistics from the Harvard Business Review show that most of the companies with the strongest layoffs in the early stages of the epidemic are the slowest to recover in the later stages of the epidemic.
Most of the inevitable consequences of layoffs are negative. For the public, layoffs are like a mirror that clearly reflects the company's past failures. A report by Bain & Company suggests that investors could push up shares if the company lays off workers as a result of a major strategic restructuring or merger. However, if the layoffs were just to cut costs, the "wolves of Wall Street" would short the company's stock.
In addition to corporate image, layoffs hurt people's hearts the most. Studies have found that layoffs increase stress and make affected employees more likely to fall into depression, which can lead to a doubling of suicide rates.
In fact, being laid off doesn't mean not being good enough. Whether it is a large factory or a small factory, the layoffs are not carried out in accordance with strict standards, and it may just be personal bad luck and encountering a boss who "kills like numb".
Campbell, a Silicon Valley entrepreneur coach, believes that layoffs should be carried out decisively, but the means of operation should be exquisite, and employees should be given sufficient security and security. Enterprises and employees are not only contractual relationships, but also form psychological contracts, generating unwritten expectations, tacit understandings and beliefs. The good promotion and salary increase fell through, and the company raised the knife of layoffs, which means the rupture of the psychological contract.
The layoffs in the movie are after all in the movie. (Photo/"In the Clouds")
Studies have shown that even surviving layoffs experience reduced feelings of security and job satisfaction. At this time, people either choose to fish perfunctory low-expenditure mode, or desperately perform "going to work" and fall into meaningless involution.
Research by the American Psychological Association showed that the job performance of those who survived layoffs fell by 20%. Layoff survivors are often like lovers with emotional wounds, with love but not much.
In the face of recession, leaders have no good options, they can only choose between the "bad" and "not so bad" options. To be clear, layoffs are by no means the only option to reduce costs and increase efficiency.
Some companies prefer "leave without pay". When the Great Recession hit in 2008, Honeywell provided unpaid or reduced-pay leave to more than 20,000 employees. Although the recession of 2008 was worse, the company performed better in sales and net income than in 2000, when it cut two percent of its workforce.
Some companies regard layoffs as the last bottom line. Since 1948, Lincoln Electric has maintained a "no-fire" record, that is, no dismissal of employees with more than 3 years of service and more than 30 hours per week. Even in the face of war, the Great Depression and huge losses, the company persisted in finding a way out through management-led strategies such as salary cuts, job deployments, reduced working hours, and increased productivity.
No matter how big an enterprise is, people are always the center of all resource circulation. Even artificial intelligence often needs to be supported by enough "artificial" first. As long as the business continues, people are indispensable.
Layoffs without salary cuts, or salary cuts without layoffs? It's a matter of business survival. Some layoffs may be a last resort, but following the trend to raise the banner of "reducing costs and increasing efficiency" to lay off employees is just bullying employees.