Several major American technology companies have recently experienced mass layoffs. As business growth slows and labor costs increase, companies like Amazon, Meta, Twitter and more made the difficult decision to reduce their workforce.
Making some of the biggest headlines of the year was Elon Musk after he acquired Twitter on Oct. 27. Heads turned towards the massive tech company as Musk laid off thousands of employees this fall.
We sat down with two Fox School experts from the Department of Management—Associate Professor Crystal Harold and Assistant Professor Todd Schifeling—to discuss the risks companies and employees face during mass layoffs.
“Layoffs are a topic that I discuss regularly in my courses because labor forecasting is a critical component of any good HR system,” says Harold. “HR leadership must make sure that they have the appropriate number of employees to meet their objectives, both in the short-term and the long-term. In the current case of the tech industry, their labor forecasting was off.”
Harold mentions that when life moved largely online during the height of the pandemic, these companies overestimated how long that trend would last and hired too many permanent employees.
Schifeling highlighted how there is always a bit of uncertainty in identifying where the economy will go next. It is natural for managers to look for clues to what their peers are doing, hence why so many companies seem to be laying off large numbers of workers at the same time.
“Companies work for a long time to build reputations as an employer of choice, but that perception can be changed overnight. A business sector that is suffering reputation loss from layoffs is tech, specifically Twitter,” says Schifeling. “Tech companies may receive some level of protection when going through their layoff processes by doing it at the same time, so people are less likely to point a finger directly at them.”
The decision to lay off or downsize a workforce can immediately affect a company. The employees who were laid off will face difficulties, but employees who didn’t lose their jobs may also suffer. A sound HR strategy is needed when deciding to hire or fire in mass to avoid the consequences of a labor shortage or surplus.
“Employees who survive a layoff can experience survivor’s guilt. You just saw your colleagues, your friends, lose their jobs and yours was spared. This can be not easy to deal with. Research suggests that following layoffs, surviving employees’ morale plummets, and their work production and quality decline.” says Harold. “These issues can trickle down to consumers through subpar service or product quality. Not surprisingly, mass layoffs also increase feelings of job insecurity among those whose jobs were spared, which could prompt them to enter the job market to explore their options.”
Alternatives to layoffs that are not associated with as many destabilizing repercussions include things like pay increase freezes, hiring freezes, natural attrition, or retraining employees from a department or function that is no longer needed to do work in another function. The downside of these approaches for dealing with a labor surplus, however, is that it takes longer to realize benefits. From an ethical perspective, companies should make sure they give advanced notice to employees and provide the resources necessary for a smooth transition.
As a professional in a workforce that seems to be ever-changing, it can be helpful to leverage your existing connections, from the classroom to professional and Temple alumni networks.
“Join and be an active member in both professional societies and Temple’s alumni association. Go to meetings and apply for leadership positions when the time is right because staying networked can be hugely beneficial for career growth and development,” says Harold. “Many professional organizations will require some demonstration of continuing education via enrollment in workshops or certificate programs. This can be helpful by keeping skill sets sharp and up to date.”
Facing unemployment is never easy, but workers should stay nimble, willing to learn and use change as an opportunity to try something new. Advice to modern professionals includes having a strong network of colleagues outside of the immediate workplace and continuing to grow and develop in the profession.