Facebook’s parent Meta gets the abbreviations wrong

When Meta, formerly Facebook, laid off 11,000 employees in November, it was in the shadow of Elon Musk’s brutal and chaotic firing at Twitter. By comparison, the way Meta CEO Mark Zuckerberg handled layoffs — saying he took responsibility for the company’s too-fast growth, showing what other cuts the company had made first and offering generous severance — seemed humane.

But this week, Zuckerberg announced plans to lay off another 10,000 workers, and will do so in parts over the next few months. People who work in recruitment will be affected immediately, those in technology will find out in April, while business people will learn their fate in late May. Additionally, Zuckerberg has been hinting at these layoffs for weeks, further adding to the atmosphere of anxiety at the company.

It’s a poor way to make cuts, which experts say should be minimal, compassionate and clearly communicated. Doing this bit by bit will leave workers on edge and drive away the people Meta wants to keep, and there’s also a good chance it will hurt the company’s future growth.

“We’ve just extended the window for people worried about cuts to the end of May. How is that supposed to be effective?” a Meta employee, who asked to remain anonymous so as not to jeopardize his job, told Vox.

In his post, Zuckerberg said: “I understand that sharing plans for restructuring and layoffs months in advance creates a challenging period. But we heard feedback last fall that you wanted more transparency in all restructuring plans, so that’s what I’m trying to propose here.”

All of this is happening as tech workers see a turnaround in their employment prospects. Tech companies that went on an unprecedented hiring spree earlier in the pandemic are now — some for the first time in history — laying off staff as ad dollars plummet amid a potential recession and as consumers do things other than hang out online. That means a blow to perceived power among tech workers who are used to big perks and high salaries, but who now worry whether they’ll ever have a job.

In general, layoffs are a bad way to run a business. In addition to making people more likely to leave the company voluntarily, layoffs destroy the morale of those left behind and reduce their productivity. This effect is worse if these cuts happen slowly and without clarity from management, as is the case with the last round of the Meta. If companies must make layoffs, they should give everyone advance notice and offer retention bonuses to those who stay through the layoff date, according to Robin Erickson, vice president of human capital at the Conference Board, which studies how companies behave in a crisis.

Also, research shows that layoffs don’t actually save companies much money. The wage savings are mediated by benefits costs, not to mention the loss of productivity and knowledge these workers bring with them.

“What happens in the short term is the corporate bean counters say, ‘Well, if you get rid of this many people, you’ll save this much,'” Erickson said. “In the long run, layoffs hurt companies. Period.”

So why do Meta and other tech companies keep laying off employees?

One reason is that companies like Meta are chasing short-term stock gains. Investors have been calling for Meta to tighten its belt, and in this case, the layoff announcement paid off. The company’s shares jumped 7 percent after the latest news of layoffs, closing at their highest point in more than eight months.

“They like cost cutting because the effects are clear and immediate, and employees are expensive, so cutting them cuts a lot of costs,” said Peter Cappelli, professor of management and director of the Wharton Center for Human Resources at the University of Pennsylvania School of Business. “They also can’t see the downsides of laying off people, at least not immediately — what happens to the work those people have done, what the knock-on effects are on teams, the turnover of others, etc.”

Missing from Zuckerberg’s announcement of the latest layoffs are apologies for causing the mess in the first place. Instead, there are details of his Wall Street-friendly “year of efficiency” plan, which includes cutting many middle-management jobs and working with fewer people overall. He uses the word “weak” or “weaker” eight times.

To be fair, Meta has doubled its employee base since 2020 to the point where some of its own employees found the company too bureaucratic. Like other giant tech companies, Meta was looking for ways to return to its more down-to-earth roots when it first considered laying off some employees. But the extended cycle of layoffs undertaken now could prove to be an overcorrection that will hurt the company in the long run.

Another reason for so many layoffs in the tech sector? Everyone seems to be doing it – Amazon, Alphabet, Microsoft, Salesforce. Stanford Business School professor Jeffrey Pfeffer called the spate of layoffs in the tech sector mostly a “social contagion.”

“If you’re looking for reasons why companies are laying off employees, it’s because everyone else is,” Pfeffer told Stanford News in December. “The reduction is the result of imitative behavior and is not particularly evidence-based.”

There’s also a more mundane reason for layoffs: accounting magic.

Wharton’s Cappelli argues that accounting rules force companies to treat employees as current costs that can be reduced, rather than assets that have value. This leads companies to use layoffs as a means to make their balance sheets look better, even if it doesn’t help the company in the long run. He notes that many companies often end up trading full-time employees for relatively expensive contract workers just because it makes their numbers look better on Wall Street.

“Some of the important financial accounting measures are reported on a per-employee basis, so as soon as we lower that denominator, metrics like revenue per employee improve,” he explained. These measures, of course, do not cover things like loss of institutional memory and reduced morale and productivity caused by layoffs.

None of this seems like particularly holistic thinking that will really lead to Zuckerberg’s stated desire in his firing post, “Building a Better Tech Company.” Instead, it feels like a short-term solution that doesn’t necessarily address the company’s core problems.

As economic uncertainty continues to exist in Silicon Valley, there is a good chance that layoffs will continue to occur in the tech industry. They’re an obvious way to try to save money and show investors that they’re correcting course, but they also risk sabotaging these companies down the road.

Shirin Ghaffary contributed to the reporting of this story.

Update, 1 p.m. ET: This story has been updated to include additional commentary from the Mark Zuckerberg firing announcement.

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