Arnd Wiegmann/Reuters
- Meta, the parent of Facebook, could go through another round of layoffs, according to reports.
- CEOs often see layoffs as a way to fix a company's problems, but the cuts can do lasting damage.
- Doing layoffs more than once can look like managerial incompetence, one expert told Insider.
Recent reports that Meta CEO Mark Zuckerberg is mulling another round of massive layoffs likely sparked an unnerving sense of déjà vu among employees — and for good reason.
Just a few months ago, Meta conducted its first-ever round of mass layoffs. The parent of Facebook, Instagram, and WhatsApp said in November it would let go of roughly 11,000 staffers, or 13% of the company.
Now, more cuts might be in the works. Insider reported that a common expectation within the company is that about 10% of the workforce — some 7,500 people — will be let go, perhaps this week. In February, Zuckerberg said 2023 would be the company's "year of efficiency."
Meta wouldn't be the only company to trim its workforce more than once in short order. Twitter's workforce is about a quarter of the size it was when Elon Musk bought the company last year and began conducting rolling layoffs.
CEOs often see layoffs as a quick fix to a company's problems, but employee purges can introduce lasting harm, including lower productivity and employee engagement, and decreased innovation. Multiple rounds of layoffs only exacerbate these outcomes, management experts told Insider.
Layoffs redux: Why did leaders miscalculate?
While a company's motivation for making multiple cuts often stems from a desire to put its fiscal responsibility on full display to investors, that strategy can backfire. Instead, the move looks more like managerial incompetence, said Dana Sumpter, a former HR executive who's now an associate professor at Pepperdine Graziadio Business School.
"Companies are racing to the bottom by trying to impress their shareholders and boards and show how cost-conscious they are," she said. "Even when investors react in a positive way to a layoff announcement — 'Good for Meta, they're being conscientious' — if the company needs to do it multiple times, there may be the question of, 'Do they have their act together?'"
Salaries and employee benefits are typically one of a company's largest expenses, accounting for as much as 70% of total business costs, according to Paycor, an HR software company. And at a time when high interest rates, high inflation, and uncertainty continue to weigh on the economy, trimming head count makes a certain amount of financial sense.
The trouble is that when companies shed workers to cut costs and create efficiencies in the short term, they tend to overlook the negative long-term consequences of the move, Sumpter said. This might be especially true today when a number of high-profile companies have announced mass layoffs and others hop on the proverbial bandwagon, she added.
"These companies want to be a part of the headlines. They want to show that they're being fiscally prudent and frugal and that they, along with their peers, are making these tough decisions and cutting costs," Sumpter said.
Cutting a second time in short succession likely stems from the same impulse, she told Insider. But as a strategy, it's likely to have the opposite effect and leave investors perplexed as to why leaders miscalculated.
"They're wondering how efficient they are, and do they know what they're doing?" Sumpter said.
One bout of layoffs dents morale; a second can be devastating
It's uncommon for a company to conduct multiple rounds of layoffs, according to data from Crunchbase. Last year, around 9% of the 433 tech companies it tracked laid off workers more than once.
That might be because it's generally considered bad practice to do multiple rounds, said Kerry Sulkowicz, the managing principal of the Boswell Group, which advises CEOs and boards on people and culture issues. "Doing layoffs in dribs and drabs creates instability," he told Insider.
"When a CEO does this, it's important to communicate that this is a difficult decision, and to the extent possible, to do it one fell swoop."
One bout of layoffs can leave a dent in employee morale; a second round can be devastating. Surviving employees often mourn the loss of their colleagues and feel guilty they were spared.
They're also likely to feel extra nervous about their job security: Instead of focusing on the work at hand, they're looking over their shoulders, which is not good for their productivity or sanity, said Sulkowicz.
"They're constantly wondering, 'Is there another round coming? Am I next?'"