Spotify latest in string of tech giants to announce mass layoffs
The global tech sector is navigating through a period of severe turbulence following a significant drop in valuations last year, leading to a gloomy Q1 of 2023. The latest in a string of layoffs across the sector has seen Google announce they will be cutting 12,000 jobs across its workforce with Spotify following suit announcing a 6% reduction of its global staff.
Following 2022’s recurring interest rate increases and soaring inflation, tech companies looking to combat low valuations – which resulted from weak performances – are scrambling to create cost-efficiencies to restabilise their market-cap value. Serving as a testament to this, last week, Microsoft announced their plans to lay off 10,000 employees, affecting up to 5% of their total workforce. The news comes following Amazon, Meta, Salesforce and Twitter announce layoffs reaching nearly 40,000 people since November of 2022.
In light of these recent events, Trachet – a leading tech business advisory firm – highlights three key points which have marked a definitive shift for the tech sector resulting in mass lay-offs:
The layoffs appear to follow a plan to restructure resources within the tech industry, by investing in technology over people. This has been seen as Microsoft has confirmed its latest move to acquire ChatGPT, which will see the company invest a reported $10 billion in the AI, with hopes to bring in new consumers.
Alongside plans to restructure, the tech sector has struggled to keep up with its current level of growth which was fuelled by the pandemic. As a result, tech companies are being forced to find quick and efficient ways to compensate for this without losing share value – mainly cutting costs.
Tech stock normally remains elevated, and investors have previously been able to justify the higher prices due to forecasts of big growth that the companies provide. The result of interest rates being much higher causes future profits to appear less valuable and has significantly played a role in cutting costs within the sector.
Claire Trachet, CEO/Founder of Trachet, comments on company culture as a key victim of layoffs, creating friction from founder and C-suite level to more junior workers. If the founders are experiencing high pressure, it is likely staff will also experience this – Twitter serving as a perfect example.
Trachet commissioned a research report which unveils a staggering third (33%) of UK workers state they’ve seen have seen their workplace’s headcount decrease and their workload increase in the last 12 months – seemingly causing a mass strain within the UK workforce. Trachet’s data also shows 20% of UK workers state their firm was slow to react and adapt, resulting in a loss of staff. This raises a crucial question, how far will business leaders expect their employees to stretch to counter the current market conditions and what impact will this have on the workforce?
The cost-of-living crisis has created pressure at every level for organisations as companies and staff are struggling to cope with rising costs – Trachet’s research further unveiled that nearly one in three (29%) Brits is actively looking for another job as they’re not being paid enough to cope with the rising cost of living. For those working in startups, the cost-of-living pressure is now exacerbated by a decrease in human resource and fears of being layed off which may lead many to pursue a career in a different organisation. Data from the study shows nearly 64% of Brits would be happy to compromise their career aspirations in order to preserve their mental health, further illustrating the importance of companies keeping a positive overarching outlook.
CEO and Founder of business advisory, Trachet, Claire Trachet comments on keeping company culture alive amidst lay-offs due to the current economic climate:
“Spotify’s recent layoff announcement – alongside Microsoft, Amazon, and now Google – are clear indications of the market corrections we’ve been experiencing in the past year. Tech firms are choosing to focus on profitability over headcounts by investing in products over people, which consequently will mean that layoffs will continue in both big and small companies.
“However, I believe there remains a wealth of capital out there for founders to help accelerate growth, which will be more evident when the markets begin to stabilise, and inflation eventually subsides. It is very likely that H2 will be an active period of investment and dealmaking, and hopefully will result in a more secure jobs market for those in the tech sector.
“Many startup founders can attribute their success to having high versatility in playing different roles – from finance and fundraising to product management, founders take on a series of responsibilities that many would find overwhelming. Now, especially given the added strains they will be facing, the issue of company culture will likely be pushed down to the bottom of their list of priorities.
“However, with mass redundancies in the sector causing employees to fear for their financial futures, founders must do their best to ensure their offices remain positive environments where people want to work – even if that means bringing in a specialist to fulfil this role. If they fail to do this, as our research suggests, they may face an exodus of experienced staff who leave in search of better job security elsewhere.”
