Downsizing The Hopes

The past two years have been swept away by dreaded pandemic waves. While people barely started recovering from it, this year, recession has knocked at the door. Globally Tech companies started downsizing and firing their employees on a large scale. India has also not remained untouched by its effect

By Geeta Singh

• The mass layoffs, among the biggest this year and the first in Meta’s 18-year history, follow thousands of job cuts at other tech companies
• 1,388 tech companies have laid off a total of 233,483 employees since the start of the Coronavirus pandemic, year ‘22 been the worst
• Last May, Google rolled out a ranking system and performance improvement plan — that could easily fire 10,000 employees
• Less than two years after its launch, Amazon India said it would shut down its online learning platform for high-school students

The year 2022 is coming to end but it would be remembered as a ‘Downsizing Year’ for the Tech world. There won’t be a big tech company in the world that hasn’t laid off some of its employees. These companies are not financially weak, rather these are the top-shot giants who rode with a growth wave during the pandemic period and paid skyrocketed salaries to their top hierarchy and have begun to cut down their workforce amidst fears of a looming recession.

Some of the ‘Ivy league clubs’ of tech companies have fired more than 30 percent of their employees. Meta, Twitter, Salesforce, Netflix, Cisco, and Amazon joined the global layoffs and laid off more than 73,000 employees. Other US Inc like Roku, Robinhood, Glossier and Betterment have notably laid off their maximum workforce this year. As per the recent report of  Lyoffus, at least 853 tech companies globally have laid off more than 138,492 employees to date. According to data, 1,388 tech companies have laid off a total of 233,483 employees since the start of the Coronavirus pandemic, but the year 2022 has been the worst for the tech sector.

Hence we can say that after the pandemic waves recession ripples started.

LAYOFF – TO BE CONTINUED

In capitalism, development and crisis alternate like day and night. One of the primary social consequences of the capitalist crisis is mass unemployment. Technically, if growth remains very low for a prolonged period, it is called a recession.

The mass layoffs, among the biggest this year and the first in Meta’s 18-year history, follow thousands of job cuts at other tech companies including Elon Musk-owned Twitter Inc, Microsoft Corp and Alphabet. Other tech companies — many of which had gone on hiring binges in the past few years — have also been trimming their workforce amid concerns about an economic slowdown. Elon Musk, the new Twitter CEO, has slashed the company’s workforce in half this month followed by 4000 contract workers and some who questioned the boss. In addition, as many as 1200 Twitter employees resigned after Musk’s ultimatum mail to be ready for a “hardcore” work culture.

Meta Platforms Inc would cut more than 11,000 jobs, or 13% of its workforce, as the Facebook parent doubled down on its risky metaverse bet amid a crumbling advertising market and decades-high inflation. 

Chinese tech giant Tencent Holdings has begun a new round of job cuts targeted at its video streaming, gaming and cloud businesses. 

SNAP, the parent company of Snapchat is letting go of 20 percent of its employees, which brings the total count to 1000. Snap is also facing the prospect of cutting down its expenses owing to a slowdown in the business.

Favourite search engine Google is a new entry into the group of tech giants that is downsizing its workforce to cut costs and improve profitability. It is preparing to lay off about 10,000 underperforming employees. 

GRAD WILL FIRE

A report released by ‘The Information’ states that Alphabet, Google’s parent company, which so far seemed immune to layoffs in the tech industry, is preparing to mass layoff by bringing in a new system of ranking employee performance and avoiding paying bonuses and stock grants to its eA report of ‘The Information’ states that Alphabet, Google’s parent company, which so far seemed immune to layoffs in the tech industry, is preparing to mass layoff by bringing in a new system of ranking employee performance and avoiding paying bonuses and stock grants. This year, in the third quarter, Google’s profit registered a decline of 27 percent.

Forbes states that one of the activist hedge fund investors of Alphabet British billionaire, Chris Hohn, pressured the company’s CEO Sundar Pichai and urged him to “take aggressive action” to combat costs he called “too high,” saying the firm has too many employees and is spending too much on individual compensation packages. “Nearly all technology companies are reducing costs,” Hohn said, pointing to Meta’s 13% headcount reduction and layoffs by Stripe, Twitter, Salesforce and Microsoft.

To combat adverse market conditions and a need to cut costs, last May, Google rolled out a ranking system and performance improvement plan—Googler Reviews and Development (GRAD) —that could easily fire 10,000 employees. GRAD will focus on employee development, learning and progression throughout the year.

If you end up joining Google, GRAD is how you and your manager will work on your career and progression.  The management has asked managers to rank 6% of its total employees as low performers, compared to the traditional 2%. Before that supervisors were told to cut down on inflated ratings.

There is an overarching worry that if employees would rate as poor performers, they could be shown the door plus this new performance system could use the ratings to avoid paying bonuses and stock grants. 

Amidst pressure from an activist hedge fund, adverse market conditions and a need to cut costs, last May, Google rolled out a ranking system and performance improvement plan—Googler Reviews and Development (GRAD) —that could easily fire 10,000 employees. Forbes states that activist hedge fund investor of Alphabet, British billionaire Chris Hohn pressured the company’s CEO Sundar Pichai and urged to “take aggressive action” to combat costs he called “too high,” saying the firm has too many employees and is spending too much on individual compensation packages. “Nearly all technology companies are reducing costs,” Hohn said, pointing to Meta’s 13% headcount reduction and layoffs by Stripe, Twitter, Salesforce and Microsoft.

GRAD will focus on employee development, learning and progression throughout the year. If you end up joining Google, GRAD is how you and your manager will work on your career and progression.  The management has asked managers to rank 6% of its total employees as low performers, compared to the traditional 2%. In a prior announcement, supervisors were told to cut down on the inflated ratings.

There is an overarching worry that if employees are rated as poor performers, they could be shown the door in addition to a concern that this new performance system could use the ratings to avoid paying bonuses and stock grants.

AMAZON & META STORY

Seattle-based Amazon, which has been cutting costs in various areas of its business in the past few months, is undergoing an annual review process to figure out where it can save more money. 

The Wall Street Journal reported that Amazon.com Inc. is reviewing its unproductive divisions, including the devices division that houses voice assistant Alexa, to reduce expenses. This news caused its shares to increase by 11%. Company’s Robotics Software developer Jamie Zhang has posted on LinkedIn that he and his entire robotics team had been let off.

Amazon has instructed its underperforming units’ employees to look for work elsewhere. The company is also moving to redeploy employees from some teams to more lucrative divisions and closing teams in sectors like robotics and retail. The massive job cuts have affected several divisions, most notably the Alexa virtual assistant business. It is expected to lose $10 billion this year.

The New York Times has claimed that Amazon is preparing to lay off about 10,000 of its employees. If this happens, Amazon will join the list of tech companies that have eliminated jobs on a large scale. It would be the biggest layoff in the company’s 28-year history.

Amazon CEO Andy Jassy has already warned employees that the company will have more layoffs as early as 2023. 

At present, Amazon employs more than 15 lakh workers globally, primarily made up of hourly workers. He said this year’s review is “more difficult” due to the economic landscape and the company’s rapid hiring in the last several years.

Business magnet, Mark Elliot Zuckerberg has announced mass layoffs at Facebook’s parent company Meta, with 13% of the global workforce being shown the door. This equates to roughly 11,000 jobs in what is one of, if not the largest round of tech layoffs this year.

Zuckerberg has admitted to hiring too fast in the high growth pandemic years, and the company now needs to scale back to improve profitability. He anticipated more downsizing as more of the leftover resources will go toward the metaverse division -Reality Labs responsible for its metaverse investments. The business lost $9.44 billion from January to September this year, with losses expected to grow significantly in 2023. 

The spending spree has drawn the ire of Wall Street and shareholders, with one investor recently calling the investments “super-sized and terrifying”. Analysts have also questioned how long Meta can pour money into the project in a weak economy. Stakeholders are sceptical about the company’s metaverse bets, and that rising interest rates and a gloomy macro environment could continue to weigh on the ad market. 

GLOBAL EFFECT ON INDIA

This global layoff trend affected Asian countries also especially, India. Until last October, 16000 employees were asked to leave by 44 startups in the country. 

Prominent Ed-Tech startups and unicorns like BYJU’S, LEAD, Vedantu, Unacademy, Trell, and Lido Learning along with other companies like Ola, Zomato, Meesho, MPL, Innovator, Udaan and others. 

Flipkart CEO Kalyan Krishnamurthy has warned that funding in the startup ecosystem may run out for the next 12 to 18 months and the industry may face a lot of turmoil and volatility. 

According to a PwC report, Indian startups are going through rapid hiring cuts and the hiring of permanent employees has come down by a whopping 61 percent in the last 12 months. 

Besides this, thousands of contractual employees have also been fired.

High-valued Ed-tech startups like BYJU’S, LEAD (formerly LEAD School), Unacademy and Vedantu in the country have laid off employees amid the ongoing funding slowdown.  

Think and Learn Pvt. Ltd, the parent company of major ed-tech Byju’s, laid off more than 2,500 employees, 5 percent of its 50,000 workforces. Byju Raveendran, Founder and CEO of India’s most-valued startup reported that the company changed its accounting standard, which delayed the recognition of revenues and caused its loss to increase significantly to 4,588.75 crores from 231.69 crores in the prior year.

Unacademy laid off more than 1325 employees in the first round in April, then sources say the headcount has been slashed by 40 percent. Lido Learning asked around 1,200 of its employees to resign. 

The SoftBank-backed ed-tech firm targets profitability and reduces costs, according to an internal note sent by Gaurav Munjal, co-founder and CEO of Unacademy group, to the staff.

Hedge fund investor of Alphabet, British billionaire Chris Hohn pressured the company’s CEO Sundar Pichai and urged to “take aggressive action” to combat costs he called “too high,” saying the firm has too many employees and is spending too much on individual compensation packages

Bengaluru-based startup FrontRow has laid off 75% of its workforce, around 300 employees. This startup business model is based on San Francisco-based startup MasterClass where celebrities come in and teach courses in their respective fields. 

The courses offered by the startup include Singing by Neha Kakkar, Comedy by Biswa Kalyan Rath, Fast Bowling by Bhuvneshwar Kumar, Batting by Suresh Raina, and Spin Bowling by Yuzvendra Chahal.

After the recent detention of founders of health tech startup Synapsica, the company has laid off nearly 30 percent of its workforce citing market conditions. This AI-based startup has resorted to layoffs to reset its business targets.

Food delivery aggregator Zomato asked employees across departments to leave the company. Zomato laid off around 3 percent of the workforce in the latest episode of firing. Another known startup Ola fired 500 employees this year.

Vedantu handed out pink slips to over 725 people. Car24 asked 500 people to leave. Meesho and Trell both fired 300 employees. And a health-tech startup, Mfine (AI-powered telemedicine mobile app) has laid off more than 500 regular employees.

PINK-SLIP REASONS 

According to a source, who used to be with BYJU’s, said the company has started a Performance Improvement Programme (PIP). It is a phase where employees are given targets which if they fail to achieve, they are fired. 

The source said, “Previously, only those employees who had been underperforming consistently for 6-8 weeks were put in the pipeline. But ever since the company started going through a rough patch financially, most employees have been put on the pipeline.” The former employee added, “So after being put on the pipeline, I was asked to get business worth Rs 6-8 lakhs in roughly 4 weeks. Normally I was asked to get Rs 2-4 lakhs at the same time. They almost doubled my target.”

Demand for online services during the pandemic years meant that tech companies hired aggressively, leading to an increased headcount. As infection rates have dipped, users have returned to their pre-pandemic behaviour, and the growth rates at tech companies are now seeing a downward trend. 

Therefore, the massive digital shift has brought substantial investor dollars to ed-tech firms, forcing them to amp up their growth engines around tech, marketing, sales and content teams. But as the wheel of time rolls towards a funding winter, investors have asked their portfolio firms to cut costs and preserve cash. After years of lavish venture capital (VC) funding and investor tolerance for cash-burning, the halcyon days seem to be ending for these firms. Since January 2022, more than 12,000 start-up employees have received pink slips.

BLEAK FUTURE

The future of startups in India is murky right now in the year ahead. A senior executive working with a job portal, on the condition of anonymity told Deutsche Welle, “When the global tech layoffs started last August, it was clear that this storm would reach India as well. It is also true that due to rising inflation in America, many companies no longer want to spend on advertising in India as well. The result is coming out in the form of layoffs”.

Even Amazon, once seen as an invincible e-com, is expected to report weak results in the last quarter of this year, when it is usually a busy period, thanks to festivals, for online businesses. The e-commerce major has also discontinued its wholesale e-commerce website, Amazon Distribution, available in some parts of Bengaluru, Mysore and Hubli. 

Less than two years after its launch, Amazon India said it would shut down its online learning platform for high-school students in the country starting from August 2023. The Amazon Academy platform was launched in January last year to help students prepare for the JEE (Joint Entrance Examination). 

The ed-tech crisis explains the risk in the hustle-driven growth model. In the past two years, India has seen five new ed-tech unicorns—Unacademy, Emeritus, Vedantu, upGrad and Lead School—and one, BYJU’S, become a decacorn, t is a term for a company valued at more than US $10 Billion. But when life goes to a normal pace after the lockdown all of them start sinking. Another reason is that they spend lavishly on marketing and promotion which has backfired on their revenues. 

As startups sink under economic stress and pressure from investors, they are forced to resort to austerity—cutting the flab in the organisation and turning to a linear structure that prioritises profits over growth. Especially those startups, which rely heavily on sales and marketing headcount, suddenly top the list of penny-pinching companies. Hence most-funded ventures like BYJU’S, Zomato and Ola have resorted to layoffs to deal with a funding crunch that will likely last beyond 2022.

There are apprehensions that recession is on the way for tech companies and India is always seen as a big growth avenue in the IT industry, so this gloom is bound to have an impact on the Indian market.