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Stanford Profesor calls out ‘Copycat layoffs’ by tech giant, says won’t help
Layoffs do not solve what is often the underlying problem, which is often an ineffective strategy, a loss of market share, or too little revenue. Layoffs are basically a bad decision, says Professor Pfeffer
Tech firms have been firing thousands of employees in recent months. More than 120,000 employees are expected to have lost their jobs in 2022 alone at some of the biggest names in technology, including Meta, Amazon, Netflix, and soon Google, as well as at smaller businesses and startups. Cut announcements continue to be made.
According to layoffs.fyi, over 26,000 employees were let go by at least 104 tech companies in the first few weeks of January, indicating a disturbing trend of mass layoffs that appears to be defining the world startup ecosystem. This shows that so far in 2023, there have been an average of more than 1,600 layoffs of tech workers per day.. Nearly 50,000 jobs have been lost in the technology sector in the last month alone.
More than 400 tech startups laid off more than 74,000 workers in the last quarter of 2022, Over 154,000 employees were let go by 1,024 tech companies in total in 2022.
According to Jeffrey Pfeffer, a professor of organisational behaviour at the Stanford Graduate School of Business, what justifies the widespread layoffs of employees by so many businesses is straightforward copycat behaviour.
Pfeffer discusses with Stanford News how "social contagion" is primarily to blame for the workforce reductions occurring across the tech sector: As businesses mimic one another's actions almost mindlessly, behaviour spreads throughout a network. When a few businesses fire employees, more are likely to do the same. The most troubling behaviour is one that results in fatalities: For instance, research has shown that layoffs can increase the odds of suicide by two and a half times.
Furthermore, Pfeffer adds that layoffs do not enhance business performance. Academic research has repeatedly demonstrated that cost-saving measures such as job cuts are ineffective. Cuts lower workplace morale and productivity because surviving employees are left wondering "Could I be fired too?" Severance packages cost money, layoffs raise unemployment insurance rates, and cuts lower workplace morale and productivity.
Pfeffer said, “Layoffs do not solve what is often the underlying problem, which is often an ineffective strategy, a loss of market share, or too little revenue. Layoffs are basically a bad decision.”
He asserted, layoffs frequently don't reduce costs because it's common for former employees to be hired back as contractors, with the hiring company receiving payment from the company. In part because layoffs can indicate that a company is having problems, layoffs frequently do not result in an increase in stock prices. Productivity is not increased by layoffs.
He went on to say, layoffs don't address the underlying issue, which is frequently an ineffective strategy, a decline in market share, or insufficient revenue. In general, layoffs are a bad choice.
Pfeffer has investigated hiring and firing procedures used by businesses all over the world for more than 40 years. He has met with executives from some of the top companies in the nation as well as their staff members to find out what makes for effective, evidence-based management—and what doesn't.
In his most recent book, Dying for a Paycheck, he examines how management practises, such as layoffs, are hurting employees and in some cases even killing them. Pfeffer asserts that, “We ought to place a higher priority on human life.”
On the question of any advice to laid-off employees, Professor Pfeffer said, “My advice to a worker who has been laid off is when they find a job in a company where they say people are their most important asset, they actually check to be sure that the company behaves consistently with that espoused value when times are tough.”
He said pay cuts are a better option than layoffs, instead of giving whole pain to some of the employee in a long run companies can give some pain to all the employees in a short run.
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First Published:25 Jan 2023, 09:17 PM IST
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