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Business News/ Technology / Tech’s New Normal: Microcuts Over Growth at All Costs

Tech’s New Normal: Microcuts Over Growth at All Costs


Amazon, Google, Microsoft and Meta are making strategic trims even as they rebound from the tech downturn.

They suggest a new era for an industry that in years past grew with little restraint, one in which companies are focusing on efficiency and acting more like their corporate peers that emphasize shareholder value and healthy marginsPremium
They suggest a new era for an industry that in years past grew with little restraint, one in which companies are focusing on efficiency and acting more like their corporate peers that emphasize shareholder value and healthy margins

The tech industry has largely recovered from the downturn, but Silicon Valley learned a long-lasting lesson: how to do more with less.

Amazon, Google, Microsoft and Meta Platforms have been cutting dozens or a few hundred employees at a time as executives keep tight controls on costs, even as their businesses and stock prices have rebounded sharply.

The cuts are far smaller than the mass layoffs that reached tens of thousands in late 2022 and early this year. But they suggest a new era for an industry that in years past grew with little restraint, one in which companies are focusing on efficiency and acting more like their corporate peers that emphasize shareholder value and healthy margins.

“There’s a second look at costs, at lines of business, and where investments are going to be next year. The output are these microcuts," said Adam Ward, a founding partner at Growth by Design Talent, a recruiting advisory firm. “This will be a new normal."

The launch of the humanlike chatbot ChatGPT late last year served as a bright spot of growth in an industry that was otherwise scaling back. Challenges regarding the technology and calls for regulation remain, but some of the biggest tech companies are starting to make it their priority.

There is a reallocation of resources from noncore areas to projects such as AI rather than hiring new people, said Ward, who was previously a director of recruiting at Facebook and the head of recruiting at Pinterest.

Amazon eliminated several hundred roles this month from its Alexa division to maximize its “resources and efforts focused on generative AI," according to an internal memo. The company has also made small cuts in recent weeks to its gaming and music divisions.

“We’ve hired a lot over the past several years, and we’re in the process of digesting that growth and making sure we’re operating as efficiently as we can as a company," said Brad Glasser, an Amazon spokesman.

Facebook’s parent, Meta, recently posted its largest quarterly revenue in more than a decade. It laid off 20 people weeks later. Chief Executive Officer Mark Zuckerberg said on an earnings call that the company would continue to operate more efficiently going forward “both because it creates a more disciplined and lean culture, and also because it provides stability to see our long-term initiatives through in a very volatile world."

Alphabet, Google’s parent, reported its strongest quarterly growth in more than a year, but the company has eliminated jobs in at least a half-dozen different organizations in recent weeks, from the news division of its search engine to the self-driving car unit, Waymo. Multiple teams justified the cuts by saying they were reshuffling workers to areas such as AI. In most cases, employees are being given the opportunity to apply for open roles at the company, in contrast to those who were laid off earlier this year.

At the same time, teams across Google are seeking approval for 2024 spending plans from Chief Financial Officer Ruth Porat, who has been working to drive down costs across the company, according to people familiar with the matter.

Google said it has been sharpening its focus and actively moving teams to its most critical areas for more than a year. “We’re continuing this work so we can build more-efficient, fast-moving teams and responsibly invest in our biggest initiatives for the long run," Chris Pappas, a spokesman, said.

Lyft CFO Erin Brewer said in an interview that the company—which beat Wall Street’s expectations in the most recent quarter—will continue to be “super disciplined" about keeping costs in control even after letting go of thousands of people in the past year.

Microsoft said in October that sales growth accelerated in its fiscal first quarter as demand for its cloud-computing services heated up in the midst of growing enthusiasm about artificial intelligence. Earlier in the month, Microsoft laid off around 300 employees from its LinkedIn division.

Many large tech companies are now handing out budgets to department heads by the quarter instead of the year, said Karena Man, a senior partner at Korn Ferry, an organizational consulting firm. The industry has “traditionally been averse to the B word: budget. It was never part of the culture," said Man.

The continued belt-tightening has created a lot more demand for part-time or project-based positions instead of full-time workers, said Man. Companies are increasingly using AI to better inform their hiring decisions, such as using the technology to determine which people and skills could be shuffled internally.

Compensation has stayed steady, but Man said companies are no longer as willing to negotiate with job seekers as they were in 2021, when the companies were bending over backward to attract people.

Pandemic-fueled growth combined with low-interest rates at the time sent companies on a hiring and expansion spree. Since then, borrowing money has become more expensive. Man doesn’t see the trend reversing even if interest rates inch down because investors are demanding more discipline.

“Everyone’s repositioning to doing more with less," said Parthi Loganathan, the founder of Letterdrop, a Y Combinator-backed startup that provides marketing software to tech companies. The chief marketing officers he is used to working with now have fewer resources, but are tasked with meeting more-ambitious goals.

It has also become harder for startups to attract investors with a growth-at-all-costs strategy, Loganathan said. “There was just a lot of mania in 2021, and we’re coming to terms with reality now," he said. “People are saying, ‘Can I lay off employees? Can I use AI to do certain jobs in the future?’"

The 2.1% tech unemployment rate remained below the national rate of 3.9% in October. But job postings for future tech positions have fallen each month since March, according to an analysis from CompTIA.

Job postings in the software-development category are more than 25% below prepandemic levels, according to Indeed’s 2024 U.S. jobs and hiring trends report. Postings mentioning generative AI, though still a tiny portion of the market, have skyrocketed.

“There are no signs there that firms are turning around and saying, ‘Hey, we’re going to ramp up our hiring,’" said Nick Bunker, director of North American economic research with Indeed. “It’s very much still a depressed hiring environment."

Sebastian Herrera and Miles Kruppa contributed to this article.

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