In May last year, 700 employees of the Swedish fintech company Klarna learnt that they were being laid off via a pre-recorded voice message from their CEO. In November, Elon Musk sent a memo to thousands of staff at Twitter informing them that they would shortly receive their notice via email.
Tech firms globally have put about 330,000 employees out of a job since early 2022, according to online tracker Layoffs.fyi, with many organisations continuing their penchant for “disrupting” normal ways of working by dismissing employees remotely.
Emma Hughes, associate professor of HR management at Leeds University Business School, suspects that tech firms used this approach because it was the fastest and easiest way to get rid of large numbers of employees and a way for them to directly control the redundancy process with minimal resistance. Or so they hoped, anyway. She also wonders whether the Covid-induced shift to online working led them to think that a digital approach would be acceptable.
Yet Hughes warns: “When employees find out their fate through digital methods, whether that’s an email or a recorded message, it’s an impersonal and blunt way to deliver devastating news. Employees deserve more respect and dignity – and a meaningful consultation process.”
Where big tech lags other sectors
Angie Kamath, dean of the NYU School of Professional Studies, characterises the digital layoffs as “inhumane” but says the scale of these redundancies should not necessarily surprise us, given that tech is a relatively new industry.
“Tech has been making money hand over fist,” she says. “There’s been tons of investment, all kinds of venture capital money flowing in based on good future ideas, and we’re now starting to see a maturing of the industry that includes corrections for massive over-hiring, accompanied by general belt-tightening. These are concepts that industries such as finance and manufacturing have been dealing with for a long time.”
Kamath doesn’t think that the redundancies were made maliciously, but she does believe there was some “awful forecasting” at play. Matters may have been made worse by Covid ushering in an era of hybrid working, leaving these firms on the hook for the bills stemming from huge real-estate assets.
Is the industry risking a vicious circle?
What consequences are the tech firms likely to see from their actions? Hughes says that only time will tell, but notes that, when you have people such as the UN’s high commissioner for human rights, Volker Türk, raising concerns about the redundancies at Twitter and the fact the human rights team and ethical AI team were laid off, it will surely have an impact.
“For employees who are still at the company, there will probably be a loss of trust and an increase in concern about whether it will happen again,” Hughes says. “That can lead to other issues, such as a lack of commitment, cooperation and engagement, leading to higher staff turnover. It might influence future recruitment too.”
Kamath takes a similar view. “It’s going to come back and haunt some of these firms,” she predicts. “There is a lot of research on what workers want and how they’re demanding more from the system and not accepting that they’re just cogs in the wheel that make company executives a lot of money.
She adds: “Leaders have to lead and part of leading is delivering bad news as well as good. There is no company that is so big that it can’t deploy someone to let an employee know their work was appreciated but they no longer have a future with the company.”
That doesn’t have to be a long conversation, Kamath stresses, but she does believe that there is mounting pressure on tech companies to humanise their redundancy process. She points to the open letter that 1,400 Google employees wrote to Sundar Pichai, CEO of parent company Alphabet, asking for better handling of layoffs.
“A lot of employees at other firms could have written something similar,” Kamath says.
There have already been some legal ramifications for tech firms too. About 40 former Twitter employees in the UK have taken legal action against the firm for a failure to conduct a proper consultation process with fair selection criteria for those being made redundant, and for cutting them off from the internal company’s systems so they couldn’t obtain the support and representation they needed.
In the US, employees have had less scope for litigation, as firms don’t have to go through a consultation process before making staff redundant.
“It’s not a crime to be a jerk,” Kamath says. “And, while some of the approaches have felt pretty tone deaf, there has not necessarily been anything wrong in a legal sense.”
How to cultivate better HR habits
The main principle for big tech or any other business to take from all this, according to Hughes, is the importance of running a detailed and meaningful consultation process with employees and their representatives before sending out any redundancy emails.
“Discuss the redundancy plan, whether there are alternative options and what the wider implications of these job cuts are,” she advises.
For remaining staff who may be offered new roles to cover the gaps created, it’s never been more important to examine your employment contract before signing it, stresses Hughes, who adds: “Even though it’s boring, read through your contract in great detail. If you’re not sure about something, get some advice on it.”
Indeed, some recent legal battles involving tech companies have centred on the contractual language they have used. She also thinks it highlights the importance of employees joining a union.
For Kamath, there was a “fast and loose” nature to tech companies, which she expects to change.
“After major layoffs, we see in the data that people are skittish,” she says. “The only way to counterbalance this is to have procedures in place such as performance evaluations, potential for promotions and career ladders. Employers must really walk the walk on diversity and inclusion.”
Kamath adds that there should also be much more emphasis on talent management. “An engaged employee is one who feels respected and has a sense of belonging at work,” she says. “They mentor other people, engaging in non-mandatory work functions and the professional development of themselves and others, which is what every firm needs.”
Even the high-flying world of big tech stands to benefit from embedding such sound fundamentals.