With the recession looming, disruption from the conflict in Ukraine, and hike in interest rates by central banks around the world, businesses are operating in very different environments now than what they were used to as recently as a year ago. This necessitated the imposition of greater financial discipline internally to be able to ride out the storm by management teams across corporations of all sizes, including startups. Funding is harder to come by, valuations have crashed, the era of free money has come to an end and investors have started asking questions about profitability.
The fact remains that a lot of these companies, especially those that benefited enormously from the pandemic-induced wholesale shift to digital, expanded rapidly in the past couple of years, preparing for what they thought was a permanent shift in consumer behaviour. To put it into perspective: Amazon’s global workforce grew from 7,98,000 in the final quarter of 2019 to a whopping 1.6 million employees by the end of 2021. Not only have people returned largely to their pre-pandemic bouquet of preferences when it comes to purchasing decisions, the surging inflation and economic uncertainty globally have made them review their spending capacity entirely. The expected boom that hundreds of thousands were hired for, came and passed. Alphabet CEO Sundar Pichai acknowledged the same saying, “We hired for a different economic reality than the one we face today.” The question remains: Were mass layoffs the only way out?
In the early 20th century, Henry Ford wanted to reduce payments made to shareholders so he could offer his customers cheaper cars and pay his staff higher wages. This is something the Dodge brothers, who owned 10 per cent of the company, opposed. They took Ford to court in 1919 and won. This case enshrined into law the fiduciary duty for publicly-listed companies to maximise profit for their shareholders, above all other considerations. In some sense, this enshrined the prioritisation of short-term profits over long-term value creation in senior management ranks at most companies of consequence.
Layoffs remain the easiest method for companies to implement workforce change with a sole focus on financial savings that show up immediately. But the fact remains: There are alternatives that are more sustainable, ethical, and even business-friendly that do not include simply disconnecting hundreds of thousands of workers from internal systems overnight and firing them via email. To clarify, this is not advocating for a bloated workforce with attendant inefficiencies. This is advocating for systems that prevent companies from getting to such a setup in the first place, and making smarter choices.
Organisations should institute managerial systems that ensure disciplined hiring and regular performance evaluation of all direct reports. This helps create a workplace that is resilient across rank and file. It also avoids managers from using layoffs as a crutch to avoid difficult performance evaluation conversations while keeping redundancy under check at all times.
Layoffs are not a good signal for anyone, least of all the workforce that is affected by it — hurting their morale, eroding their loyalty, and keeping them on their tenterhooks. Organisations also lose the resources invested in training the employees affected by layoffs as well as access to their networks and knowledge acquired while on the job, especially as a lot of this knowledge isn’t institutionally captured and remains mobile with the individuals. A productive and engaged workforce is critical for any organisation to keep churning out products and services which in turn lead to value maximisation for all stakeholders, including shareholders of course.
Even if business cycles dictate mass layoffs as inevitable, it is critical to give as long a heads up as feasible to the affected employees while providing all possible support in helping them land on their feet for their next role. A lot of our professional circles are really small. People never forget the way you treat them, and an employee (both current and former) can be an organisation’s biggest advocate as well as its biggest detractor.
For those affected by layoffs, always have a nest egg built up as it buys you time and choices. Invest in your networks and do remember, you lost the job for reasons beyond your control. Be easy on yourself, things will work out. You got this!
The writer is founder of Proficy, Public Policy India and was formerly with Twitter India and South Asia in a public policy role
The expected boom that hundreds of thousands were hired for, came and passed. Alphabet CEO Sundar Pichai acknowledged the same saying, “We hired for a different economic reality than the one we face today.” (Illustration: Pixabay) 
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