Big techs teach how not to fire people

Technology HR departments have come out of the depths. After years of throwing money at anyone with a computer science degree or IT experience, companies are having to shed employees.

Amazon and Facebook owner Meta are leading the pack in massive job cuts, with more than 10,000 each planned, while Twitter is making headlines for brutality and incompetence. New owner Elon Musk fired about 3,700 employees via email and immediately tried to rehire some of them, claiming they had been fired in error.

The wave of layoffs goes beyond the big names: Nearly 800 tech companies have announced layoffs since January, eliminating 120,000 jobs, including 25,000 this month alone, according to tracking site Layoffs.fyi.

With the exception of a few veterans who survived the dot-com bust, tech workers have never seen anything like it. How cuts are handled could shape the industry’s culture for years to come.

Typically, innovation and rapid growth require tech workers to keep the faith. They often work extra hours and solve seemingly impossible problems while waiting for financial rewards that may take years to arrive. Unexpected layoffs, especially when they are handled cruelly, undermine any sense of shared sacrifice not only among those who leave but also among those who remain.

Tech companies facing their first big culls should keep this in mind and learn lessons from other industries. The banking industry is known to attract many employees who are primarily concerned with immediate personal gain. That’s why the reforms implemented after the 2008 financial crisis were aimed at forcing employees to worry about the consequences several years into the future.

This short-term thinking was a natural consequence of decades of cyclical hiring and firing that undermined any sense of institutional loyalty. Banks have spent decades hiring staff in good times only to swing the ax indiscriminately in bad times. And many of them did it in particularly nasty ways. In 2012, Swiss bank UBS made it clear that individual feelings matter little. About 100 London-based fixed-income traders were told they had lost their jobs when they arrived at the turnstiles at the entrance and found that their badges had been revoked.

The post-Covid version, practiced by Twitter and others, is to disable someone’s Slack app and email accounts before saying they’ve been fired. A lack of compassion sends the message that workers are expendable, so why should they make an effort that won’t directly benefit them?

At the same time, companies that demonstrate basic decency can reap benefits. When pandemic travel bans hit the US airline industry, Delta managed its financial crisis primarily with voluntary takeovers and unpaid leave, while American and United announced mass layoffs. When air travel returned last summer, Delta had fewer problems with canceled flights, in part because the Atlanta-based airline was able to replenish staff more quickly.

While the other operators rescinded most job cuts after receiving government aid, their former employees took advantage of the booming job market and preferred to switch companies. (Loyalty only goes so far: Delta’s pilots’ union recently voted to strike in protest at long delays in contract negotiations.)

While avoiding mass layoffs is ideal, many tech executives feel this is not possible. Still, some ways of doing things are clearly better. Patrick Collison, chief executive of payments company Stripe, was recently praised for admitting he was wrong and giving generous severance packages, while Brian Chesky offered outplacement support for workers leaving as part of Airbnb’s 2020 job cuts.

Management experts say it’s best to have a big round of cuts, with adequate outplacement benefits, and be clear with employees about why the losses are necessary and when they will stop. Being human and accessible helps. But don’t overdo it. Braden Wallake, chief executive of marketing agency HyperSocial, became a figure of joke online after posting a selfie crying over the layoffs.

Above all, says Bob Sutton, an organizational psychologist at Stanford University, don’t pretend you’re just getting rid of low performers: “Everybody knows it’s bullshit and in the future you might see them again. You might even want to hire them again”.

Tech executives may also want to take lessons from professional services firms, which have decades of experience in laying people off due to their “move-or-go” employment structures. For many law firms and consultancies, alumni networks are a source of referrals. Sometimes being nice pays off.

Translated by Luiz Roberto M. Gonçalves