I'm a former Microsoft VP of HR. Here are the real reasons why layoffs are happening and how much longer they'll last.
- Chris Williams is a former VP of HR at Microsoft and podcaster, consultant, and TikTok creator.
- He explains that COVID made way for unprecedented opportunities for tech companies and many over-hired.
I was Vice President of HR at Microsoft at the peak of the dot com bubble. I lived — like most of us — through the collapse of 2008. I've seen this movie before.
Here are three reasons why the tech industry is laying people off and why it's not a sign that tech is collapsing.
1. COVID exuberance
Some industries like travel and entertainment were devastated when everyone was stuck at home. Tech was just the opposite. Everyone stuck at home on their computers was a gold mine. Companies saw unprecedented demand and opportunity. Some saw it as a sea change.
The biggest was Amazon who saw a huge shift to ecommerce as not just a blip but a change in buying habits. They hired breathlessly, doubling from 800,000 employees in 2019 to over 1.6 million in 2021. Alas, when things opened back up, we also returned to the brick and mortar stores. Amazon had over-hired and has needed to retreat.
The same was true for other companies in tech. Microsoft, Google, Meta, even Peloton all saw the pandemic as a sea change. Though it changed many things, the rebound has shown the changes to be less dramatic. They too have found themselves to have over-hired.
Former Federal Reserve Chairman Alan Greenspan called the dot com bubble "irrational exuberance." COVID has been a bit like that too.
2. Shedding excess
The wakeup call that came with the rebound from COVID also caused many tech companies to examine their businesses for excess. Tech has been famous for harboring people and projects beyond their usefulness.
To their credit, many of these companies have shown loyalty to those who helped lead them in the creation of some amazing products. And they have chosen to stick with experimental projects long past the time when more traditional companies would have pulled the plug.
But when the COVID rebound happened, they used the opportunity to examine more critically some of these things well past their "sell by" date. Some of the layoffs we've seen have included long-time employees years from their most meaningful contributions. And projects years past their prime.
When choosing who to layoff, these companies deserve some credit for applying business results as a metric. Rather than simply saying "last in, first out." But it has been painful to watch.
3. The optics
Some of the layoffs we've seen in tech are ones that the companies have probably wished they could do for years. Some of the above, for example.
But they didn't want to be seen by Wall Street as companies at risk. They didn't want to be the only one laying people off while other companies were still hiring or at least staying stable. The optics would have sent their stocks into a nosedive.
With the cover of many companies doing layoffs, there was safety in numbers. Companies who otherwise would have avoided layoffs have done them. Even notoriously cautious and stable Apple has used this to realign their retail organization and lay off a small number.
The cover offered by a broad retreat has made the layoffs more widespread than the pure economic metrics might justify.
The future is bright
We are in a season of layoffs, and it's not clear we've seen the last or worst of it. I expect to see more coming through summer and into the fall.
That said, there is no reason to see the layoffs as a harbinger of doom and gloom for the tech world. There are almost too many rays of hope to count.
There is the revolution AI will bring. Microsoft is betting the company that every aspect of knowledge work will be impacted, and even that may be conservative. Machine learning and tools like ChatGPT will have profound impact across tech and beyond.
There is the amazing world of quantum computing that will completely reset our yardstick for measurement of computer performance. It will overhaul the worlds of cryptography, finance, modeling, genomics, and on and on.
Then there is the virtual world. Perhaps Meta is overselling the metaverse, but there is plenty of reason to be optimistic for augmented reality. The applications in industrial and other real-world mixed scenarios are endless. Even Apple is rumored to be putting serious effort here.
None of these even touch on the dramatic shifts in social media that lie ahead. The drama and changes around TikTok, Twitter, Facebook, and others provide plenty of room for growth.
And there is the huge backlog of digital transformation that is pending. So many old-line businesses have yet to convert to electronic workflows there is opportunity there for decades.
There are so many lights ahead in the future of tech you would be wise to wear shades.
Chris Williams is the former VP of HR at Microsoft and a leadership advisor, podcaster, TikTok creator, and author.
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