SAN FRANCISCO: As Meta Platforms Inc, Alphabet Inc, and other Silicon Valley giants try to ease the payrolls after years of feverish hiring, one clear target has emerged: middle management.
Meta will shed some layers of management, Chief Executive Officer Mark Zuckerberg said on the company’s conference call Wednesday, calling 2023 its “year of efficiency.” The company laid off over 11,000 employees, 13% of its workforce, in its first major layoff last year. This is “just the beginning,” said Susan Li, the company’s chief financial officer. The stock posted its biggest single-day rebound in nearly a decade after reporting sales that beat expectations.
Meanwhile, the latest layoffs at Alphabet revealed a startling statistic: Google employs more than 30,000 managers, Google chief people officer Fiona Cicconi told employees. The company shed 12,000 jobs, or 6% of its workforce, this month.
At Intel Corp. Executive salaries are being cut along with top executives to save money as the company faces increasing competition and a slump in demand for PCs. While HR experts agree that taking a pay cut is the right move for executives in turbulent economic times — from the perspective of shareholders and employees alike — the pain isn’t usually shared down the ranks.
Beyond technology, similar cuts are on the horizon. According to CEO Raj Subramaniam in a memo to employees, FedEx Corp is cutting executive and director positions worldwide by more than 10% to make the company “more efficient and agile.”
The moves come as middle managers everywhere are under increasing pressure from above — receiving letters from their bosses to do more with less — and from below — enforcing return-to-the-office policies and piloting new hybrid work arrangements. A recent survey conducted by Slack Technologies Inc’s Future Forum found that of all organizational levels, middle management employees are the most fatigued. About 43% said they were burned out.
In Techland, the management is under particular pressure. The belief that the world’s top tech companies need little more than core engineering teams is perhaps best embodied by Elon Musk’s “hardcore” Twitter 2.0. Since the acquisition, Musk has gutted the company’s 7,000 employees. “Elon, what’s the one thing that’s getting the most muddled thing about Twitter right now?” Musk was asked on the platform in October. He replied, “There seem to be 10 people ‘managing’ for every person programming.”
This narrative of inefficient bureaucracy and “lean and mean” organization has been around since the 1980s, when General Electric Co CEO Jack Welch and other business titans advocated downsizing and restructuring to cope with globalization and technological change to stay competitive. However, studies have shown that for many companies this reduction in strength was only temporary. The ranks (and paychecks) of middle management grew in the 1980s and 1990s, making many American companies, as one economist put it, “fat and mean.”
At Google, management was once a dirty word. In the company’s early days, the rule of thumb was that product and development teams were overseen by directors with 25 to 30 reports, said Keval Desai, a former product management director who joined in 2003. Google was looking for self-starters with an entrepreneurial spirit that could thrive in its flat organizational structure, he said.
“In a fast-paced industry, where technology is rapidly evolving and where we must be piecemeal, we cannot afford for a group of people to do nothing but be human information routers,” Desai said of the rationale Google.
The model served Google well, although it came at a price, said Desai, who is now the founder and chief executive officer of SHAKTI, a San Francisco-based venture capital firm. With few managers on board, some teams at Google developed similar products, and the company fell behind in the cloud computing market, where customers need more organization and predictability.
“Google’s next decade, I think, was a response to some of those side effects,” said Desai, who left the company in 2009. “Google kind of went to the other end of the spectrum.”
A Google representative did not immediately respond to a request for comment.
Most importantly, the current round of layoffs in Silicon Valley is intended to appease investors who think tech workers are being coddled, according to Peter Cappelli, a management professor at the University of Pennsylvania’s Wharton School.
“People announce layoffs because it sounds good, investors like to hear that,” Cappelli said.
Many companies are announcing job cuts because so many others are doing it, he said. If they don’t, they have to justify that decision. Although he noted that there is an element of political theater in the blockbuster job cut numbers: companies tend to wire more layoffs than they ever carry out.
Firing managers “doesn’t necessarily result in efficiency gains, and there’s really no sign of productivity gains.”
Wayne Cascio, a professor at the University of Colorado Denver Business School, takes this a step further and finds in his study that companies that delay layoffs the longest during downturns have higher returns on shares two years later than competitors that lay off staff quickly.
Making a company’s workflows more efficient takes a lot of effort, analysis and planning, Cappelli said. If the leadership hands out pink slips without this preparation, there will be chaos in the short term.
“You cut people before you figured out what they were doing and how to get the job done,” he said. “In the next phase, a lot of people are doing two jobs at the same time. You could say it’s kind of efficient, but the cost of doing it is pretty high – things don’t get done well or at all.”
