Companies say they have to make layoffs, but mass layoffs can often have a long-term negative impact on their business, according to research and workplace experts.
Driving the news: In the first two months of the year, 435 tech companies laid off about 121,000 workers, according to data from Layoffs.fyi.
- Although the number of companies making layoffs fell in February, it remains the third-highest month for tech layoffs since 2020.
- The number of layoffs this year is already more than 75% of the way to 2022’s total, Layoffs.fyi founder Roger Lee noted in an email.
The big picture: Subsequent redundancies must be those employees who did not do losing their jobs often see a decline in performance and feel less engaged at work, especially in research-intensive industries, a study found.
- Redundancies can also lead to more turnover as people – typically the best – jump from a sinking ship. Recently, there has been talk of people “rapidly looking” for other jobs.
- The atmosphere of anxiety caused by layoffs can also lead to a contamination in the culture. “Survivors may respond to the dismissal by defending their turf or using airtime to make themselves appear more knowledgeable,” writes Sarah Green Carmichael for Bloomberg.
But: Sometimes layoffs are necessary, especially if a company can’t pay wages or sees less growth ahead.
But very profitable tech companies may want to think twice about downsizing, especially in a tight labor market, says Kevin Delaney, CEO of Charter, a media and research firm that works with companies on talent strategy.
- “Technology continues to be an area of growth and investment. Do these companies need to hire workers [in the future]? The answer is yes.”
- They will likely face challenges finding talent, he added, noting that there are alternatives to layoffs — like finding new roles for employees in other divisions — something Zapier is trying.
- Companies also cannot replace people who travel. Delaney also mentions the possibility of furloughs or managers taking compensation cuts.
Go deeper: Delaney’s firm released a report Thursday outlining strategies for managing corporate culture through a downturn, whether that includes layoffs or not.