In the area of dynamic business, layoff has become a common term. The year 2023 witnessed a surge in the already ongoing trend of layoffs. 185673 employees were laid off in 2023 by 633 organizations in 2023. Irrespective of the company’s size, layoffs have become common. Employees have started to find extra income sources due to the fear of losing their jobs at any time, no matter how high a position they are adorning. Companies could have many reasons to lay off employees. The layoffs would be done depending on the size, demographics, and history. Mass layoffs have become a part of the corporate culture, but the cumulative number of layoffs in all companies is alarming.
Causes Behind The Recent Layoffs
The discussions become rife with the layoff of 25000 employees in the first month of 2024, creating talks that Silicon Valley is crashing. What makes these layoffs even more concerning is that big brands like Microsoft and Amazon are assorting to layoff measures along with smaller brands. Ironically, their stock prices saw a rise after the layoffs. These corporate giants don’t have to go for an employee layoff to sustain. However, they still went for it and created a new culture without judgment towards the companies that lay off their employees. We cannot zero in on a single reason why this trend is going on. However, as we go deeper, we find a multitude of reasons.
1 Unstable Economy
The unstable economy and uncertainty in the market conditions significantly impact a company’s finances. Recession and other financial crises result in the companies reassessing their finances thereby changing the operational strategy. To remain competitive and financially viable, they realign their strategies. The first point that strikes your mind in financial trouble is to cut down labor costs. This is an investment-free avenue.
Increased production costs, decreased consumer spending, and resultant dip in the demand for goods and services affect the stability of the companies. To sustain, the primary strategy that they assort to would-be employee layoff.
2. Automation
One of the primary causes of employee layoffs is automation. Technological advancement provides a new avenue for companies by opening the door for artificial intelligence, robotics, and automation. As a result, much of the manual labor would be replaced by machines, and hence, many positions become redundant. In the long run, the companies will be forced to remove the redundant positions, resulting in layoffs. With the possibility of AI and automation, the production charges have come down drastically, and hence the companies wouldn’t think twice before asserting automation. When Artificial Intelligence rules the world, the possibility of increased employee layoffs will increase.
3. Organizational restructuring
When an organization undergoes restructuring as a part of a growth strategy or due to mergers and acquisitions, there will be consolidation of departments, reallocation of critical roles, elimination of specific roles, etc. More often than not, mergers and acquisitions have resulted in substantial employee layoffs. When a company acquires another company, the job roles would be different, and hence, the other jobs that are redundant as per the new company would be chopped off.
4. Financial Crisis
The companies will naturally be affected when the global market is undergoing a crisis. Such scenarios result in a dip in the profit margin. To maintain the profit margin, the companies will have to cut costs. The most straightforward cost-cutting strategy is to be productive with the least labor, as labor expenses these days are enormous. Hence, as an easy way out, the companies would go straight to employee layoffs as labor expenses are high.
5. Inability To Adapt To The Changing Trends
The last few years were glorious times for the start-ups. New ideas were welcomed with open hands. However, upgrading with the changing technological landscapes has become inevitable. With increased competition, evolving in the new era is a must. However, not all companies can keep up with the changing scenarios. Those companies overhired during the boom period and were forced to lay off employees during the dip.
6. Digital Demand During The Pandemic
When the world went digital, the boom in the IT industry was unprecedented; hence, to keep up with the soaring demand, the companies hired more employees. Once the pandemic fear died down and the world started moving offline, the demand for online support died drastically. As a result, the global giants, the start-ups that overhired during the pandemic, had to cut down the employee strength after the world went offline.
Layoff Analysis
Multifactorial reasons influence layoffs. Economic instability, technological advancements, corporate restructuring, or financial crisis – the reasons could be many. On one hand, employee layoffs are a painful process for even the HR department. However, employee layoff is imperative in contingency situations to adapt to the changing market scenario, enhance productivity and operational efficiency, and maintain financial sustainability. The taboo lying around employee layoff is not as prominent as it was a few years back. Those days, if a company lay off the employees, it would be considered a mark of decline. But now, with giants like Meta, Microsoft, and Amazon laying off their employees, it is no longer considered a result of the company’s poor performance. When a business giant is laid off, the other medium-sized companies derive the courage to cut down on labor costs.
To bypass the layoff nightmare, employees should upskill themselves to be equipped with skills that would still be needed for the company compared to their counterparts. Even though losing jobs can be painful, an empathetic approach of the company toward the employees is advisable. It is a time to show resilience and sometimes keep the larger good of the company.
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