Layoffs: Companies copy others ‘in almost blind imitation’, says professor

The number of companies implementing layoffs is growing, with most citing tough economic conditions and recession fears as the driver.

Even with high borrowing rates and persistent inflation, Jeffrey Pfeffer, a professor at the Stanford Graduate School of Business, noted that companies tend to copy each other “in almost blind imitation.”

“It’s a process called social influence – people, including managers, watch what others do (and say) in a process of social contagion,” Pfeffer said, adding that it can even happen with layoffs. .

Dr. Yalda Safai, a New York-based psychiatrist, told FOX Business that panic, hysteria and anxiety are contagious.

As recession fears grew, “a lot of companies, in a panic, started laying off workers,” Safai said.

More powerful than facts

AMAZON CEO SAYS LAYOFFS WILL CONTINUE IN 2023

As a result, Safai said other companies watching their competitor “get ahead by cutting losses” might wonder if they are doing something wrong.

So even if a company is not in trouble, it may be forced to act now, she added.

Amazon, Apple, Meta Platforms, Lyft and Twitter were among the tech companies that announced hiring freezes or layoffs, with Amazon possibly cutting its workforce by 20,000 people. In fact, Amazon CEO Andy Jassy told employees in a publicly available memo that the layoffs would continue into 2023 for the same reasons.

Safai does not overlook the fact that the economy plays a role in this decision and in the beginning it was the driving force for many. However, she argued that this trend has been accelerated by feelings, which she says are a “more powerful force than facts”.

We’ve seen evidence of this during the pandemic, for example, when some people started creating conspiracy theories, she said.

“Feelings are very powerful. We underestimate that because we think we are intelligent creatures, so we shouldn’t be victims of our own feelings and should instead trust what our brain says,” he said. -she adds. “But it’s not always the case.”

Pfeffer even argues that there is evidence to suggest layoffs “do little to improve productivity, profitability, or innovation and growth.”

In a recent article from Stanford University, Pfeffer explained. saying that severance pay is expensive and that layoffs increase unemployment insurance rates. He also noted that the cuts can hurt work morale and the productivity of the remaining employees.

BuzzFeed

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GANNETT, CNN, WASHINGTON POST MAKE CUTS IN WEEK BRUTAL FOR MEDIA INDUSTRY AS HUNDREDS LOSE JOBS

The media industry has also been hit hard recently, with hundreds of industry workers laid off last week, including those who worked for CNN and Gannett, a company that owns dozens of local media outlets along with USA Today.

BuzzFeed became the latest company on Tuesday to announce a reduction in its workforce, citing the economic downturn it says will last through 2023.

CEO Jonah Peretti has argued that the layoffs, which represent around 12% of his workforce, are a necessary measure to cut costs at a time when revenues are partly hit by the economy.

The company expects fourth quarter revenue of $129 million to $134 million and adjusted EBITDA of $12.5 million to $17.5 million. Last year, fourth quarter revenue was $397.6 million and adjusted EBITDA was $41.5 million.

“Our revenues are impacted by a combination of deterioration macroeconomic conditionsand the continued audience shift to vertical video, which continues to grow from a monetization perspective,” Peretti said. “It forces us to reduce our costs.”

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Peretti said downsizing “is a critical part of cost reduction” given that “staff salaries are the most significant cost to the business.”

PepsiCo

PEPSICO to lay off hundreds of employees

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Likewise, PepsiCo is also cutting hundreds of jobs at its facilities in Texas, New York and Illinois as it strives to streamline marketing and centralize manufacturing. In a memo, the company said it “is facing a variety of headwinds and an accelerating pace of change sweeping our industry” and needs to simplify and modernize its business.

DoorDash

DoorDash said it was cutting more than 1,200 positions to reduce operating expenses after hiring quickly and now struggling in a tough economy.

The food delivery business faces “sudden and unprecedented opportunities” after the pandemic gripped the world, according to CEO Tony Xu. To keep pace with growth, the company has ramped up hiring and launched many new ventures, he added.

Xu admitted that the company continues to grow rapidly, but given how quickly it has hired employees, “its operating expenses – if they don’t decrease – would continue to exceed our revenue.” The general manager even blamed himself for not managing the team’s growth better.

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