Middle managers, beware: You're the prime layoff target in tech's new quest for 'efficiency'

Meta will be cutting some layers of management, CEO Mark Zuckerberg said on the company’s earnings call Wednesday, naming 2023 its “Year of Efficiency.” The company let go of over 11,000 workers last year, 13% of its workforce, in its first major layoff. This is “just the beginning,” said Susan Li, the company’s chief financial officer. The stock staged the biggest single-day rebound in nearly a decade after reporting revenue that beat expectations.

Recent layoffs at Alphabet, meanwhile, revealed a startling stat: Google employs more than 30,000 managers, according to remarks Fiona Cicconi, Google’s chief people officer, made to staff. The company eliminated 12,000 jobs this month, or 6% of its workforce.

At Intel Corp., managers’ pay will be slashed alongside top executives’ in an effort to shore up cash as the company faces intensifying competition and a plunge in demand for personal computers. While human resources experts agree that it’s the right move for executives to take a pay cut during turbulent economic times — from the perspective of shareholders and employees — the pain isn’t usually spread down the ranks. 

Beyond tech, similar cuts are emerging. FedEx Corp. is reducing global officer and director jobs by more than 10% to make the company “more efficient, agile,” according to CEO Raj Subramaniam in a memo to employees.

The moves come as middle managers everywhere are under increasing pressure from both above — receiving missives from their bosses to do more with less — and below — enforcing return-to-office policies and navigating new hybrid work arrangements. A recent survey by Slack Technologies Inc.’s Future Forum found those in middle management are the most exhausted of all organizational levels. Some 43% said they’re burned out. 

In techland, management is under particular seige. The conviction that the world’s top tech companies need little more than core engineering teams is perhaps embodied most fully by Elon Musk’s “hardcore” Twitter 2.0. Since taking over, Musk gutted the company’s 7,000 staff. “Elon, what’s the one thing that’s most messed up at twitter right now??” Musk was asked on the platform in October. He replied: “There seem to be 10 people ‘managing’ for every one person coding.”

This narrative, of the inefficient bureaucracy and the “lean and mean” organization, has been around since the 1980s when General Electric Co.’s CEO Jack Welch and other business titans embraced downsizing and restructuring to stay competitive in the face of globalization and technological change. But studies have shown that for many companies, this reduction in force was temporary. The ranks (and paychecks) of middle managers swelled in the 1980s and 1990s, making many American corporations, as one economist put it, “fat and mean.”

At Google, management was once a bad word. In the company’s early days, the rule of thumb was that product and engineering teams would be overseen by directors with 25 to 30 reports, said Keval Desai, a former product management director who joined in 2003. Google sought to hire self-starters with an entrepreneurial spirit who could thrive in its flat organizational structure, he said.

“In a fast-moving industry where technology is evolving rapidly, where we have to be scrappy, we can’t afford for a group of people to do nothing but be human routers of information,” Desai said of Google’s rationale.

The model served Google well, though it came it at a cost, said Desai, who is now founder and managing director 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 clients require greater organization and predictability.

“The next decade of Google was, I think, a reaction to some of those side effects,” said Desai, who left the company in 2009. “Google, in some ways, went to the opposite end of the spectrum.”

A representative from Google didn’t immediately respond to a request for comment.

Above all, though, the current round of layoffs in Silicon Valley are primarily meant to placate investors who think tech employees are coddled, according to Peter Cappelli, management professor at the Wharton School of the University of Pennsylvania.

“People announce layoffs because it sounds good, it’s what investors like to hear,” Cappelli said.

Many companies are announcing job cuts because so many others are, he said. If they don’t, then they’ll have to justify that choice. Though he noted there’s an element of political theater in blockbuster job cut numbers: Companies tend to telegraph more layoffs than they ever carry out.

When managers are let go, he said, “it doesn’t necessarily lead to efficiencies, and there’s no evidence, really, of productivity bumps.”

Wayne Cascio, a professor at the University of Colorado Denver Business School goes a step further, finding in his research that companies that delay layoffs longest during downturns  see higher stock returns two years later than competitors who are quick to shed headcount.

Making a company’s workflows more efficient demands a great deal of effort, analysis and planning, Cappelli said. In the short term, if leadership hands out pink slips without this kind of preparation, chaos reigns.

“You’ve cut people before you’ve figured out what they do and how to get the work done,” he said. “The next phase is a lot of people doing two jobs at the same time. You might say that’s kind of efficient, but the cost of that is pretty big — things don’t get done well, or done at all.” 

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