Why Layoffs Don’t Always Spell Doom & Gloom?

As per a report published in 2024, “as many as 271 companies have sacked 78,572 employees in the Tech sector”. The global Tech industry is somewhat used to the ‘uncertainties’ in terms of job security. However, what’s somewhat different this time around is that tech bellwethers such as Google, Apple. Tesla, Amazon have all laid off people.

Tech Industry and startups, in particular, play a huge role in the India’s consumption driven economic growth story. Indian Tech workers were relatively better positioned to whether the layoff storm till recently due to the cost arbitrage factor.

However, that story is rapidly changing. As the Indian IT companies continued climbing up the value-chain; they are now as exposed to the harsh realities of business environment changes as their western counterparts. In addition to this, some of the Indian ‘startup stars’ have encountered challenges in recent times, forcing them to announce layoffs. Byjus, Ola Cabs, Healthifyme were some of the Indian Startups that have announced layoffs in the recent times.

The “Hire and Fire” policy is obviously more pronounced in Tech or Services industries whereas the manufacturing industries have been somewhat less exposed to this phenomenon due to unionisation. However, one thing is certain – going forward, we need to treat layoffs as an integral part of overall career journey irrespective of the industry that we work in. There is a urgent need to destigmatize the prospect of losing job to layoffs & the employees need to be better prepared to anticipate layoffs and subsequently, react to layoffs.

The root-cause analysis of a problem usually starts with the “what” and then progresses into the “why”, but we’re guessing that we don’t need to go into the “what” of layoffs, so let’s jump straight ahead to the “why”.

Why do Companies Layoff People?

As hard as they are, layoffs happen for many reasons. Some of these include:

  • OPEX Reduction: “Meta Has Begun Laying Off Workers to Reduce OpEx by 10%”, read a 2022 headline at a leading tech news portal. A company’s workforce constitutes the bulk of its day-to-day expenditures. Handing out salaries, paying for the seating area, rent and other utilities can significantly impact a company’s bottom line. For a firm looking to improve profits, and thereby, its bottom line, the most rational option is to review the payroll first. In fact, as more and more organisations embrace technical advancements, the budget is more likely going to be reserved for onboarding new technologies as opposed to people. Why? Because people become redundant when technologies thrive, or so companies believe. These layoffs are usually broad-based & more acutely felt by middle-management & locations where usually salaries are the highest.
  • Restructuring & reprioritisation of business: Concomitant to the layoffs, Flipkart also announced a “reshuffling” exercise, where the VPs were shifted around/promoted to different divisions “to lead and experience different businesses and verticals in the company”. Organisations, especially the large and diverse ones, continuously appraise their portfolio to merge/exit businesses and/or geographies, in addition to moving resources to different parts of businesses. These layoffs are usually targeted and if one happens to work at the impacted division / team; they would usually find themselves at receiving end of a bad-news irrespective of their performance / ratings etc.
  • Clean-Up: It is not a secret that IT/Tech firms went on a frenzied hiring spree during the COVID-19 pandemic; offering inflated salaries and copious benefits to anyone who fit the bill. Once things went back to normal, this setup began adversely impacting their pockets, forcing them to relieve the “over hired quota”. Although such clean-ups occur in companies every once in a while, they are hardly advertised in the papers. These layoffs are often linked to performance and employees with lower ratings are most affected. However, often there is thin line between these and OPEX reduction layoffs. Organisations may cut deeper than required under the garb of performance driven layoffs.

Restructuring/Reorganisation & OPEX reduction-driven layoffs should ideally be a one-off situation for an organisation, while the ‘clean-up’ should be a more routine operation. However, in the recent past, we have seen marquee organisations carry out reorganisation or OPEX-driven layoffs every year or every couple of years. Thus, the employees need to prepare themselves better for this eventuality.

How can Employees Guard Against Layoffs?

Despite the layoff figures reaching new highs every day, we say – do not fret. There are ways to sense an impending layoff and ensure (to your best efforts) that you aren’t the one coming under the scanner.

  • Read the writing on the wall. If your company is reporting lower than expected results/profits or major deals are falling through at the last minute or the markets aren’t reacting positively to your company’s quarterly results – that’s when you need to start treading waters carefully.
  • Understand your company’s business model. Often, it is (relatively) easy to tell when a company is reducing focus on a particular business division. You can spot several tell-tale signs of this, including hiring freezes, failure of project approvals, budget cuts, etc. When you see these measures being taken for your business division, it is probably wise for you to start inquiring about its (and your) future.
  • Trust your capabilities to stand you in good stead. Usually, employees who have gotten good ratings and have upskilled themselves are better off than those who have gotten comfortable in their roles. OPEX/Clean-up layoff decisions are largely performance-based. Managers are asked to provide a list of people they can let go in a particular appraisal cycle. Thus, ensuring that your position within your team is strong should safeguard you.

If and when you think things aren’t going too well for your company (or business unit) and you fear layoffs are imminent, try the following:

  • Reactivate your social networks. Start getting in touch with old friends, colleagues, groups and acquaintances who may be able to assist you in your job search. It is always an awkward conversation if you’ve not taken effort to stay in touch with them for years. Don’t wait for the termination slip to reach your desk, embrace a more proactive approach for your future.
  • Begin upskilling. Continuous learning just got back in fashion! Basically, a lot of the new jobs require incredibly niche skills, so if you’re in the lookout for these, then your best bet is to start skilling up. Stacking on new skills will not only help to avoid a layoff in the first place, but may also allow you to find a new job faster.
  • Plan your finances. And by that, we don’t suggest that you delay financial planning until layoffs, but financial advisors typically recommend that you should have money equivalent to at least 6 months’ salary in savings for such contingencies. In case you haven’t already got started on your financial journey, don’t forget to check out our courses!

If you do happen to be in an unenviable position of being laid off, rest assured that you are not alone. While layoffs are inevitable, they are not indomitable. Losing a job is no more seen as the end of the world, provided you have a solid backup plan. All you need is some foresight, patience and the right attitude to overcome the worst.

Tap into your networks, reach out to your corporate/social circles and start job search with your head held high. And, as always, don’t forget to invest in yourself today for a brighter tomorrow.

Let us know if you have had similar experiences and how you dealt with them in the comments section below.

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