The era of garage-based tech start ups is largely behind us. Big tech companies employ tens of thousands of people. They gobble up tech start ups early in their development; paying for concepts and ingenuity to advance their own products and services.
Tech firms have branded themselves as disruptors over the last two decades. They introduced employee-centric benefits like fully paid health insurance, work-from-home opportunities, unlimited vacation, and on-site chefs. This forced ‘traditional’ companies to compete more aggressively for talent through more attractive compensation packages and office perks.
However, tech companies have grown out and up exponentially, becoming the corporate mainstream. They no longer operate as hip start up environments where engineers join for the purpose and passion of a groundbreaking product. Big tech is now big business. Their organizational structures have evolved into something hierarchal and more traditional.
Consequently, the hiring freezes and layoffs that have been announced over the past few months should come as no surprise. Although unemployment remains low and the demand for talent is high, big tech is responding to shareholders and boards, showing that they are being fiscally responsible as stock prices dip. They are signaling their unease with inflation and a looming recession.
Companies like Netflix or Peloton generate big headlines when they cut a few dozen positions, despite having thousands of employees globally. Yet, historically, many large companies have laid off employees annually. This practice, on the surface appears misaligned with the modern and employee-centric image that these tech firms have built. But upon closer inspection, there is clear precedence for this type of organizational behavior.
For example, ranked work, culls the bottom percent of performers on a regular basis. This practice was championed by former GE CEO Jack Welch has long been controversial. Proponents advocate for its ability to elevate high performers while remove poor performers. Critics however, point out that the ranking is not genuinely objective as it encourages office politics, favoritism, and often doesn’t address larger culture issues.
Today, the practice of ranking has largely been abandoned by name. It doesn’t lend itself to the image of a modern employer looking to attract high-demand talent. Yet, it has never really shelved. Simply, companies have rebranded it as a layoff. Tech giants that started from basements and garages are now beholden to investors and stock prices. Thus, the regular layoff cycle is born. Over the next several months, it is likely that we will see additional technology companies announce layoffs. For many of the tech behemoths, this is not likely to be an indicator or their demise, but rather a way to reset, manage investor expectations, and continue to hunt for new and upcoming high performers.