Saturday, June 15, 2024

Microsoft Downsize: Tech Recession Results in 60,000 Layoffs Across the Sector

The global tech sector is navigating through a period of severe turbulence following a significant drop in shares last year, leading to a gloomy Q1 of 2023. Microsoft shares fell by over 6% following a reduction in the company’s forecast of personal computer sales.

Following 2022’s recurring interest rate increases and soaring inflation, tech companies looking to combat low valuations – which resulted from weak performances – are scrambling to create cost-efficiencies to restabilise their market-cap value. Serving as a testament to this, yesterday, Microsoft announced their plans to lay off 10,000 employees, affecting up to 5% of their total workforce. The news comes following Amazon, Meta, Salesforce and Twitter announce layoffs reaching nearly 40,000 people since November of 2022. Despite this, Microsoft has stated that they will continue to hire in key areas of the company.

In light of these recent events, Trachet – a leading business advisory firm – highlights the critical point startups are facing to keep company culture alive amidst layoffs. Claire Trachet says that company culture begins at the top, with the founder and C-suite team and trickles down. If the founders are experiencing high pressure, it is likely staff will also experience this – Twitter serving as a perfect example.

Trachet commissioned landmark national research to understand the impacts of this on founders which found 34% of business leaders state that in running their business, they have no one to support them, they do all key tasks alone and that disconnects them from their passion. The research further highlights a third (33%) of UK workers state they’ve seen have seen their workplace’s headcount decrease and their workload increase in the last 12 months – seemingly causing a mass strain within the UK workforce. Trachet’s data also shows 20% of UK workers state their firm was slow to react and adapt, resulting in a loss of staff. This raises a crucial question, how far will business leaders expect their employees to stretch to counter the current market conditions and what impact will this have on the workforce?

The cost-of-living crisis has created pressure at every level for organisations as companies and staff are struggling to cope with rising costs – Trachet’s research further unveiled that nearly one in three (29%) Brits is actively looking for another job as they’re not being paid enough to cope with the rising cost of living. For those working in startups, the cost-of-living pressure is now exacerbated by a decrease in human resource and fears of being layed off which may lead many to pursue a career in a different organisation. Data from the study shows nearly 64% of Brits would be happy to compromise their career aspirations in order to preserve their mental health, further illustrating the importance of companies keeping a positive overarching outlook.

CEO and Founder of business advisory, Trachet, Claire Trachet comments on keeping company culture alive amidst lay-offs due to the current economic climate:

Microsoft’s recent layoff announcement – alongside the numerous others we’ve seen from Big Tech – are clear indications of the market corrections we’ve been experiencing in the past year. Firms are now much more focussed on profitability and sustainability over growth, and a consequence of this is that headcounts will continue to fall at both big and small companies. It certainly seems that there are little-to-no exceptions when it comes to resetting the DNA of these organisations and their metrics for success.

“However, I do not believe the sector will remain stagnant as there remains a wealth of capital available for founders to help accelerate growth, as markets stabilise and inflation subsides, it is very likely H2 will be a very active investment and dealmaking period.

However, whilst headwinds from 2022 remain, startups with a high cash burning nature will continue to encounter difficulties. I’m sure that the cheery atmosphere amid these forward thinking workplaces has changed dramatically and will require some attention from founders in terms of keeping people motivated.

“Many startup founders can attribute their success to having high versatility in playing different roles – from finance and fundraising to product management, founders take on a series of responsibilities that many would find overwhelming. Now, especially given the added strains they will be facing, the issue of company culture will likely be pushed down to the bottom of their list of priorities.

“However, with mass redundancies in the sector causing employees to fear for their financial futures, founders must do their best to ensure their offices remain positive environments where people want to work – even if that means bringing in a specialist to fulfil this role. If they fail to do this, as our research suggests, they may face an exodus of experienced staff who leave in search of better job security elsewhere.”

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