- The high-flying tech industry is facing a reckoning as the economy slows, with companies like Amazon, Google and Microsoft making headlines with their massive layoffs.
- Our media analysis found that the tech industry became the centre of the inflation narrative and that companies didn’t handle their PR and comms well, taking a significant reputational hit.
- We also found that tech companies’ employer brands suffered as a result of the numerous media stories about sudden firings, while CEOs were blamed for dodging responsibility.
Tech companies are constantly in the news, usually trumpeting the next big thing. However, the tech news cycle recently hasn’t been dominated by the latest gadget or innovation.
Instead, mass firings are making headlines – the tech industry increased its layoffs by 649% in 2022, which is the highest since the dot-com bubble more than a few decades ago.
To see how the media debate around the industry’s layoffs is affecting its reputation, we analysed 2,852 English-language articles published since August 2022. Here are our main findings:
1. Tech became the centre of the inflation narrative
The wave of layoffs that hit dozens of US companies across many sectors toward the end of 2022 and the start of 2023 resulted in a myriad of media stories about the state of the economy.
However, the tech sector in particular was in the spotlight, receiving significantly more media attention than sectors such as banking or retail:
Many journalists explained that during the pandemic boom times, the headcounts of giants like Microsoft, Google, Amazon and Facebook grew bloated due to overzealous hiring as demand for their products and services skyrocketed. But as decades-high inflation took hold and operating costs soared, Silicon Valley had no option but to trim the fat.
The canary in the coal mine was reduced advertising spend and revenue. As advertising revenue dropped last year—in part due to fears over a global recession triggered by the pandemic—it was inevitable layoffs would follow.
The “war for talent” during the pandemic boom period led to businesses hiring too fast and spending too much in doing so – which media outlets framed as showing “sloppy” behaviour. Some journalists remarked that the workers at the lower rungs of the tech industry are being left to suffer the consequences of irresponsible decisions, while the decision-makers themselves face minimal to no consequences. And these accusations show no sign of slowing down, as the number of articles around the industry’s layoffs keeps rising:
For an increasing number of publications, it seems that after a decade of largesse, the biggest tech companies are casting off their reputations as places that offer lifetime employment with free food and high salaries – they are now increasingly painted as calculating corporations focused on one thing over everything else: making money.
2. Silicon Valley didn’t communicate its case convincingly
In their layoff statements, pretty much every tech company put the blame for the cuts on the economy.
At Amazon, the cuts were supposedly necessary because of “supply chain difficulties, inflation, and productivity overhang” and economic tension. Salesforce CEO Marc Benioff cited the “economic downturn we’re now facing” as the reason for the company’s 10% headcount reduction. PayPal CEO Dan Schulman pinned the blame for his company’s decision to lay off 2,000 employees on the “challenging macro-economic environment.”
This is what made Inflation the main topic in the debate:
However, the inflation argument backfired across most media publications. Commentators remarked that in many instances, the real source of concern at these companies comes down to boneheaded decisions made by the companies — whether it’s Facebook, which authorised a hiring binge over the pandemic and invested billions of dollars into its metaverse folly before having to cut 11,000 jobs, or Shopify, who laid off 1,000 people based on a bet on the future of e-commerce that “didn’t pay off.”
While many of these companies have made serious strategic blunders, layoffs won’t solve those problems, according to many journalists — cutting workers won’t suddenly make the companies more productive or improve their products.
And many of these tech behemoths are still eye-watering ly profitable, making the economic case for layoffs questionable for the media. Microsoft‘s profits declined by 12% in the last quarter of 2022 from the same quarter in 2021, but it still pulled in a whopping $16.4 billion. Amazon pulled down a profit of $2.8 billion in the most recent quarter, below the online-shopping highs of the pandemic but in line with its historical average. But the company still turned around and laid off 18,000 employees.
3. Companies damaged their employer brands
Layoffs create a clear reputational risk and employer brand hit. Beyond public scrutiny and scandal, layoff news could have an outsized impact on whether people say a certain company is a good place to work, and the latest round of dramatic cuts could indicate that Silicon Valley’s Big Tech darlings are losing their lustre.
The disparity between Big Tech’s high spending and the callous way in which they have let go of their staff has tarnished their reputation as good employers, and reminded staff that their needs are subordinate to those of shareholders.
For example, Snap laid off 20% of its staff, or roughly 1,000 people, in August. Prior to the layoffs, anywhere between 75% to 85% of surveyed Snap employees said they’d recommend their employer to a friend. After layoffs, however, that confidence dropped to 30% of Snap employees who would recommend their employer to a friend.
Clearly, layoffs changed the perception of Snap as a choice employer, and we see that same trend throughout large companies. We’re seeing layoffs have a large impact on the employer brand they’ve built up over time.
An employer’s brand reputation is a big deal for tech workers who know their skills are in-demand: Nearly 90% say an employer’s brand is important when they’re considering a new job, and nearly 80% wouldn’t apply to a higher-paying job at a company with a bad reputation, according to a July survey of 950 people by Dice, a career site for tech workers.
For decades, Silicon Valley tech darlings like Google, Apple, Facebook and Twitter set the gold standard of making it in the tech space. But the last several years, and especially the pandemic, have begun to show the cracks in the facade to unveil each company’s shortcomings, from data leaks to worker mistreatment lawsuits to leadership tumult. And with the latest round of layoffs within a matter of weeks, it could be enough to tarnish the once-lauded dream companies seemingly everyone wanted to work for.
4. Tech came out as bad at dealing with people
Layoffs seem to have come as a surprise to employees at several Big Tech companies, whose failure to communicate has aggravated the anguish among those now out of work.
Such employee stories gave rise to many media articles framing tech companies as mistreating their workers. In fact, the most influential companies in the debate were the ones at the centre of the most scandalous layoff stories.
We determine an organisation’s media impact in the context of a topic by looking at its media influence score calculated in terms of coverage by high-profile media outlets, topic relevancy score measuring its contextual relevance, and media visibility as measured by the number of mentions.
Twitter emerged as the most influential company, as Elon Musk ended his first week as its owner with an indelible mark by slashing up to half of the company’s workforce with little notice and abruptly cutting off employees’ access to their computers and work systems.
There were multiple media reports of how some staffers at the company found out they were fired when their password was changed remotely, and an unusual gray screen showed their company Macbook had been locked.
Similarly, there were many stories about Google workers who found out they were sacked when the light on the card reader outside their New York office flashed red, rather than green.
Some publications noted that perhaps the most appalling aspect of sudden termination is the asymmetry between what corporations expect of their workers and how they treat them in return. At higher-paying tech jobs it can mean sacrificing any semblance of a life outside the office, a requirement that is often justified by high-minded rhetoric about changing the world or the promise of some pot-of-gold reward in an unspecified future.
Treating employees like disposable units who can simply be unsubscribed to ultimately endangers a company’s reputation. It seems mistreated workers know their value, even if employers — as they are increasingly prone to demonstrate — do not.
5. CEOs were blamed for poor management
Tech CEOs, who are regularly in the news, were central in the layoffs debate, with many reports blaming them directly.
CEOs at companies like Amazon, Microsoft, Salesforce, and Meta were accused of setting their companies on an unsustainable course, investing in boneheaded new ventures and assuming the pandemic-driven tech boom would be a new normal. For many journalists, it seemed that when profits or even projected future profits slipped a bit, something had to give — and it certainly wasn’t going to fall on the CEOs. When one company chose to lay off thousands of people, it became optically justifiable for other companies to follow suit — a natural way for the CEO to seem “disciplined” or “responsible” despite the brutal cost to employees.
Unsurprisingly, Elon Musk, who has embraced managerial incompetence as if it were an emerging art form, was the most influential individual in the conversation:
According to many commentators, any executive who participates in decision-making that leads to hundreds or thousands of people losing their jobs should be the one leading them out the door – or they should be fired for poorly managing some of the largest companies in the world. Given the human and business downsides of layoffs, most experts agree that a CEO’s top priority should be to avoid them at all costs.
Some companies have managed to do just that. Apple has managed to cut costs without layoffs in part by reducing Tim Cook‘s salary by 40%, to $49 million. While one can’t necessarily applaud a company for paying a CEO “just” $50 million, there’s something to be said for the chief executive willing to slash their own pay before resorting to letting employees go. Similarly, the chipmaker Intel‘s CEO took a 25% pay cut and reduced the salaries of his executive team by 15% to avoid broad layoffs.
As the sole person in charge, CEOs are responsible for misjudging the macroeconomy, making terrible investments, and then following along with the industry in a shortsighted attempt to please Wall Street. And yet, despite a smattering of pay reductions, none of them have faced real consequences. By focusing on “broader economic uncertainty” rather than admitting the cutbacks are because of executive mismanagement, CEOs are damaging their reputation while trying to sidestep the blame.