Tech giants’ layoff communications stumbled as they cited economic reasons that were at odds with their record earnings, inadvertently creating reputational risks by igniting concerns over AI’s role in job cuts.
What we found: As tech layoff announcements come in waves, companies often give the same reasoning when they talk to the press.
Our analysis of 1,258 English-language articles around 10 tech giants – Google, Meta, Microsoft, Amazon, SAP, Salesforce, Cisco, IBM, Dell and Paypal – found that most of them cited economic factors as the main rationale for their mass job cuts.
For example, Google said layoffs were cost-cutting measures amid economic uncertainty, Microsoft cited a slowing economy and the need to “realign resources”, and Amazon spoke of shifts in economic conditions.
The problem
Our issue analysis found that this economic refrain didn’t resonate well in the media, as many reports juxtaposed it with these companies’ near-record profits.
- Many journalists mentioned how, for instance, Microsoft hit a $3 trillion valuation while laying off employees, Amazon recorded its highest operating profit in history and SAP‘s shares jumped 7% to an all-time high.
- Critics contend the layoffs are driven more by a desire to appease investors and boost profit margins in the short term rather than real financial necessity.
- With profits already high, the cuts were portrayed as a way to further improve the bottom line and stock prices.
The emerging risk
While criticisms for strategic blunders and lack of responsibility have remained prevalent since we analysed the layoffs debate last year, our current analysis detected a new emerging issue – the narrative that AI plays a larger role in layoffs than companies admit.
- Some, like SAP and Salesforce, said they are refocusing or doubling down on investment into the buzzy tech.
- But a number of media outlets argued this could also just be a nice way to manage the PR element of layoffs while fully automating jobs and replacing workers with AI.
- Influential figures like marketing professor Scott Galloway are popularising the idea that AI is “corporate Ozempic” for tech layoffs – a tool to trim the fat and boost profits that companies are hesitant to fully acknowledge using.
Why this risk will grow: We think this narrative can become a greater reputation threat for a couple of reasons:
- Companies are not communicating well about AI: Take, for example, how IBM‘s ambiguous communication regarding AI’s impact on hiring contrasts with CEO Arvind Krishna’s statement about pausing hiring for AI-replaceable roles. This inconsistency raises suspicions about the real reasons behind workforce reductions and can fuel the narrative that companies might subtly replace workers with AI without admitting it.
- Trust in AI is sinking: Public trust in AI is waning, as evidenced by the 2024 Edelman Trust Barometer, which revealed a widespread perception that innovation is being mismanaged. This mistrust is creating a fertile ground for the narrative that AI is a threat to employment, as people fear rapid innovation is not benefiting society as a whole.
How Commetric can help
These comms challenges require a strategic pivot from tech’s current PR tactics. Here’s how we can help:
- Craft better layoff comms strategy: The way massive layoffs resonate in the media means tech companies should treat them like crisis management. Commetric can refine layoff communication strategies by actionable monitoring to foster crisis preparedness and protect tech companies’ reputation throughout the layoff cycle.
- Detect corporate risk: By detecting emerging narratives, like the undervalued impact of AI on layoffs, Commetric helps anticipate potential reputational threats, enabling companies to address them proactively before they escalate into larger PR crises.
- Own your AI story: As public trust diminishes amid concerns AI doesn’t benefit society, Commetric can guide tech companies to understand and navigate the broader AI debate and shape a messaging strategy that underscores their AI investments as a positive societal force.