With an economic downturn looming, persistent inflation, and rising interest rates, big tech companies, in particular, have announced mass layoffs this month.
Following years of aggressive hiring, Google is reducing its workforce by 12,000 employees, Amazon by 18,000, Microsoft by 10,000, Salesforce by 8,000, IBM by 3,900, and SAP by 3,000. Meanwhile, layoffs have reached Wall Street, due to deal slumps, at firms including Morgan Stanley and Goldman Sachs.
Although layoffs shouldnt be a companys first course of action regarding cutting costs, they are sometimes necessary. Workforce reductions are difficult emotionally and managerially, but there are ways to do it correctly and humanely, according to my colleague Geoff Colvin.
In his new report, From planning to execution: A step-by-step guide to conducting layoffs the right way, he provides a blueprint for companies preparing for workforce reductions. A vital stepinclude all relevant decision-makers in the process.
Colvin writes: Deciding how many employees to cut is one of the toughest judgment calls. The goal typically is to reduce headcount to match the current or expected lower level of business. How low will it be? How long will it last? Those estimates require input from the entire C-suiteCEO, CFO, CHRO, CMO, CDOplus business unit heads and lawyers.
CFOs may be the stewards of the balance sheet and cost management. But making the decision on layoffs, which involves employee well-being and the short and long-term viability of the business, is a collaborative one they share with the C-suite.
Layoffs are big projects that take time if you do them correctly, especially regarding risk management. Legal compliance alone is a high-stakes, painfully complicated process, Colvin writes. The subject is vast, and mistakes can be expensive, he writes. More broadly, exactly how the layoff is conductedinternal delivery, CEO wording, severance detailscan burnish or taint a companys employer brand for years. Colvins piece explains how to avoid costly errors and what steps to take to prevent layoffs in the future.
And most importantly, how do you communicate with employees about the news and practice empathy? Colvin provides some dos and donts. You can read the full report here. Many layoffs took place this month, and more are seemingly on the horizon. According to Grant Thorntons latest survey of CFOs, the top area cited for potential cost cuts was human capital expenses related to employee headcount and compensation.
In the tech sector, overall, there have been more than 59,000 employees laid off since the start of the year, According to Layoffs.fyi. And more tech layoffs are expected.
If you do reduce headcount, its important to decouple skills from jobs to make sure that even as unneeded roles are eliminated, employees with critical skills are retained and redeployed to different areas, according to a report by Mercer. Companies are pivoting much more to looking at What are the skills that we need? Mercer CFO Mark Elliott recently told me.
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Sheryl Estrada
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Big deal
A new report by FIS (NYSE: FIS), a financial services technology company, is based on a global survey of 875 financial services executives (banks, insurers, capital markets firms, and fintechs). The respondents named embedded finance (non-financial companies offering financial products and services), crypto (including stablecoins), Decentralized Finance (DeFi), and the metaverse, as trends that will impact their businesses this year.
Going deeper
"7 Ways Managers Can Help Their Team Focus," a report in Harvard Business Review, explores the findings of a survey of 1,600 employees and managers. About 61% of employees admitted that they rarely to never do even an hour or two of deep, focused work each day without distraction. The authors have conducted research on staying productive in a hyper-stimulated world. They present ideas to help teams stay focused.
Leaderboard
Matthew (Matt) Cagwin was named CFO at The Western Union Company (NYSE: WU), effective Jan. 20. Cagwin had served as the companys interim CFO since September 2022. Cagwin joined Western Union in July 2022 as head of financial planning and analysis. Before Western Union, Cagwin served as SVP and CFO of Merchant Acceptance of Fiserv, Inc./First Data Corporation and as SVP, corporate controller, and chief accounting officer of First Data. Cagwin also spent 10 years at Coca-Cola Enterprises in various roles, with his last three years as VP, European controller, and strategic initiatives based in London.
David Rosato was named senior executive vice president and CFO at Berkshire Hills Bancorp, Inc. (NYSE: BHLB), the parent company of Berkshire Bank, effective Feb. 6. Rosato brings over 35 years of experience to the role. He spent the last 15 years with People's United Financial, Inc., eight of which were as CFO. Before joining People's United, Rosato worked at Webster Financial Corporation, including serving as its treasurer, and at M&T Bank Corporation.
Overheard
We took good will out of the bank. We know that. We have work to do to repair trust, but our customers are very loyal and were seeing that loyalty.
Southwest CEO Bob Jordan told CNBC regarding the holiday meltdown derailed the travel plans of millions.
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