Digital transformation expert on mass layoffs: I would have expected more from tech
It doesn't add up when IT is 'not really in a dire situation financially'
Interview Digital business transformation expert and erstwhile COBOL programmer Kamales Lardi has spent a lot of time in the tech industry, including consulting with large corporates and SMEs who are going through a process of making cuts.
But mass layoffs are hitting mid-career tech pros and harming the businesses who make them, she told The Register in an interview last week, implying the current trend of mass layoffs is a logical misstep.
"I would have expected more from the tech industry that is supposed to be one of the most innovative, comparatively. I feel these tech companies are taking steps backwards, particularly with the dismantling of the departments and structures they had put in place for future growth."
[Mass redundancies are] an outdated and traditional practice that most companies turn to as a first resort to create liquidity
Lardi says that most of the people impacted by layoffs have "approximately 10-11 years of experience" and so are "not really junior staff that are easily replaced," noting there would be "a loss of skills and knowledge in these companies."
She is also concerned over loss at the technical and software engineering layer – where diversity is already a major issue – with execs looking to build and develop technology using AI systems that are known to have biases, trained on data that is limited.
Over the years, Lardi has worked across industries and regions, and has found that over 70 percent of digital transformation initiatives either fail or don't achieve intended outcomes. One of the elements that make or break digital transformation, which is "often ignored," is the "people element."
"In my view, the companies seem to be copying each other," says Lardi, who sees them as taking the opportunity to shed some of the "excess" they took on board during a pandemic-induced hiring spree, when so many thought that the future was a long, interminable corridor of Zoom sessions and peripherals makers were making money hand over fist.
Today, however, many of the companies who saw unprecedented revenue increases during global lockdowns have embarked on mass job cuts. Layoffs.fyi has pulled in data showing 693 technology businesses shedding 197,945 employees in the year so far – which is not even halfway through – compared to 164,591 laid off by 1,056 companies in the whole of 2022.
Lardi quoted Henry Ford's aphorism – "Thinking is the hardest work there is, which is probably the reason so few engage in it" – saying that mass redundancies were "an outdated and traditional practice that most companies turn to as a first resort to create liquidity."
Shareholders, profits, and the bottom line
Echoing Gartner, Lardi said: "Layoffs don't really impact profitability and impact is not visible in the short term due to increased expenses and high severances (3-6 months) typically that have to be paid out.
"I feel these tech companies are taking steps backwards, particularly with the dismantling of the departments and structures they had put in place for future growth.
"Additionally, this is rather short-term thinking, rather than focusing on sustainable strategies for the digital future."
Lardi, who recently wrote a book titled The Human Side of Digital business Transformation, notes that while companies are laying off people, they are investing billions in AI and automation, citing the $1 billion+ Microsoft has sunk into OpenAI so far.
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Earlier this year, Microsoft said it planned to shed 10,000 jobs (4 percent of the company's staff) in the wake of Satya Nadella's comments on the need for productivity boosts. It wasn't the only one, of course. Salesforce, Amazon, Google, Meta, and others are also cutting excess staff hired during COVID lockdown-inspired growth.
On the company's most recent earnings call last month, Nadella noted: "During the pandemic, it was all about new workloads and scaling workloads. But pre-pandemic, there was a balance between optimizations and new workloads. So what we're seeing now is the new workloads start in addition to highly intense optimization drive that we have."
CFO Amy Hood then quickly responded to this, stating the company had "been through almost a year where that pivot that Satya talked about, from [here] we're starting tons of new workloads, and we'll call that the pandemic time, to this transition post, and we're coming to really the anniversary of that starting.
"And so to talk to your point, we're continuing to set optimization. But at some point, workloads just can't be optimized much further."
Not singling Microsoft out specifically, but speaking to the point of moves made by tech companies in a "maturity phase," Lardi said that investors were now "assessing them based on different KPIs such as revenue per employee." She said that "layoffs have high impact on this KPI, even though these companies may have large reserves" making them a "quick way to rightsize for investors and share prices."
But is it sustainable?
We asked Lardi about the unprecedented cuts made at Twitter when Elon Musk came on board.
She said: "I find it hard to believe that 30 percent of the organization was running the entire structure, and even so, it would take time to assess the structure, shift roles and responsibilities and implement transformation to become more efficient. The loss of the workforce in a few weeks causes concern, and I believe we will see the top layer peel off with the new CEO.
"Based on what I have seen him post online, I am concerned about the values and direction that tech leaders like him propagate."
On the other hand, those whose skills are lost to the tech industry now have options to create financial independence, and might not return to traditional roles in companies. Still others are finding work as contractors, where technically skilled people balance more than one full-time job enabled by remote work.
Ultimately, the tech industry is "not really in a dire situation financially," she says. While it "might have some loss of revenue [it is] not in the red yet. Layoffs should be last resort in truly bad financial situations, rather than first resort in slightly uncertain conditions."
Among other solutions, she says, is for companies to push back on doing what they see others around them doing, and instead "address the people element" and get buy-in from investors and others to focus on the longer term, not the short term. And this means building "an ecosystem of stakeholders (internal and external)." ®