Big Tech: How layoffs should be approached

Yahoo Finance’s Allie Garfinkle discusses big tech’s approach to layoffs and the consequences they could face in the future.

Video transcript

RACHELLE AKUFFO: Layoffs in the tech space continue with over 150,000 workers across the industry losing their jobs thus far in 2023. But the approach in reducing headcount may lead these tech companies into future hurdles among employees. Here with the do's and don'ts for job cuts is Yahoo Finance's Allie Garfinkle. Allie, the right and wrong way to do this.

ALLIE GARFINKLE: There is indeed a right and wrong way to do this. And as it turns out, tech is doing this the wrong way. So there have been a couple of key ways that have been features we've seen over and over again in how tech companies are laying people off. And I'd say it can be amounted to two things. First, they're being done incredibly impersonally. For example, we'll hear about these massive Zoom calls or workers being locked out over computers. That is a huge no-no, according to HR experts.

And then the second is that it will happen over time. And this was the thing that HR experts actually were incredibly against. Those layoffs over time-- for instance, Amazon is doing its layoffs in waves-- that is also a huge, huge no. Because as it turns out, these are exactly the things you are not supposed to do when you're laying people off. So which brings us to the question, is, what should tech companies be doing? What is the right thing to do? Obviously, there is no good way to lay someone off. There is no good way to fire someone. But as it turns out, there are better ways and worse ways.

For example, you can actually be doing this with one-on-one conversations. And that really can minimize the harm. So people feel thought of and it doesn't affect how they think about themselves moving forward. And the big thing that I heard over and over again, Rachelle, one big cut. The waves are no good. They will create instability in an environment. And if you're wondering why investors should actually care about this, I have one word for you-- "innovation." For these companies, innovation is everything, and innovation goes back to people.

So the HR experts I spoke to for this story, I asked if there could be consequences moving forward for these companies. And they said absolutely yes, and the biggest one is that workers will grow more uncertain and less productive. The conversations actually got-- went to places I didn't know we were going. For instance, we were talking a lot about Maslow's hierarchy of needs, for example, which is a motivational theory in psychology, and neuroscience and the fight or flight reflex. It's that primal for people. This really goes back to how people think about themselves and how they feel that they can provide for themselves and their families.

So what's to be done? What could the long-term effects really entail? In this particular case, for companies that are hinging on innovation, even high performers could go. Well, a lot of them might say, hey, look, I need some stability. I've got to get out of here. But the other thing, too, is that over time, this could affect how companies are innovating and operating. If workers feel more uncertain, if they're worried about being laid off, they will be less productive. So I think that if we see companies look different in make-up or in productivity or in innovation down the line a couple of years from now, it's possible it will tie back to how they are handling this moment.

RACHELLE AKUFFO: And you have to think, when people are looking for jobs, they remember these big headlines of how certain companies treated certain employees and may want to steer clear. Great stuff there. Allie Garfinkle, thank you so much.