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What is behind the recent mass layoffs in the tech industry?


Big names in the tech industry, including Meta, Lyft, HP and Amazon, have been laying off workers by the hundreds or even thousands. Daniel Keum is an assistant professor of management at Columbia Business School. A. Martínez asked Keum what he thinks is behind the wave of tech layoffs.

DANIEL KEUM: There are about three, four drivers, I think, that people are talking about. I think the most immediate one is that they're rightsizing their growth. They were very aggressive in forecasting their future growth through the pandemic years, but the growth didn't materialize. I think the second part is - and this is something people talk about a little less - is that usually there's a natural rate of turnover either by companies finding the poor fit from the employees or employees finding the poor fit with the company. In the past eight months or so, when we were - people were talking about Great Resignation, it was employees finding employers, oh, you're not a great fit for me. So a lot of people are quitting and looking for something different. What we're seeing in the past one month is actually the other - the flip side of that dynamic where employers are finding with employees, oh, you're not a great fit for us.


Is that more or less what we're seeing with Amazon, as well?

KEUM: So there's an additional layer to Amazon, if you ask me. So if you look at where the layoffs are taking place, it's actually quite uneven. So even within Amazon, most of the layoffs are concentrated in their devices business. In the past decade, if you look at the tech companies, they're actually tech empires. They're actually spread across many different lines of businesses, across many different products. They started with their one or two core lines of businesses that made them massively successful. And those lines of businesses have grown to maturity. And these tech companies wanted to look for new engines of growth. So what's the next big thing? Amazon is one of those companies that bet very heavily on devices, and these devices haven't really panned out. Or, I mean, they're not doing terribly. It's just that compared to their existing success, given all the uncertainty right now, they feel that it's time to pull back so that when the uncertainty resides (ph), they can come out swinging.

MARTÍNEZ: Are there any lessons to be learned? I mean, we're talking about the tech industry here, professor, but, I mean, is there any lessons to be learned for other industries to not maybe go down the same path as tech companies on this?

KEUM: I think everybody needs to be careful in who they hire and how they hire and make sure that the people you're hiring - labor has gotten a lot more expensive - people you're hiring are the right fit for you because sometimes, companies fall into the vicious cycle of training people; they leave. You hire new people. You train them. They leave. And people who want to stay on - they get tired of training new people.

MARTÍNEZ: And what about the laid-off workers? What are their prospects going forward?

KEUM: Again, losing a job is a deadly event, and we should not talk about this lightly. But these are the most highly trained and most highly sought-after talents in the world. Most of them are able to find a new job within three months or so.

MARTÍNEZ: Was it a mistake, looking back, to try to aggressively expand when we didn't really know what the pandemic was going to bring? And the pandemic's still going on. But, I mean, considering that we didn't know much about anything back when all this expansion started, was it a mistake to project this aggressively into the future?

KEUM: I mean, managers want to grow (laughter). It's their first instinct. So, I mean, there was more strategic consideration behind that. The fear was, if we don't grow, someone else will.

MARTÍNEZ: That's Daniel Keum, professor of management at Columbia Business School. Professor, thanks.

KEUM: Thanks for a great set of questions.

(SOUNDBITE OF LAURENCE GUY'S "WICHITA FALLS") Transcript provided by NPR, Copyright NPR.