Finance leaders have cited inflation, rising interest rates and lower sales as reasons for layoffs over recent weeks and the tech industry had been particularly hard hit.
A week after Elon Musk took over the social media giant Twitter in November, about half of the workforce was laid off. Also in November, Amazon announced plans to cut 10,000 corporate and tech employees. Lyft and Microsoft were also on the lengthy list of tech companies slimming their workforce in recent months.
CFOs and finance executives have been agonizing over whether or not layoffs are the right call in order to keep their businesses running smoothly. With the prospect of an imminent recession, employees' livelihoods are on the line.
The tech industry is not the only area where we could see layoffs in the coming weeks, said Russ Porter, CFO of Institute of Management Accountants and 30-year finance veteran at International Business Machines. With the holidays and new year approaching, “many companies will be taking a look at revenue outlooks and related budgets for next year, and determining the conditions that would necessitate a significant reduction in costs that may take the form of workforce reductions,” he said.
Global supply chain
How layoffs are going to affect different industries besides tech depends on their role in the global supply chain, said Porter. “Those with deep exposure to economies that are less stable or reliable may be more affected, while those with resilient supply and demand conditions will have an easier time,” he said.
Food services, utilities and education supplies are all examples of sectors that are not as reliant on global supply chains, according to Porter.
On the other hand, current supply chain struggles surrounding technology hardware — microchip availability and sourcing regulations, for example — leave the tech industry in particular vulnerable to losses that lead to layoffs, he said.
Apple, Microsoft, Amazon, Alphabet, and Meta have lost more than $3 trillion in market value this year, according to reporting from Bloomberg.
Global manufacturing is another industry with the potential to be hard hit by layoffs in the coming months, said Porter. Like many, the industry is facing headwinds including supply challenges and an uncertain economic outlook, according to Deloitte.
The automotive industry could also slash its workforce because of global supply chain disruptions, said Porter. Between higher interest rates in economies abroad and difficulties sourcing parts, these company leaders may reduce costs by cutting high numbers of workers in the near future.
Already in August, both Ford and Volkswagen cited their shift to electric vehicles as a factor behind layoffs, with both automakers alleging electric vehicles require less manual labor than conventional cars, according to a Business Insider report.
The tech industry is somewhat already seeing the ramifications of layoffs with new competitors, as sometimes happens with these cut workers, said Porter.
Overall, however, “the exact impact will take time to see, as customers determine if the resulting products and services still meet the quality/price expectations they expect,” he said.
The decision to cut workers is not one that finance chiefs should take likely, according to Porter. “Layoffs are about people,” he said, “Specifically, they’re about people we know and work with every day, and grow to care about, and who may have done nothing ‘wrong’ to warrant their separation from the rest of the team. It’s a tough call for any business leader to make, but sometimes a necessary one for the good of the organization.”
How layoffs will affect company culture and morale is another factor that CFOs need to consider. “There may be additional work that must get done by fewer people, and an ongoing distraction about being able to keep one’s job if business conditions don’t improve,” said Porter.