By: DJ Madurski
Revival of Revenue Per Employee
In recent years, tech firms have strayed from certain metrics to measure the growth and profitability of their firms. Following the financial crisis of 2008, many tech firms sought to analyze their firm by the dollar amount brought in by each employee, on average, with a profit by employee metric.
At the time, Google had over $210,000 and Amazon followed with $31,000 per employee. However, this metric has almost all but fallen off. That is until recently, when Amazon and Meta have combined for almost 50 thousand jobs being cut in the past 6 months in an attempt to bring up their revenues as a whole and their revenues per employee.
A “Year of Efficiency”
Mark Zuckerberg, Meta CEO, has stated that he hopes to create a “year of efficiency.” He plans to partially go about this task by reducing the number of Meta employees. In November of 2022, he cut over 11,000 jobs:about 13% of Meta’s workforce. More recently, Zuckerberg has stated he intends to cut 10,000 more jobs from the company. Moreover, Meta plans to cut any failing or unnecessary projects as well as cut layers of middle management in order to save as many revenues as possible. This could be an essential play by Zuckerberg that could save millions in revenue.
Meta is not the only firm who has recently been cutting jobs at an alarming rate. Amazon, another giant, has stated they would lay off 9,000 employees. After cutting 18,000 jobs in January, Amazon is looking to have a lean year with great revenues at the sacrifice of tens of thousands of employees. Amazon CEO Andy Jassy argued this was done due to the “uncertain economy in which we reside” in an attempt to streamline their costs.
Further support of this move by Amazon is the great increase in employees in the past few years. According to Bloomberg, Amazon’s employee base grew by 93% in the last three years while Apple only grew by about 20% and Microsoft grew by about 55%. Based on these numbers, these cuts may have been a necessity.
Who is Losing Their Jobs?
Jassy stated that Amazon had hired too many employees at the onset of the pandemic, and needs to lessen their workforce to streamline profits. Not all employees are being targeted by these cuts, as the firm has narrowed down the teams facing the chopping block. They are looking at thinning their human resources department, their cloud computing unit, their advertising team, and those involved with Twitch, a massively popular video game streaming service.
Of these teams being trimmed down, it seems as though some may be needed while others are not. Starting with the human resources department, this may be a bad move by Amazon. It seems as though every year – or month – brings another report of employees being mistreated. For a firm that suffers so much from internal affairs, it seems counterintuitive for them to deplete their HR department. Was an 8 hour shift of delivering packages or packing items without a break not bad enough? Now they may not even have the necessary personnel to seek assistance in these instances.
Reducing their efforts in advertising seems negligent compared to the losses in HR. Whether somebody purchases products from Amazon or not, nearly every individual knows of the firm and its ability to provide seemingly everything somebody might need on their doorstep in the matter of days. How often does somebody say to themself, “Oh wow, I really need this. Better hop on Amazon, it should be here shortly.” It truly is incredible how the firm has managed to develop the market share that Amazon has. Because of this, the loss to the advertising team may minimally impact the sales of Amazon while reducing the amount paid to their employees.
Domino Effect
Of course, cutting these employees would save the firm a great deal of money as employees are commonly the most expensive portion of a firm. However, could other firms follow suit and begin to cut employees in attempts to save revenues?
Jeffrey Pfeffer, professor of organizational behavior at the Stanford Graduate School of Business, speaks of “copycat behavior,” and how these major firms may lead to others following suit. This phenomenon described by Pfeffer seems to be accurately reflect the economy. In just 2023 alone, over 500 tech companies have laid off over 139,000 employees. Some of these cuts very well may have been a necessity for these firms to survive in an ever changing, competitive market, however; can one justify each and every one of these layoffs? Families may be losing their major breadwinner, leaving many in a tough spot, not to mention the rough economy with rising inflation. The only true way to see if these cuts were justified is to wait and see how companies perform and respond. Will profits be increased? Will companies struggle to manage their work loads? Only time will tell.
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