Mass layoffs undoubtedly tarnish a brand’s image

Industry veterans discuss the recent firings by various biggies which are also phenomenal brands.

Mumbai: Seems like Elon Musk’s takeover of Twitter has proved to be ominous! Ever since the business tycoon took the reins of the social media company in his hands and sacked a hefty number of employees, the news hasn’t been too favourable for the workforce of most digital and information technology (IT) companies. Not that it was any better before that. The last three months have been exceptionally bleak for IT personnel in India and across the globe. In a conversation with, industry experts gauge factors concerning brand image and brand trust in such a situation.

To put things in perspective, as per Tracker, around 787 companies across the world have let go of a total of 1,20,699 employees this year. Majority of them owe this to the global recession that the world is undergoing.

Meta, which had employed 87,000 people across the globe as of September, has fired the most number of employees ever done by any organisation—it sacked more than 11,000 employees, which is about 13 per cent of the social media firm’s global task force. Its Indian counterpart was affected too. The company has also decided to freeze hiring until Q1'24. The company’s feeble Q3 performance and a rise in the overall costs of the firm by a fifth in the previous quarter made Meta CEO Mark Zuckerberg take such a step.

After Musk stepped in at the helm of Twitter, he dismissed about 3,700 employees (including the top-level management of the firm), which amounts to about 50 per cent of the company’s overall working strength. The marketing and communications team of the social media company’s India bureau was shown the exit door; a total of 180 people were fired from the Indian office. Musk reasoned that he couldn’t let the firm lose four million dollars a day.

Very recently, media and entertainment conglomerate Walt Disney announced a layoff as well as a freeze in its hiring process. The firm’s chief executive, Bob Chapek, made this decision as part of a cost-cutting measure as the firm’s streaming business goes through losses.

Computer software major, Microsoft, fired around 1,000 employees across multiple divisions last month, owing to setting business priorities and making structural adjustments. According to some media reports, chip maker Intel, was also considering job cuts by 20 per cent in the previous month. The organisation went through a dip in sales and profits in its second quarter performance this year.

Salesforce, an enterprise software company that had previously thought of sacking about 2,500 people, has let go of about 1,000 personnel. In what could be termed as a hypocritical scheme of events, edtech company Byju's has fired about 2,500 employees in the name of cost-cutting and in turn hired one of the most expensive brand endorsers in the world, celebrity footballer Lionel Messi, for its social initiative.

Unacademy, the SoftBank-backed edtech giant, laid off about 10 per cent of its workforce, or about 350 employees, in accordance with the current funding crisis that is being faced by start-ups.

Udaan, a B2B e-commerce platform that raised $120 million last month, decided to forego hiring about 350 employees.

Also, media reports suggest that Snap, the company that runs Snapchat, was considering downsizing its staff by 20 per cent, in August. This was due to the 80 per cent drop in its stock price this year.

Affecting brand image

Considering that these are not just sizeable firms but also successful brands in their respective domains, how does this chain of mass layoffs affect the brand image of these companies?

Brand guru and Samsika Marketing Consultants founder, chairman & managing director Jagdeep Kapoor explains that every company represented by a brand has two types of customers. External customers who are consumers. Internal customers who are employees.

"The brand’s image gets affected by both external customers (consumers) and internal customers (employees). Brands are built in the minds and hearts of customers. Any such large layoffs affect and shake hearts and minds, and hence the brand image does get affected," he cites.

He adds, "Ultimately, companies are showcased through brands, which are served by employees and consumed by consumers. This kind of ‘earthquake’ leads to a ‘shake’ of internal and external confidence and faith. Instead of the brand being in the ‘make’ mode, it goes into the ‘shake’ mode."

Sideways Consulting co-founder Abhijit Avasthi agrees that for certain brands, the image gets dented. "For the established tech companies, the consumer brand might not be affected that much, but the employer brand will take a beating for sure. For the newer ones, like the edtech ones, the consumer brand will suffer big time as well because it will raise questions about their ability to deliver the service well," he points out.

Communications consultancy, Treize Communications founder & CEO Sonam Shah believes that while this does affect the brand's image to a certain extent, employees today are more accepting of the fact that they can lose their jobs at any time.

She believes that if this is handled sensitively, the brand will not have a difficult time managing its public image. She goes on, "Public memory is short, and there is enough and more for the audience to read and talk about. Once people get new jobs and the situation gets better, the brand can work on reviving its brand image easily."

Advocacy platform, Socxo chief marketing officer Ajit Narayan, feels that the layoffs all around will have a negative buzz, as is natural. And these are not one or two but in thousands. "People will talk about it. For a while. But then, as with everything else, people’s memories are short. And life goes on as usual. Depending on the company and how they manage the situation. And if they do turn around. Then all will be forgotten," he emphasises.

He spells out, "The ‘be negative’ impact will be temporary. More like a setback. The ones that ease out of it better will be the ones that show empathy for those being told to go. And then there will be those who will be ego-driven. And if the turnaround does not bring results, they will carry the negative image with them."

Building trust

By taking such harsh steps in terms of downsizing, how easy or difficult will it be for these firms to revive their brand name and build trust after being splashed about so negatively in the media and undoubtedly through word-of-mouth too?

Avasthi is of the opinion that it will take a fair bit of time. "Companies very often confuse increasing awareness with trust. Big budget splashes can help you build awareness, but earning trust takes time and patience and consistently delivering the goods with integrity," he reiterates.

"Trust is another word for a brand. It takes decades to build brands and trust. It just takes a moment to let it slide. Building a brand or an organisation is difficult. Re-building it is even tougher because a lot of intangibles like feelings, emotions, and sentiments also need to be rebuilt, not only of internal and external customers but also of their families," Kapoor highlights.

On the contrary, Shah thinks, "It will not be a very difficult road, but a lot of this depends on the business model of the company and if the company needs to restructure its core offerings or work on escalating the current ones."

Narayan, too, thinks that this is a temporary phase, and most of the brands will come out of it over the next few quarters. "Also the market reality and future plans will have a major impact. There is a recession looming large, and this and other stories now will be washed away if that becomes a reality," he specifies.

Layoffs particularly in the digital and IT industry

There is an economic recession across the globe, which has affected and continues to affect a lot of industries. Surprisingly, most of these layoffs seem to be happening in the digital and IT industries. What could be the reason behind this?

Avasthi mentions that the reasons for the layoffs vary from company to company, so one can't attribute them to any generic reason. However, he brings out, "Broadly speaking, for some of the newer venture capital (VC) funded startups, it's simply because they were badly run businesses that were trying to move ahead of themselves—trying to do too much in too little time—chasing unrealistic, unsustainable growth. There is a sense of misplaced arrogance that some of the founders had; it's catching up with them."

"For the big, established tech giants, I feel it's another manifestation of insatiable capitalist greed. I can understand layoffs to save a sinking ship, but if you are sitting on billions of dollars, I can't comprehend why it's not okay to make a little less money for a few years and let people keep their livelihoods till optimal solutions are found. But then that's a larger philosophical debate," he expresses.

According to Narayan, tech is the industry which has given large scale employment and also the large paychecks. "The industry has been driven by the scale and adoption idea and not profitability. To achieve scale and the speed at which it is being envisaged, it needs people. So they hired for scaling plans," he brings out.

Further, he points out, "The ‘what if’ of growth not leading to profitability had been discounted. And that is what is playing up as access to capital dries up. And demand for profitability goes up. Business is driven by profits. And the leaders of the business will have to keep that in focus as they run their businesses. Not just fancy talk of scale, growth, and adoption. This is the hard truth."

Shah sheds light on some facts - the layoff spree has been frequently happening within the start-up and tech space. There was a phase for a few years, pre-pandemic, where IT companies and even start-ups had a series of layoffs. Pink slips were shown to employees.

She says, "The market and economic conditions are too dynamic for job stability, especially in the IT and tech sector. People who join here are aware of this. So what's important here is how the process is executed and if all the HR policies and compensations are in place or not."

"These things have happened in many industries. But the service sector, which is dependent on people, gets affected and highlighted more. But these companies and brands will rebound back after a time lag. One will have to watch to see whether these companies and brands have a permanent layoff or just a time lag off," Kapoor signs off.

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