This commentary first appeared in CNA and was written by Yorlin NG. Republished with permission. You can access the other commentaries from Yorlin Ng on CNA as well.
Layoffs in the tech sector are all over the news. Shopee, until recently one of the most desired workplaces for young talents in Singapore, has executed a few rounds of cuts, affecting as many as 7,000 employees globally. That’s smaller than the 11,000 jobs cut by Meta (formerly Facebook), and the 10,000 jobs Amazon is said to be planning to cut.
Singapore’s Manpower Minister Tan See Leng recently told Parliament that 1,270 workers were laid off by tech firms from July to mid-November.
There could be more if current macro uncertainties of inflation, rising interest rates and increasingly expensive capital persist. How would these layoffs affect tech businesses and talent?
Varied impact of tech layoffs
The companies announcing the layoffs are not all of the same breed.
First, there are the US tech majors – the likes of Alphabet and Meta – which are facing headwinds but still hugely profitable.
Next, there are the local and regional tech champions – Sea Group and GoTo – which are working hard towards profitability. In the mix are myriad growth companies, in public and private markets, which have benefited from low-cost funding in the last decade but now running out of cheap fuel for growth.
Last but not least, there are earlier stage start-ups that are dealing with their own struggles.
The leadership, organisation and workforce are all different. Hence when we assess the layoffs, the people impacted and how they are impacted can be very different.
For instance, around eight in 10 of those 1,270 laid off in Singapore were in non-tech roles such as sales, marketing and corporate functions. Yet Twitter’s recent firing impacted engineering and product teams much more than commercial and sales functions.
Tech companies are not as efficient as you think
The whole value proposition of tech is to make or run things more efficiently, through software, algorithms, and consumer products like smartphones.
You might think that tech companies are efficiently run too, but that has not always been the case.
For instance, big tech companies used to deploy a “blocker strategy” where they pay above market rate and hand out multiple benefits to hoard talent from competitors.
Another practice was to throw more people at a problem instead of solving the fundamental issue. We have heard from practitioners in our community that this was the case when Shopee was rushing for growth, when what could be done by one product manager might be handled by more than five people.
Furthermore, there has been discussion that the gross merchandise value per employee (an indicator for efficiency) at Southeast Asian e-commerce companies is much lower compared to their counterparts in China. This is common for many start-ups in the growth phase.
Finally, a bugbear for many tech companies is “involution”, a term made popular in China. Often in tech companies, people may be working hard but the effort does not translate into tangible value.
One start-up we worked with had a hardworking sales team running multiple campaigns and visiting potential customers daily, but was only able to get a small increase in sales. Upon reflection, they realised they lacked strategic and operational tactics, and did not understand changing customer behaviour.
Tech companies have, in the past few years, been able to ring in large profits or tap into cheap capital from the market. While some foresaw this year might not see the same growth as the last, few anticipated the dip to be so significant and destablising. These companies are doing a lot more soul-searching now that investors are scrutinising their expenses.
Where will tech talent go now?
Speaking to contacts in the industry, there is a sense that the real impact of the layoffs is yet to be seen, although many of those retrenched received a decent severance package.
Other companies, tech and non-tech, are already trying to tap into the talent coming out of these layoffs. We’ve seen TikTok’s parent company ByteDance take in former Shopee staff, while Singapore banks are amping up recruitment for tech-related roles.
However, the cooling of the overall tech sector means employees and companies aren’t feeling much FOMO (fear of missing out).
We are seeing that people affected by layoffs are not rushing to take up their next job role yet. Some are taking time to figure out what motivates them, and where they want to take their careers. Even those who have been spared from layoffs are considering their longer-term options.
As there is less pressure to fight for talent, companies now have more mental space to plan their transformation – instead of rushing for the next big thing just because others are doing it. They can assess what kind of talent would best suit their ambition, but more importantly their core culture and vision.
Tech will boom again
Ultimately, some tech companies will become more agile and adapt faster to a more volatile environment. They will create pressure for their peers, pushing innovation and productivity across the value chain.
This process will naturally see failures too – be it a company going under, a start-up not taking off, or a deserving individual losing his or her job. But the fact that CEOs and employees are reflecting on their choices now is good for the whole ecosystem.
Tech will boom again, but in a different form. Will it be Web3, where blockchain technologies rule the Internet? Virtual reality and the metaverse? Artificial intelligence? Or SaaS, software licensed to businesses on a subscription model?
Nobody is sure, just like nobody quite predicted the mobile Internet proliferation after the Great Financial Crisis.
The question is, when the next boom happens, are employers and workers prepared to seize it?
The co-founder of a tech giant in China once told us that the most important priorities are making the right choices when you are young, then working hard – in that order.
Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].