Salesforce to Lay Off 10% of Staff

Facts

• Business software giant Salesforce on Wednesday announced it will be laying off around 8k employees, or roughly 10% of its staff, as well as cutting back on office space due to concerns surrounding the economy.¹
• In a letter to employees, co-CEO Marc Benioff cited the 'challenging' economic environment and 'customers ... taking a more measured approach to their purchasing decisions' as reasons for the cuts. He added that the company 'hired too many people' ahead of the slowing economy.²
• The cutbacks come after Salesforce in October reported a 32% staff increase over the previous year and a total of 79,824 employees. The company expects to incur between $1.4B and $2.1B in charges related to the restructuring plan, with between $800M and $1B to come in the fourth quarter of the fiscal year 2023.³
• The company is expected to complete its employee restructuring by the end of its fiscal year 2024 and its office closings — which will see it incur between $450M and $650M in charges — by 2026.⁴
• This is the latest in a series of tech industry layoffs, after Facebook and Instagram parent company Meta fired 13% of its staff in November, and Snapchat parent company Snap laid off 20% in August.¹
• Following the news, Salesforce's stock rose 3% in pre-market trading after losing nearly half its value in 2022. The company said its US employees will receive a minimum of about five months' pay, health insurance, and other benefits, while foreign employees will get a 'similar level of support.'⁵

Sources: ¹New York Times, ²New York Post, ³FOX News, ⁴CBS and ⁵CNBC.

Narratives

• Narrative A, as provided by San Francisco Chronicle. Although the pandemic tech boom allowed companies to increase their workforces by as much as double, recent economic woes have, unfortunately, shattered that brief market boom. The US Federal Reserve has reacted to inflation by hiking interest rates, leading to a reduction in available venture capital. Digital ad revenue is also down, and firms overhired during the pandemic, forcing Silicon Valley to downsize.
• Narrative B, as provided by Harvard Business Review. Layoffs are the old-school way of dealing with a recession. Nowadays, companies should instead find alternatives because social media has made everyone a workers' rights activist with a global microphone. Beyond the poor optics, companies that conduct mass layoffs have been proven to perform less well than those that avoid them because of the cost of restructuring and the low morale caused among remaining staff.