How did tech become America’s most troubled industry?
by Luay Rahil
America’s most stable companies are laying off so many people every day, and everyone knows why, but no one is willing to say it.
In the last few months, you witnessed the collapse of America’s most profitable industry, the tech industry. The tech industry is crumbling, and if you work in it. You better get your resume ready. According to the Layoffs tracker, more than 158,951 people lost their jobs in 2022, and at least 56,570 employees were laid off in the first three weeks of 2023.
Companies that allow remote work are struggling more than others. For example, When Elon Musk took over Twitter, the company was considered one of the laxest companies about remote work. However, Twitter was losing $4 million daily. Then Elon Musk took over and asked employees to show up at the office. As a result, Twitter has been more innovative in the last three months than in the previous three years.
10% of employees do most of the work
Musk understands that about 10% of remote workers produce 50% of Twitter’s results.
His views are confirmed by Jordan Peterson and by a law called Price’s Law. The law states that 50% of the work is done by the square root of the total number of people who participate in the work. So, if you have 100 people doing any job, 10% of them produce more than 50% of the results. So, companies that want to survive in the coming few years should be flexible with the top 10% and offer less flexibility with the rest.
On the other hand, the top 10% of the workforce that produces 50% of the work don’t mind coming to the office. However, the other 90% of the workforce that don’t want to be held accountable are voicing their displeasure with the end of remote work.
Musk understands the above principle. That’s why he asked his managers to be flexible with his top performers but strict with everyone else, “At the risk of stating the obvious, any manager who falsely claims that someone reporting to them is doing excellent work or that a given role is essential, whether remote or not, will be exited from the company.”
Only a few executives have the guts to do what Elon Musk does. But it is becoming obvious that companies who are afraid to hold people accountable regarding the quality of their work or about showing up to the office will lose in the long run.
So, this is what is happening in the tech industry.
Remote companies are struggling.
Every remote company is struggling, big and small. No one company is immune to this collapse, and I’m surprised the failure is led by the big five, Amazon, Google, Facebook, and Microsoft, except Apple, for obvious reasons.
Let me share some of what happened at these companies. Amazon cut 18,000 of its workforce, approximately 6% of its corporate workforce. Google let go of 12,000 employees, roughly 6% of the full-time workforce. Facebook shed 11,000 jobs or about 13% of its staff, and Microsoft let go of 10,000 people, which will reduce Microsoft’s headcount by 5%.
It seems that tech executives are unable to help their companies avoid the collapse, so mass layoffs and hiring freeze became their only weapons, and when executives like Elon Musk, Tim Cook, or Matt Ishbia save their companies from collapse by asking employees to stop working remotely, they get criticized by other CEO’s who are laying off people.
The hybrid approach is the way to go.
Apple is one of the few companies that have yet to cut people. They won’t because their CEO, Tim Cook, balanced between flexibility and his belief that in-office employees are more productive and innovative. When employees threatened that they would quit, he doubled down on Apple’s office policy, insisting that in-person collaboration is essential for the company.
Cook defended his policy by saying, “We make products, and you have to hold products. You collaborate with one another because we believe that one plus one equals three.”
Face-to-face interaction has a lot of value that doesn’t show up in the profit and loss statement at the end of the year. Any employee who doesn’t see that value works at the wrong company or doesn’t belong to the top 10 % of the workforce. I say the wrong company because I believe everyone deserves to be happy and if you are not satisfied with your job, find another job.
Let me clarify one thing. Small software companies can get away with 100% remote work. However, you can’t scale these companies beyond a certain number of employees. So for every other company, hybrid work should be the standard work mode.
However, companies must get hybrid work right. The future belongs to companies and individuals that master the art of hybrid work. Work should be done in a blended environment that leverages the best of both worlds: face-to-face experiences and virtual work.
Employees who insist that remote work is better for them without acknowledging the side effect of it will lose, and companies who ignore the benefits of working remotely will lose their best talent.
However, companies shouldn’t be flexible with unproductive employees. As I stated above, if you belong to the top 10% of the workforce, you should be free to work anywhere you want. But you can only create your own rules if you perform. If you are not performing, show up to the office, ask for mentorship, attend some training, increase your skillset, and start performing.
Two things can be true at the same time.
Remote work is good for you, and in-office work is good for your companies. No one should argue these two things.
Robert Hooijberg and Michael D. Watkins wrote an article in Harvard Business Review that outlined four very difficult things to replicate in a virtual environment.
- Collaboration is an essential element in building strong relationships that leads to trust.
- Innovation happens faster when people brainstorm together in the same room. You can’t ignore that fact.
- Acculturation helps a group of strangers become a team working to achieve a common goal. This is critical to the long-term organizational effectiveness of any company. Companies that ignore that, like the former Twitter CEO, will be unable to innovate and lose money simultaneously.
- Dedication is about having a shared sense of purpose and feeling like part of a community.
These same issues were brought up by a study that was conducted at Stanford, “Full-time working from home is problematic for three reasons: It is hard to be creative at a distance, it is hard to be inspired and motivated at home, and employee loyalty is strained without social interaction.”
Companies that want to exist in the future should offer a hybrid work environment to help employees collaborate and innovate. Likewise, employees who wish to be indispensable to their companies should master the art of hybrid work.
Phot Credit: Photo: Canva
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