AI Pivot Leads Tech To Dump More Jobs

"The drumbeat of job cuts in the tech industry continued on Tuesday when DocuSign became the latest company to announce layoffs this year, as Silicon Valley keeps a grip on costs while pouring more cash into artificial intelligence.

Since cutting tens of thousands of workers in late 2022 and early last year, the tech industry has extended its belt-tightening after years of growth with little restraint. Companies have emerged from the tech downturn with a new focus on profitability. And the AI excitement that has been a boon to the tech industry is also leading companies to shift resources away from other efforts and, in some cases, increase automation in their own workforces.

DocuSign said it would cut about 6% of its workforce, or 400 jobs, as the e-signature company looks to bring costs down and spur its struggling stock price. That came a day after Snapchat parent Snap said it was cutting 10% of its staff to ensure it can invest in growth. Last week, identification-software company Okta said it is laying off 400 employees, or about 7% of its workforce. Zoom, Google, Amazon.com and others across tech have also moved recently to cut jobs.

Management experts say the barrage of tech layoffs largely reflects new efforts by companies to operate leaner and more efficiently. Companies expect new artificial-intelligence tools to help them achieve those goals, albeit slowly, as they are still trying to determine which jobs those technologies can replace or minimize.

"The biggest driver is automation," said Anna A. Tavis, clinical professor of human-capital management at New York University. Companies are saying to themselves, "let's rip the Band-Aid. The sooner we do it, the better," she said.

The tech sector cut almost 16,000 workers last month, the most since May 2023, according to outplacement firm Challenger, Gray & Christmas, and was second only to the finance industry for the period.

Google parent Alphabet, which cut 12,000 jobs last year in its largest-ever layoffs, has been shedding hundreds of additional staffers across the company in recent weeks as it focuses more resources on priorities such as AI.

"We have ambitious goals and will be investing in our big priorities this year," Chief Executive Sundar Pichai said in a note to employees last month. "The reality is that to create the capacity for this investment, we have to make tough choices." He said this year's cuts won't be on the same scale as last year's, but that they were likely to continue throughout the year.

While some companies are making room to spend more on developing AI itself, others are seeing the benefits of using AI to replace or aid jobs usually done by humans.

The language-learning software company Duolingo last month said that it cut 10% of its contractors and that it would use artificial intelligence to handle some content creation.

Such transitions to AI extend beyond the tech sector. United Parcel Service said it would cut 12,000 jobs amid a shipping slowdown and that those positions weren't likely to return even when business picks up. UPS is using machine learning to help it better determine what to charge customers for shipments and, as a result, the company's pricing department has needed fewer people.

Pandemic-fueled growth combined with low interest rates at the time sent companies on a hiring and expansion spree. Since then, borrowing money has become more expensive.

Workers are also staying in their jobs longer now, which is making layoffs more common.

After so much hiring and so many wage increases during the pandemic, "workers are getting whipsawed," said Rocki-Lee DeWitt, professor of management at the Grossman School of Business at the University of Vermont.

Companies are also under pressure to meet analysts' expectations, and layoffs can be a way to boost a stock price. "That forecast locks you into meeting the expectations," DeWitt said. "If you fail or give downward guidance, you get spanked."

Okta Chief Executive Todd McKinnon, announcing layoffs last week, said the company had overhired based on growth projections that haven't panned out. "We need to run the business with greater efficiency," he said in a memo to employees." [1]

1. AI Pivot Leads Tech To Dump More Jobs. Needleman, Sarah E.  Wall Street Journal, Eastern edition; New York, N.Y.. 07 Feb 2024: B.1.