That is not all; the company will relocate its office from Tokyo to Kawasaki. The objective of the job cuts is to achieve 10 per cent profit margin by 2027 and attain better stability.

After a decade of financial struggle, Toshiba was bought over by a group led by Japan Industrial Partners (JIP) in a $13 billion deal.

The job cuts do not come as a shocker. In April 2024, Toshiba had revealed that it was contemplating a significant downsizing of its workforce in Japan, eyeing a reduction of about 5,000 positions. At the time, it was reported that the move would affect roughly seven per cent of its domestic staff.

The focus of these job cuts was primarily be on back-office roles within the company’s headquarters, with plans to implement them through voluntary retirement schemes. This proposed reduction would be the largest since the fallout from the 2015 accounting scandal.

The move, then, was anticipated to incur a loss of about 100 billion yen ($646 million), covering expenses such as special retirement packages and outplacement services. This restructuring is part of Toshiba’s attempt to streamline its operations by consolidating its energy, infrastructure, devices and IT divisions into its main headquarters, aiming for greater efficiency and synergy.

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The announcement came during a Townhall session led by Nitya Sharma, CEO, and co-founder, Simpl, this Wednesday, 8 May, at 9 am, as per media reports. Reports also disclosed that some employees were even disconnected from their Slack accounts before the Townhall commenced.

The layoffs, which included personnel from diverse verticals, notably impacted high-ranking employees as well. Although promises of severance were made, the exact terms remain undisclosed.

Addressing the situation, Ashish Kulshrestha, head-corporate communications, Simpl, stated, “As an organisation committed to creating a shared value for our merchants, and millions of customers across the country, we have undertaken a series of measures to improve operational efficiencies, reduce fixed and overhead costs, along with taking the difficult decision of letting go of some of our talented employees. These efforts are enabling us to accelerate our journey towards profitability and build a fiscally prudent organisation. We have laid out a comprehensive growth plan while having a razor sharp focus on profitability in order to advance our mission of enabling e-commerce and Direct-to-Customer merchants to provide enhanced convenience to their customers.” He further stated, “With the continued efforts around improving business efficiencies, we are expecting to be profitable by mid-2025.”

To support the departing employees, the company has also announced severance packages including 2 months of salary with 15 days of salary for every year spent at Simpl, as well as extended medical insurance and outplacement services.

This recent decision by Simpl mirrors a similar move made in April of the previous year, when the company laid off over 150 employees, attributing it to over-hiring driven by assumptions of increased e-commerce demand due to the pandemic. During that period, Sharma addressed the staff through a letter, taking responsibility for the decision and acknowledging its repercussions, especially amidst economic uncertainties. He assured affected employees of a severance package, healthcare benefits, as well as outplacement and counselling support to assist them during this transition.

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The high competition and the uncertainty of the macro environment are the reasons cited for the decision to trim the workforce.

Josh Silverman, CEO, Etsy, has informed employees in a letter that even though the marketplace has expanded two-fold since 2019, drastic changes are required to stay competitive. The company is looking at restructuring and streamlining for cost-effectiveness.

While employee costs have grown, the sales have not increased for Etsy sellers at the expected rate, despite adopting cost-cutting measures and alteration in recruitment strategies, including a hiring freeze. Sustainability is the need of the hour, and the company is now resorting to layoffs to make that happen.

The Etsy marketplace sells handmade products and brings buyers and local artisans in touch with each other, worldwide. The firm now wishes to focus on improving sales for the seven million sellers associated with it from around the globe. It seeks to ensure value for all its stakeholders.These layoffs are part of this much-required internal restructuring.

The firm will incur a cost of at least $25 million in paying severance to the affected employees, along with other benefits. The restructuring exercise will be completed by the end of Q1, 2024.

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About 10 days ago, Byju’s was reportedly considering axing about 1,000 jobs amidst a financial crisis. At the time, it was said that the sales and marketing teams would bear the brunt of the cuts. This time, reports indicate that members of the content division have been asked to put in their papers voluntarily. There are also reports that post the quarterly evaluation, almost half of the sales team is now part of a performance improvement plan or PIP. The impact of this round of layoffs will reportedly be seen in the business development, products and technology departments too.

Earlier this year, over 1,000 people were asked to leave from the engineering division, which reduced the workforce size by 15 per cent.

Byju’s also bagged headlines recently, when it failed to make a quarterly interest payment of around $40 million on a $1.2 billion term loan B. The company, which has been accused of defaulting on payments, later took legal action against its lender, Redwood Investment Management, filing a lawsuit in the New York Supreme Court. Byjus has not only stopped payments to the lender but has called their approach predatory’.

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At the time, Sundar Pichai, CEO, Google, had admitted that the pace of growth at Google had reduced, and that better management of the various macroeconomic factors would be required to make the Company more productive and profitable. He was concerned that the revenue growth was not up to the mark and a lot lesser than expected.

During a recent meeting, Pichai admitted that the future is unpredictable and that he was in no position to reassure the workforce that there would be no job cuts.

In August, Pichai had indicated that Google definitely had more employees than it had work, while expressing concerns about the low productivity of the workforce.

While Pichai still talks about introducing measures to better handle the situation imposed by the unfavourable state of the economy, with the fear of recession looming large, he does not deny the possibility of job cuts in the future.

Media reports say that Pichai has expressed the need for better discipline and critical decisions. He has been stating that as a Company, Google needs to think of ways to be better prepared for difficult times.

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With ‘accountability’ being a significant part of the sales performance, this round of layoffs appeared to be inevitable as per the Company. As per a Protocol report, about 90 contractual employees were laid off earlier and the Company has frozen hiring till next year. While many will be asked to leave basis their unsatisfactory performance, many others would be put under a month’s review post which they would be let go.

As per statements given to various media, the Company intends to support the impacted employees who, the Company claims, are less than 1,000 in number.

The workforce strength of the Company had grown 36 per cent over the last one year, in keeping with the surging demands of customers.

Salesforce, the cloud-based customer-management software, serves clients across industries. Throughout the pandemic it managed to generate high revenues and even acquired Slack, the messaging platform about a year ago.

In 2022, however, it has been trying to minimise spending, and had slowed down hiring and cut down on travel too to do so.

It is reported that Starboard Value, the activist investor may be pressurising Salesforce to improve profitability, which is presently said to be at least 13 per cent less than expected. The first step towards improving the situation would naturally be to curtail expenditure, a fact that Salesforce had realised a while ago.

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Though the exact number of people to be affected in this round is not officially known, some media reports suggest that 350 employees will be impacted, most of whom would be contract workers and sales supervisors. The Morning Context mentions that the Company may lay off about 1000 employees this time.

Earlier, in the month of June 2022, Udaan had fired 180 employees to cut costs and enhance efficiency of operations. At the time, media reports claimed that about 700 employees at Udaan had been rendered jobless.

The Company confirmed that it will lay off employees, as it is aiming to achieve efficiency and profitability. Some roles in the organisation have become redundant, and therefore, need to be removed. The outgoing employees will be given appropriate support from the firm as required.

Currently valued at $3.1 billion, Udaan received fresh funding of $231 million from new and existing investors, in 2021.

After its latest round of funding, the Company had claimed to be headed for IPO in the next 12 to 13 months, but instead, it has been laying off employees.

The Bengaluru-based Company was founded in 2016 by former Flipkart executives Amod Malviya, Sujeet Kumar and Vaibhav Gupta.

The B2B e-commerce platform is backed by investors such as Microsoft, Lightspeed Venture Partners and Nomura among others.

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The decision to downsize is based on the uncertain economic conditions prevalent across the globe and the fall in demand. The Company’s shares have also fallen from about $117 early this year to about $53 now.

Amongst the factors that have led to the poor financial performance of the Company are the Russia-Ukraine war, supply chain problems, inflation as well as the economic slowdown in China.

The layoff move is expected to help Seagate achieve profitability in the longer term. The Company also plans to alter its production output and yearly capital expenditure with a focus on saving costs and working towards growth.

However, before starting to see profits and beginning to save about $110 million annually, the Company will have to shell out at least about $60 million in pre-tax charges in terms of severance packages and benefits following this round of layoffs.

The Company hopes its revenue will recover to at least $1.85 billion and earnings per share will touch 15 cents by December. The figures for the previous year were $3.12 billion in revenues and earnings per share of $2.23 per share.

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In the third quarter of this year, the mass recall cost the Company about $1.28 billion. The defective respirators had proved to be a risk to the lives of sleep apnea patients, and had led to lawsuits being filed against the Company. Negotiations are reportedly still on with American authorities pertaining to a final settlement in these lawsuits.

Roy Jakobs, who took over as CEO of the Company recently, is therefore faced with many challenges, the primary one being to improve productivity and increase profitability.

Over the last decade or so, Philips had successfully transitioned from being a consumer electronics company to a medical device manufacturer.

By laying off some of its employees, the Company hopes to become more productive and agile.

This is an attempt at turning the company around and making it more profitable.

It is reported that about €300 million or $295 million will be spent on severance packages of the laid off employees.

Budgets for research and development (R&D), sourcing of materials and consolidation of suppliers and warehouses have also been reduced as part of the cost-cutting measures.

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No employee, not even the senior managers will enjoy business class travel any more. Those who seek to upgrade will have to pay for the same personally from their own pocket.

Considering that the organisation is preparing for an initial public offering in two years’ time, it is now trying to operate as a ‘frugal’ organisation. To ensure economical operations, the special privileges of the senior executives will have to be eliminated, for instance, dedicated drivers, indicated Gaurav Munjal, CEO, Unacademy in a memo to the staff.

By doing away with unnecessary expenses, Unacademy intends to become more profitable and generate free cash flow before the IPO.

Early this year, in the process of shutting down the unprofitable businesses, Unacademy closed down its kindergarten to class 12 (K-12) section, which rendered over 700 employees jobless.

Munjal has assured the staff that the organisation is not in a crisis and that these cost-cutting measures are not intended to give that impression. Munjal emphasised that the organisation is simply trying to focus on profitability ahead of the IPO.

Of late, edtech companies have been struggling with drop in demand as the environment is becoming more normal and offline methods of delivery are being experimented with.

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The move will help the airline focus on making the business “sustainably profitable” and help cut costs. Only timely measures right now, in terms of restructuring and resizing, in accordance with the demand, will help it to begin earning profits next year. It is also expected to shift its operations from London Gatwick and focus only on Heathrow airport.

The Company is trying to obtain financial assistance from the government, potential investors and other stakeholders. It is reported that a sum of £500m ($624m) was sought in the form of commercial loans and guarantees to help rescue the airline.

The British Airline Pilots Association (BALPA) has requested adequate action from the government to save the aviation industry and come up with a recovery plan at the earliest.

Owned by Richard Branson, Virgin Atlantic believes that it may take about three years for air travel to be restored to normalcy and demand to return to what it was before the coronavirus outbreak.

Virgin Atlantic is not the only one to be considering job cuts. Recently, Ryanair and British Airways also resorted to such drastic measures to cut costs.

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More than the cost of the health insurance, or the loss of profitability, the biggest concern among employers is, the pressure they feel / face to provide insurance.

The survey highlights the three big concerns that businesses have, while providing health insurance. First is that the cost of the employee health insurance may negatively affect the company’s profitability. The second concern is that the premiums may make the employee health insurance unaffordable. And third, rising costs can render companies unable to provide salary increments or bonuses.

The survey lists a couple of alternatives for companies to reduce healthcare expenses.

One way is to reduce the cost of premiums through a benefits plan design. According to the report, self-funded insurance can lower premiums for employees, while possibly saving companies money through reduced operational costs.

Wellness and preventive care were listed as the next alternatives to reduce healthcare expenses. Investing in healthy employees can lead to lower costs in the future, thus leading to a better and efficient workforce. More than 50 per cent of businesses in the US offer preventive programmes to employees, including regular check-ups, screenings, health-education workshops and physical-fitness programmes.

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Several researches and analyses have taken place to prove that layoffs do not help organisations in any way to boost their profits. Many myths are attached to layoffs.

1. Increase in productivity: People think layoffs help increase the productivity of the company, as they help cut flab and make the company leaner. But a study conducted by Wharton professor, Peter Cappelli, found that while labour cost decreases during downsizing, sales per employee also goes down.

2. Reduction in cost: Another myth is that layoffs help cut costs. However, there is no logical reason to support this. A research conducted by professor Wayne Cascio of the University of Colorado lists some direct and indirect costs associated with layoffs. These include severance pay; paying out accrued vacation and sick pay; outplacement costs; higher unemployment-insurance taxes; the cost of rehiring employees when business improves; low morale and risk-averse survivors’ potential lawsuits and sabotage.

The research by Cascio also mentions that IBM had to spend 700 million dollars on employee restructuring in 2007 and Microsoft spent around 1.6 billion dollars during a mass downsizing activity in 2014 when they laid off 18000 employees.

3. Increase in profitability: Yet another myth that exists is that by cutting costs through downsizing, there will be an increase in the profitability of a company. This is also not true. A study of 122 companies found that downsizing further reduces the profitability of a company and the most affected are the organisations in the R&D intensive sectors. Cascio’s study of firms in the S&P 500 also established that companies which downsized remained less profitable than the ones that did not.

“Nowadays companies tend to measure profits on a short-term basis rather than focusing on the long-term impacts. Whenever they witness losses in back to back quarters, the shareholders and investors pressurise the management to take some major steps. Hence, they resort to laying off people as a short-term remedy rather than thinking about the long-term impact. I think it is foolish to do so. Layoffs should be the last option”

Another survey by the American Management Association on the companies’ own perceptions of layoffs reported that half the companies did not see any increase in operating profits and one third did not see any positive impact on the productivity of the workers.

“We cannot say that layoffs can increase the profitability of a company. It only helps to reduce the losses by cutting costs,” says Ramesh Shankar S, former EVP and head, HR, Siemens.

Amit Das, director and CHRO, Bennet & Coleman, adds, “It certainly reduces the fixed cost in the short term but the implications arising out of the negative internal and external environment, impact on reputation and goodwill, low morale and productivity, make the objective of ensuring profitability in a sustained manner extremely difficult.”

At the end of it all, we are still left with one question — Are layoffs necessary? Isn’t there another way to come out of bad times?

Let us take a classic example of an airline company which has never laid off a single employee in 40 to 45 years, that is, since its inception. Southwest Airlines, a US based company did not lay off a single employee even during the great recession period when many of its competitors were ‘forced’ to do so.

Experts say that no company wants a layoff to happen and it is a last option. But how did Southwest manage to avoid it?

“Layoffs certainly reduces the fixed cost in the short term but the implications arising out of the negative internal and external environment, impact on reputation and goodwill, low morale and productivity, make the objective of ensuring profitability in a sustained manner extremely difficult”

According to Shankar, in a manufacturing industry, material cost sums up to around 60-70 per cent of the total cost, and the cost of human resource is only 5 to 10 per cent.

“Nowadays companies tend to measure profits on a short-term basis rather than focusing on the long-term impacts. Whenever they witness losses in back to back quarters, the shareholders and investors pressurise the management to take some major steps. Hence, they resort to laying off people as a short-term remedy rather than thinking about the long-term impact. I think it is foolish to do so. Layoffs should be the last option,” opines Shankar.

Shankar suggests that rather than laying off people companies should look to minimise the major costs, which can differ from sector to sector. And if not fulltime employees, organisations can hire part-time, third-party or contractual employees to reduce the impact of unemployment.

Some may still argue that during layoffs mostly underperformers and disgruntled employees are targeted, which allows the organisations to increase productivity while claiming to have a positive effect on the corporate culture. But the fact remains that you cannot expect productivity from the remaining employees as their morale is already down and some may also be deeply affected by the thought of losing their friends and co-workers.

“Companies can and should use these opportunities to clean up and take the tough calls. Good times often lead to bad management practices because they tend to get hidden, and bad times force companies to review their bad practices and clean up”

“Such actions taken only during the layoff time will have no positive impact on corporate culture if not the reverse. We cannot expect to go for interior decoration when the house is on fire”. Nevertheless, a well-structured identification process backed by robust communication and adequate support during exit process helps to reduce the pain and the inevitable negative impact on the organisation’s reputation, besides low internal employee morale,” advises Das.

Hari T.N, head-HR, BigBasket, adds, “Companies can and should use these opportunities to clean up and take the tough calls. Good times often lead to bad management practices because they tend to get hidden, and bad times force companies to review their bad practices and clean up.”

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