Layoffs: Companies copy others 'in almost mindless imitation,' professor says

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The number of companies implementing layoffs is growing with most citing challenging economic conditions and recession fears as the driver. 

Even with high borrowing rates and persistent inflation, Stanford Graduate School of Business professor Jeffrey Pfeffer noted that companies tend to copy each other "in almost mindless imitation."

"It is a process called social influence—people, including managers look to what others are doing (and saying) in a process of social contagion," Pfeffer said, adding that this can even occur with layoffs. 

Dr. Yalda Safai, a psychiatrist based out of New York City, told FOX Business that panic, hysteria and anxiety are contagious. 

With recession fears growing, "a lot of the companies, out of panic, started to lay off people," Safai said. 

More powerful than facts

Worker selects and packs items during Cyber Monday at the Amazon fulfilment center in Robbinsville Township in N.J., Nov. 28, 2022.  (Reuters/Eduardo Munoz / Reuters Photos)

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As a result, Safai said other companies who are observing their competitor "getting ahead of the game by cutting their loses" may be questioning whether they are doing something wrong. 

So even if a company isn't struggling they may be pressured to take action now, she added. 

Amazon, Apple, Meta Platforms, Lyft and Twitter were among technology companies announcing hiring freezes or layoffs, with Amazon possibly reducing its workforce by as many as 20,000. In fact, Amazon CEO Andy Jassy told employees in a memo made public that layoffs will continue in 2023 for the same reasons. 

Safai isn't discounting the fact that the economy is playing a role in this decision and that at first, it has been the driver for many. However, she argued that this trend has been accelerated by feelings, which she argued are a "more powerful force than facts are." 

We saw evidence of this during the pandemic, for instance, when some people started to create conspiracy theories, she said. 

"Feelings are very powerful. We underestimate that because we think that we're intelligent creatures, so we shouldn't be a victim of our own feelings and instead should go by what our brain is saying," she added. "But that's not always the case." 

Pfeffer even argues that there is evidence that suggests layoffs "do little to enhance productivity, profitability, or innovation and growth."

In a recent Stanford University article, Pfeffer elaborated. saying that severance packages are costly and that layoffs increase unemployment insurance rates. He also noted that cuts can hurt workplace moral and productivity for remaining employees.

BuzzFeed

In this photo illustration, a woman holds a smartphone with the BuzzFeed logo displayed on the screen.  (Rafael Henrique/SOPA Images/LightRocket via Getty Images / Getty Images)

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The media industry was also recently hit hard as hundreds of industry staffers were laid off last week including those who worked for CNN and Gannett, company that owns dozens of local media outlets along with USA Today. 

BuzzFeed became the latest company on Tuesday to announce a reduction in its workforce, citing the economic downturn that it projects will extend into 2023. 

CEO Jonah Peretti argued the layoffs, comprising about 12% of its workforce, are a necessary measure to reduce costs at a time when revenues are being impacted, in part, by the economy.

The company expects fourth quarter revenue of $129 to $134 million and adjusted EBITDA of $12.5 to $17.5 million. Last year, fourth quarter revenue came in at $397.6 million and adjusted EBITDA was $41.5 million.

"Our revenues are being impacted by a combination of worsening macroeconomic conditions, and the ongoing audience shift to vertical video, which is still developing from a monetization standpoint," Peretti said. "That requires us to lower our costs."   

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Peretti said reducing its workforce "is an essential part of cost cutting" given the fact that "staff salaries are the single largest cost at the company."

PepsiCo

PEPSICO TO LAY OFF HUNDREDS OF EMPLOYEES

8: Pepsi products are displayed for sale in a Target store on March 8, 2022, Los Angeles, Calif. (Photo by Mario Tama/Getty Images / Getty Images)

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Likewise, PepsiCo is also eliminating hundreds of jobs at its facilities in Texas, New York, and Illinois as it works to streamline marketing and centralize manufacturing. In a memo, the company said it's "facing a variety of headwinds and accelerated pace of change sweeping our industry" and that it needs to simplify and modernize its business. 

DoorDash

DoorDash delivery person is pictured on the day they hold their IPO in the Manhattan borough of New York City, New York, U.S., December 9, 2020. REUTERS/Carlo Allegri (REUTERS/Carlo Allegri / Reuters Photos)

DoorDash announced it was cutting over 1,200 roles in order to reduce operating expenses after rapidly hiring and now battling a challenging economy. 

The food delivery company faced "sudden and unprecedented opportunities" after the pandemic gripped the world, according to CEO Tony Xu. To keep up with the growth, the company sped up hiring and started many new businesses, he added. 

Xu admitted that the company continues to grow fast but given how quickly it hired employees, "its operating expenses – if left unabated – would continue to outgrow our revenue." The chief executive even blamed himself for not better managing team growth. 

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