Facebook-parent Meta Platforms announced on Tuesday that it would be cutting 10,000 jobs as part of a wider restructuring plan. This marks the first instance of a big tech company announcing a second round of mass layoffs amidst an economic downturn. The job cuts are expected to result in significant cost savings for the company, which has been struggling with a post-pandemic slump in advertising spending.
The announcement was met with enthusiasm by investors, as Meta's shares jumped 6% following the news. However, for the affected employees, the news is likely to come as a significant blow. The job cuts will be accompanied by the scrapping of plans to hire for 5,000 open positions, the cancellation of lower-priority projects, and the flattening of layers of middle management.
In a message to staff, Chief Executive Mark Zuckerberg expressed concern about the economic outlook and the need to prepare for the possibility of a prolonged economic downturn. "I think we should prepare ourselves for the possibility that this new economic reality will continue for many years," he said. The move comes amidst concerns about rising interest rates and their impact on the economy, which have prompted a series of mass job cuts across corporate America.
Meta has been pouring billions of dollars into building the futuristic metaverse, but has struggled to maintain advertising revenue in the face of economic uncertainty. As a result, Zuckerberg has promised to make 2023 the "Year of Efficiency", and the latest restructuring plan is expected to result in significant cost savings. Meta now expects expenses in 2023 to come in between $86 billion and $92 billion, lower than the $89 billion to $95 billion forecast previously.
The restructuring plan will also involve removing multiple layers of management, asking managers to become individual contributors, and giving them fewer than 10 direct reports. This, in turn, will make the organization "flatter", according to Zuckerberg. "We don't expect to grow headcount as quickly, it makes more sense to fully utilize each manager's capacity and defragment layers as much as possible," he said.
This is not the first time Meta has undergone significant restructuring. In November 2022, the company announced the first mass layoffs in its 18-year history, resulting in the slashing of 11,000 jobs. The company's headcount at the end of 2022 stood at 86,482, up 20% from the previous year. The tech industry as a whole has laid off nearly 290,000 workers since the start of 2022, with around 40% of these layoffs coming this year alone, according to layoff-tracking site layoffs.fyi.
While the job cuts will undoubtedly be a difficult time for affected employees, Meta's restructuring plan is expected to help the company weather the economic uncertainty facing the tech industry. The move towards greater efficiency and flatter organizational structures could also have wider implications for the industry as a whole, as companies seek to streamline their operations and reduce costs in the face of economic challenges.