Amazon and Salesforce cut headcounts as the economic downturn takes its toll

Amazon and Salesforce have each announced a round of job cuts in the latest sign of the downturn in the macro-economic environment. 

Amazon intends to cut more than 18,000 jobs, the largest number in the firm's history, mostly from its consumer retail business and its human resources division. In a memo to staff, CEO Andy Jassy said the firm had “hired rapidly over several years”, but cited an “uncertain economy” as necessitating a reining in: 

This year’s review has been more difficult given the uncertain economy and that we’ve hired rapidly over the last several years. In November, we communicated the hard decision to eliminate a number of positions across our Devices and Books businesses, and also announced a voluntary reduction offer for some employees in our People, Experience, and Technology (PXT) organization. I also shared that we weren’t done with our annual planning process and that I expected there would be more role reductions in early 2023.

Today, I wanted to share the outcome of these further reviews, which is the difficult decision to eliminate additional roles. Between the reductions we made in November and the ones we’re sharing today, we plan to eliminate just over 18,000 roles. Several teams are impacted; however, the majority of role eliminations are in our Amazon Stores and PXT organizations.

He added: 

Amazon has weathered uncertain and difficult economies in the past, and we will continue to do so. These changes will help us pursue our long-term opportunities with a stronger cost structure; however, I’m also optimistic that we’ll be inventive, resourceful, and scrappy in this time when we’re not hiring expansively and eliminating some roles. Companies that last a long time go through different phases. They’re not in heavy people expansion mode every year. 

We often talk about our leadership principle Invent and Simplify in the context of creating new products and features. There will continue to be plenty of this across all of the businesses we’re pursuing. But, we sometimes overlook the importance of the critical invention, problem-solving, and simplification that go into figuring out what matters most to customers (and the business), adjusting where we spend our resources and time, and finding a way to do more for customers at a lower cost (passing on savings to customers in the process). Both of these types of Invent and Simplify really matter.

Difficult decision

On a similar theme, Salesforce announced plans to cut its headcount by ten percent, around 7000+ roles, stating that it has been left with “too many people” on the back of a combination of rapid hiring and the current economic slowdown.  In a letter to staff, CEO Marc Benioff said: 

We have never been more mission-critical to our customers. We have an unparalleled ecosystem, with thousands of partners and millions of Trailblazers building their companies on our platform.

However, the environment remains challenging and our customers are taking a more measured approach to their purchasing decisions. With this in mind, we've made the very difficult decision to reduce our workforce by about 10 percent, mostly over the coming weeks.

I've been thinking a lot about how we came to this moment. As our revenue accelerated through the pandemic, we hired too many people leading into this economic downturn we're now facing, and I take responsibility for that.

The firm also plans what a regulatory filing calls “select real estate exits and office space reductions within certain markets”. This was hinted at in the last quarterly analyst call when CFO Amy Weaver said the company would “continue to review around our real estate footprint”. The company had already begun sub-letting parts of certain offices as far back as last summer. 

Both Jassy and Benioff emphasized redundancy packages for affected staff. Jassy said: 

We are working to support those who are affected and are providing packages that include a separation payment, transitional health insurance benefits, and external job placement support.

Meanwhile Salesforce will be offering “nearly five months of pay, health insurance, career resources, and other benefits to help with their transition” to US workers, who make up around 55% of the total headcount as of the latest figures. Anyone outside of the US will receive “a similar level of support, and our local processes will align with employment laws in each country,” according to Benioff. 

My take

Tough decisions being made in tough times. These are only the latest indicators of the economic downturn’s impact on the tech sector; sadly they won’t be the last. It’s going to be a bumpy ride.