News Analysis

Salesforce layoffs showcase bad recruitment strategy

by Dan Byrne on Jan 4, 2023

Salesforce doesn’t mind starting the new year with bad news. 

We’re barely five days in, and the cloud-based software giant has announced major staff layoffs and the closure of some of its global offices. 

In doing so, it becomes the latest big tech company to decide on significant downsizing. And this time, those in charge have quickly admitted that it results from a flawed recruitment process. 

Let’s dive deeper into it.

What’s the latest?

Salesforce has announced that 10% of its worldwide staff will be laid off “in the coming weeks” and that some of its regional offices will close.

It’s the latest bump in a rough road out of the pandemic for the company; it enters 2023, having lost nearly half its value over the previous twelve months. 

In a letter to all Salesforce employees, Chair and CEO Marc Benioff said that the company faced a “very difficult decision” motivated by an expected lull in customer activity.

“I’ve been thinking a lot about how we came to this moment,” he said. “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.”

What do the layoffs mean?

Benioff laid it out simply: the layoffs mean the company’s recruitment strategy failed. Now, perhaps far sooner than many thought, it is paying the price. 

At the height of the pandemic, when billions found themselves confined to their home, Salesforce saw a jump in custom and a growing gap in its workforce. This environment was ripe for a “hire, hire, hire” mentality, and Salesforce, like many other firms, just rolled with it. 

In hindsight, it didn’t do this with a full appreciation for the longer-term impacts.

So recruitment was at fault – how so?

Successful recruitment strategies are a careful balance. 

They’re supposed to ensure realistic staffing goals are met while considering the available talent and money. But as well as that, they’re supposed to feed into a company’s overall strategy, helping to ensure it remains healthy and profitable long-term.

It’s this last part that’s fallen flat in Salesforce’s case. It took care of a need, seized an opportunity, but placed more risk on its longer-term prospects in the process.

What looked like a successful response to an unprecedented demand for digital expertise now seems far too enthusiastic and ultimately unsustainable.

Is this isolated?

Certainly not. If you’ve been keeping up with big tech news in the past year, you’ll have seen that the waning pandemic and fears of recession have meant layoffs at multiple firms similar to Salesforce. 

In November 2022, Facebook owner Meta announced over 11,000 layoffs amounting to 13% of its total workforce. Amazon announced roughly similar downsizing at around the same time.

So what do these layoffs tell us?

It’s tricky to answer because they were borne of a complicated and unique situation.

The pandemic was an unprecedented blip in corporate activity, causing ripples not seen in most people’s lifetimes, spurring panic, fuelling uncertainty and encouraging action wherever there was a prospect for success.

This was the environment in which all companies – not just big tech firms – were trying to adapt their recruitment strategies.

We’re still discovering the pandemic’s full effects, but for now, we see examples of why recruitment strategies need to play a longer game. 

If there is a sudden increase in staffing needs, the board and executives should pinpoint why, whether the situation is likely to reverse, and how the company will manage that when the time comes. 

Playing this longer game, companies should strike a better balance in the numbers hired, meaning they can expand while avoiding a boom-bust-style recruitment saga.

Diploma in Corporate Governance

Enhance your career as a director. Develop the practical knowledge, insight and global mindset to be a great board director.

Learn more

Related Posts