Tech layoffs: ‘Companies got carried away with overhiring,’ former Medtronic CEO says
Former Medtronic CEO and Author of 'True North, The Emerging Leader Edition' Bill George joins Yahoo Finance Live to discuss layoffs across the tech industry, tech leadership, how Apple could escape layoffs, and the outlook for the tech sector.
BRIAN SOZZI: PayPal is the latest big tech company to announce layoffs, cutting nearly 2,000 workers amid a challenging macro environment. But as the sector escalates cost cutting measures, who is to blame-- the economy or company leadership?
Former Medtronic CEO and author of "True North" Bill George joins us now. Bill, always great to get some time with you. What grade would you give the likes of Evan Spiegel and Mark Zuckerberg on the operational front, given both those companies have announced thousands of layoffs?
BILL GEORGE: Not very high. The only one that hadn't announced big layoffs is Tim Cook at Apple. I think these companies got carried away with overhiring as if growth goes to the sky. And they were not careful. And they just hired willy-nilly. And now they're faced huge layoffs.
And I tell you, the impact is going to be on their culture. This is kind of-- for a lot of employees, this is the first time we've seen job cuts in tech for about 13 years, since 2009-- or 14 years. But I think they're really facing reality.
And I think it's going to be a douse of cold water for a lot of these employees saying maybe this culture is not going to be as great as I thought. And I think they're going to have a real cultural fallout from the kind of arbitrariness-- some of them fired people by Twitter. I mean, how would you like to be fired by Twitter, just no one having the courtesy to have you sit down and talk about it?
BRAD SMITH: Yeah. So, Bill, from that perspective, is there any CEO or leader, from your perspective, that has done the layoffs correctly in order to maintain corporate culture at a time where it's extremely difficult?
BILL GEORGE: Well, I think Satya Nadella at Microsoft tried, but they still laid off 10,000 people. So they, too, are caught in hiring too many people. So I think they have not taken it a step at a time, and they just kind of boom, there you go. Look at Amazon-- 18,000 people. That's a lot of folks. I know it's a big workforce, but still. And I think it's going to have a real impact on how they think about talent.
So here's the problem is they're still trying to recruit talent. There's still a shortage of talent. So it's not like there's all this excess talent out there. So are they getting rid of the good people, the bad? Are the great people going to stay or are they going to move on? That's the real question because this business, I am very confident tech is going to continue very solid.
And these companies are making tens of billions of profits. So they're not exactly hurting financially. They're not doing this because they're in deep financial trouble. It may be because their stock price turned down 20% last year, on average. But I really think the real issue is are they going to continue to get talent after they've been so aggressive in firing people and not doing it selectively?
BRAD SMITH: Bill, last time we had on, I really valued your insights around how some of the executive leadership can really promote diversity, equity, and inclusion at their companies, especially at the leadership capacity. But when you're going through some of the large cuts, it raises this larger question of, how do you still maintain that and the proper way to make sure that you're not just going through, as we had seen in some reports, where you're seeing teams gutted and that really accounts for much of the diversity, the inclusion at some companies?
BILL GEORGE: Boy, it sure does. And let's just take women for one example, which is a real paucity of females in top roles in the tech industry. 56% of the cuts to date are women, which is shocking as well, considering the high prominence of males in these tech roles. So I think-- yeah, I think diversity is a real issue.
And I think there's another issue no one is talking about, and that's remote work and that people aren't even in touch. A lot of these people never even been into the office. They don't know people. They aren't working with them. And I can tell you if the cuts come along who's going to get cut it's going to be the remote workers.
I mean, I'm down here in San Francisco right now. The Salesforce Tower, the largest building in San Francisco, is largely empty. So I think these companies have to do it. You remember that huge Apple complex they built. Meta ha built a huge complex. I think they're going to have to rethink their whole structure, their whole workforce.
Why didn't they hire more contract people? That's easy. I don't feel as much remorse when you let contract people go. They're there for 90 days or 180 days. Instead, they hired permanent employees.
So at Medtronic, we had a different attitude, as I used to ask the question, if you're going to hire this person, can you assure me we're going to have them through a downturn, which inevitably going to come? And if not, why don't we just hire some contract people? These are mostly software-- software engineers, so they can be hired on contract.
JULIE HYMAN: Of course, Bill-- it's Julie here-- when things are going well, you feel like they're always going to be going well, right, I guess, in some of these situations. So for the companies that have avoided the so-called overhiring, what has differentiated them? How do you think that they have avoided that?
BILL GEORGE: I think they had been more careful in hiring. See, if you-- if you really have to be careful on when you're going up to think that this test out of the growth is going to continue, and you can get a little euphoric, particularly at the middle managers that are hiring these people, not really thinking through how assured are we of the growth?
I mean, look at Meta and Mark Zuckerberg, totally overhired. $10 billion a year he's spending on virtual reality, way overhired. And so they're not having to face reality. They should have done that a long time ago. So shame on them. You know, ironically, you've got some great leaders in this field and-- but they're starting to learn the challenges of running a company and not just having all these advertising dollars come flowing in. And I think that's the key.
So now, I think it's going to be a big reassessment about the whole workforce. How do you get talent? How do you keep talent? How do you get diverse talent?
How do you provide opportunities for women, BIPOC, non-Americans to reach the top of your company? How do you open up more opportunities? And are we going to have all remote work in tech?
You know, and I realize there's real issues there, but I think they're going to have to get more people back into the office, working in teams, collaborating in person, and not just churning out software code. I realize there are people that do that, so you'll always have a certain hybrid workforce. But I think this is going to cause them to rethink.
Now ironically, I think I read somewhere that 28% of the cuts are coming to human resources, which is kind of hard to believe. But HR staffs are going to have to rethink what is their work and what are they doing and how are they helping these CEOs build the workforce they want for the future? So it's not just about cutting back. It's where are you going to go? It's not like the tech industry is in position the steel industry is in. No, it's a growth industry. It's going to continue growing.
BRIAN SOZZI: Bill, you mentioned Apple CEO Tim Cook. Do you think he's one of the most underrated CEOs in the public company game today?
BILL GEORGE: I do because Steve Jobs gets all the credit. No, Steve Jobs is a genius inventor, just like Elon Musk is of this era. But Tim has run an incredible company with great discipline, great discipline in hiring, great discipline in quality and turning out-- now, he is in the product business.
So it's not just turning out software. But, yeah, they do a tremendous amount of software. And I think he has done that very, very well and been careful about overhiring and going overboard in kind of the new, new thing, chasing that. And I think that's the big risk.
BRAD SMITH: All right. Well, we know that they're going to be reporting earnings tomorrow, and we're going to hear the silky smooth voice of Tim Cook. We'll see what he has to say on the call. Former Medtronic CEO, also a silky smooth voice and author of "True North," Bill George. Thanks so much for taking the time today, Bill. Appreciate it.
BILL GEORGE: Thank you. Anytime. Join me on your show.
BRAD SMITH: Absolutely.