Rank-and-file workers are not the only employees that have been impacted by the widespread layoffs and cost-cutting measures that have taken hold since the Great Resignation. In 2023, nearly half of all observed job cuts were manager-level or higher, according to research from Live Data Technologies. Layoffs in leadership made up almost two times the share of total terminations compared to the previous five-year average.
Data from Challenger, Gray and Christmas reveals more than 1,500 CEOs left their positions last year. This was the largest number of departures since Challenger started tracking this data in 2002, as reported by CNBC.
Investors push for layoffs at the executive level as a means to address financial concerns and unmet growth targets. Organizations may eliminate executive positions as part of a firmwide restructuring to stem costs. Job cuts at this level can also occur due to shifts in strategy, mergers and acquisitions.
Highly compensated executives may be pushed out the door for their poor decision making that landed the company in financial turmoil, although rank-and-file workers generally bear the brunt of downsizing when their companies aren’t doing well.
Executive Pay Cuts
In addition to transitioning out of their roles, 66% of executives have taken a pay cut in the past six months, according to the Society for Human Resource Management, with 94% of those attempting to prevent or reduce the scale of layoffs at their respective companies.
Economic turbulence, due to high inflation, operating costs and interest rates, along with the skyrocket growth of artificial intelligence, prompted companies to transform their businesses, mitigate costs and budget more efficiently.
Shareholders, activist hedge funds and corporate boards took action by scaling back the pay of top chief executives.
Some CEOs, including Alphabet’s Sundar Pichai, Apple’s Tim Cook and JPMorgan’s Jamie Dimon, were given pay cuts amid the corporate belt-tightening trend. Zoom’s chief executive and founder Eric Yuan announced that his compensation will be slashed by 98% and he will be forgoing his bonus, as the company lays off 15% of its workforce. Additionally, Wall Street investment banks, including Goldman Sachs, Morgan Stanley and Citigroup, cut managing director and senior leadership roles at a high rate.
Disadvantages Of Laying Off Middle Managers And Executives
After years of overhiring and high labor costs, Meta CEO Mark Zuckerberg grew concerned over the proliferation of managers within the social media giant, stating during an internal question-and-answer session, “I don’t think you want a management structure that’s just managers managing managers, managing managers, managing managers, managing the people who are doing the work.”
He asserted that the company became too bloated with personnel and costs. In response, Zuckerberg christened 2023 as the “year of efficiency,” which is a socially acceptable term for getting rid of highly paid managers that have built up large fiefdoms without adding value.
However, there are consequences to letting go of managers. With limited management, there is a decreased number of supervisors who are available to mentor and coach their teams to succeed.
The workload would get dumped on the remaining managers, which is problematic, since they already experience the highest levels of burnout in the workplace. According to a recent survey by the UKG Workforce Institute, 86% of managers are experiencing job burnout, including 73% of C-Suite leaders.
Source: Forbes
