Founder: Turnaround Talk
During a 2021 interview with Corporate-911, Robin Nicholson (the company’s Director) pointed out that there are external forces which are applying significant pressure on companies and are becoming root causes of distress. Nicholson pointed out that addressing these challenges forces turnaround professionals to have very different conversations with distressed clients.
One of the major changes that was brought about by the Covid Pandemic came in the retail space. The physical lockdown measures imposed globally meant that there was an initial shock to retail as customers could not come to their stores. However, the internet provided a perfect sales platform and saw many companies invest heavily into online retail as an option to keep their companies afloat.
This proved to be a shrewd move as the publics attraction to online retail has only gained momentum. This has presented companies with an additional challenge as many global companies now find themselves overstaffed as a result.
Trouble at Amazon
An AFP article points out that global retail giant, Amazon, announced on 4 January that it will cut more than 18 000 jobs from its workforce, citing “the uncertain economy” and the fact the online retail giant had “hired rapidly” during the pandemic.
“Between the reductions we made in November and the ones we’re sharing today, we plan to eliminate just over 18 000 roles,” said CEO Andy Jassy in a statement to staff.
The AFP article adds that US media had reported in November that the company was planning to lay off 10 000 people. Amazon had said that layoffs were planned but did not give a figure until now.
Jassy said the company’s leadership was deeply aware that these role eliminations are difficult for people, and we don’t take these decisions lightly.
“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,” he said.
The AFP article points out that some of the layoffs would be in Europe, Jassy said, adding that the impacted workers would be informed starting on 18 January.
He said the sudden announcement was being made “because one of our teammates leaked this information externally.”
“This year’s review has been more difficult given the uncertain economy and that we’ve hired rapidly over the last several years,” Jassy said.
But he added that “Amazon has weathered uncertain and difficult economies in the past, and we will continue to do so.”
The AFP article points out that the retailer had hired with a vengeance during the pandemic to meet an explosion in demand for deliveries, doubling its global staff between the beginning of 2020 and the start of 2022.
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Salesforce to slash thousands of jobs
An article by Bloomberg points out that Salesforce is facing similar problems after aggressive hiring.
The Bloomberg article points out that Salesforce said it would cut about 10% of its workforce after the enterprise software company hired too many people in the lead-up to the economic downturn and customers became more cautious with spending.
The company, which has about 80 000 employees, said in a regulatory filing on 4 January that it aims to complete the workforce restructuring by the end of fiscal 2024 and real estate reductions in fiscal 2026.
The article adds that the software giant is under pressure from investors including activist Starboard Value to improve margins. Meanwhile, it has projected the slowest revenue growth for the current quarter since going public in 2004 and has seen top executives Co-Chief Executive Officer Bret Taylor and Slack Chief Executive Officer Stewart Butterfield announce their departures.
“The environment remains challenging and our customers are taking a more measured approach to their purchasing decisions,” Chief Executive Officer Marc Benioff said in a letter to employees on Wednesday. “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.”
Salesforce, the largest private-sector employer in its hometown of San Francisco, has almost tripled its workforce in the past five years, in large part through dozens of acquisitions. It previously cut hundreds of workers concentrated in sales teams in November 2022.
A sign of a recession?
Nicholson is a veteran of the media industry and speaking from experience, he pointed out that reducing spending on advertising is one of the sure-fire signs that a tough global economic environment is on its way. This was felt within the South African Broadcasting Corporation in 2008 when the Global Financial Crisis had a significant impact. Spending on advertising in the media space decreased so significantly that many stations were forced to downsize.
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Many global economists are predicting that we are in for a global recession. This also brought about massive political change globally as Former US President Barack Obama had to deal with the fall out of the GFC in his first Presidential term.
Ignoring the Salesforce conundrum, retail’s fine balancing act is clear. There is increased interest in online shopping which will naturally require a smaller staff complement. Couple this with the fact that spending is going to be under pressure, and you get two major reasons why retail business owners would be in favor of looking at reducing staff. Strike number three is that there is a significantly reduced revenue stream in the form of online advertising which is something that many online businesses have leaned on in the past.
This doesn’t mean that retail is dead, far from it. South Africa is a prime example of how retail can never completely replace traditional retail. Hybrid models need to take precedence and the fine balancing act for retailors is to have enough staff to cater for the needs of online and traditional retail. With spending being under pressure, this may not be an easy task.
