Salesforce on Wednesday announced a plan to cut about 10% of its workforce and reduce its real estate footprint, joining the growing number of companies laying off employees as the tech industry confronts widening economic headwinds.
The company’s chair and co-CEO, Marc Benioff, said most of the layoffs will take place in the coming weeks. He explained in his letter to employees that Salesforce grew headcount too much during the pandemic, compounding its financial strains as revenue eventually declined.
“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,” Benioff wrote.
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Between January and October 2022, Salesforce reported a headcount of 73,541 and 79,824 global employees, per CNN.
Salesforce was not alone though. Several other companies in the tech sector upped their headcount following the pandemic-induced economic boom that forced a shift to digital life. But it was short-lived. As life returns to normal, the companies begin to face the reality of declining revenue. That was exacerbated by the recent Russia-Ukraine war that has triggered inflation and potential recession across economies globally.
The situation has created a buoy for layoffs by a growing number of companies in the tech sector. On Wednesday, video-sharing platform Vimeo said in a regulatory filing that it would cut approximately 11% of its workforce.
Meta, Twitter, Amazon and other firms have also announced cutting workforce as consumer demand dwindles. Their CEOs, just like Benioff, admitted miscalculating the pandemic boom that they based their decision to increase headcount on.
Following the announcement, Shares of Salesforce surged more than 3% in early trading Wednesday.
In his letter Wednesday, quoted by CNN, Benioff said impacted employees in the United States will “receive a minimum of nearly five months of pay, health insurance, career resources, and other benefits to help with their transition.” He added that those outside the United States “will receive a similar level of support.”
“The employees being affected aren’t just colleagues. They’re friends. They’re family. Please reach out to them. Offer the compassion and love they and their families deserve and need now more than ever. And most of all, please lean on your leadership, including me, as we work through this difficult time together,” Benioff said.
Besides layoffs, firms in the tech sector are taking stringent measures, including operational changes, to cut cost. CNN reported that Salesforce made a significant change to its C-Suite and co-CEO and Vice Chair Bret Taylor said he is stepping down from his roles at the company at the end of January.
Salesforce is planning to trim employee numbers by 10%, amid concerns over the current economic climate. In a regulatory filing on Wednesday, the software company, which counts around 80,000 staff, said it hired more people than it needed during the pandemic and had already been hit by changes in customers’ spending habits. Its workforce restructuring is expected to finish by the end of the 2024 fiscal year and cost the company up to $2 billion. Salesforce previously laid off hundreds of people in November, mainly from sales. (LinkedIn News)