Reasons Behind Elon Musk Huge Layoff of Twitter’s Employees

In October 2022, after Elon Musk acquired X (previously known as Twitter), Elon Musk layoff 80% of X’s employees, resulting in the social media platform currently having just 1,500 employees, compared to less than 8,000 when he acquired it(Priya Singh). Although layoff after the acquisition is common in the business world, 80% of jobs cut for X is worth attention especially when comparing with the percentage of layoff in other companies: Redfin (13%), Lyft (13%), Stripe (14%), Snap (20%), Meta (13%)(Harvard business review).

Saving Money or Not

In the interview, Elon Musk said this “drastic action” was needed as the company was facing a “$3bn negative cash flow position”. In his estimation, X only has “four months left.” However, Shannon Liss-Riordan, the attorney representing the plaintiffs in employees suing Twitter over the layoffs, said in an email: “While Elon Musk seems to think he’s saving the company money by avoiding these obligations, we intend to let him know that the cost of failing to live up to his responsibilities could be much higher(Daniel Wiessner).”

Indeed, from an ethical point of view, Elon Musk’s drastic action was obeying labor’s rights by firing employees without notifying workers and state and local governments 60 days ahead of the job cuts(Jacob Bogage). Meanwhile, former senior executives of Twitter said that Elon Musk had unpaid severance payments totaling more than $128 million(Money Watch).

The executives say that because Elon Musk didn’t want to pay them severance, he “concocted false reasons and appointed employees from various companies under his umbrella to defend his decisions(Money Watch).”

“Under Musk’s control, Twitter became an outlaw, defaulting on wages to employees, landlords, vendors, and others,” the lawsuit filed in federal court in the Northern District of California says.” Musk doesn’t pay his bills, believes the rules don’t apply to him, and uses his wealth and power to ride roughshod over anyone who disagrees with him(Money Watch).”

Besides damaging reputation and brand image, huge job cuts can potentially result in losing valuable intangible capital such as institutional knowledge and talent. Meanwhile, job cuts can undermine a company’s financial stability and profitability in the short term due to disruption of a company’s operations, productivity, and ability to execute projects and goals. As a result, according to mutual fund Fidelity, X has lost 71 percent of its value since Elon Musk bought it (Gabbatt).

As mentioned above, X’s dramatic layoff not only damaged the brand image of X but also negatively impacted X’s financial performance. Hence, an interesting question was raised: what motivates Elon Musk’s dramatic layoff?

Deeper insight IA deeper insight into Elon Musk’s jobs cut

Deeper insight into Elon Musk’s jobs cut is needed before answering the question above. Elon Musk said that the reason behind job cuts is to reduce the cost and increase efficiency. “Twitter was in a situation where 10 people were in a meeting, one person was on the gas and nine people were on the brakes, so you couldn’t get very far,” he said. Musk added that other large tech companies could make further cuts without affecting productivity.

Nevertheless, this is not a logical explanation for large layoffs. If jobs cut can improve the company’s overall performance, then: 1) 80% of the fired employees don’t have any work to do; 2) the rest 20% of employees are now each doing the work of four people, and they are indifferent to it; and 3) X finds ways to be more productive.

However, the above scenarios are not valid. To begin with, Twitter cannot have 80% of the employees wasted but remain competitive in the social media market. Additionally, even if the remaining 20 percent of employees can accomplish more than four times the original workload, it is unlikely that they will have no complaints. Employee dissatisfaction, on the other hand, is highly likely to lead to a decline in efficiency, which can negatively affect the performance of the entire company. Lastly, the easiest way to become more efficient is to stop doing a lot of things and focus only on those tasks that will be immediately apparent if not done. The first tasks we need to give up are those that don’t need to be closely monitored, such as getting new clients and looking after old ones, followed by those that won’t show an impact until the long term, such as maintenance. There may be some tasks we no longer need to do, but do you want to leave that up to your line manager?

We need to admit that jobs cut may improve X’s performance, but according to the analysis above, it is more harmful and beneficial. Therefore, there must be a secret behind the layoffs.

Secret behind the layoffs

A current employee previously told Insider that the firings appeared to be aimed at many in the internal Slack channel “Social Watercooler”, a platform that has around 2,000 members and has long been used by staff to chatter and criticize the company(Mann).

In addition, the week before the layoffs, communication between Twitter employees became difficult. Five current and former employees told The New York Times that Slack, the company’s internal messaging service, was taken offline, leaving employees unable to chat with each other or look up company data(The New York Times).

According to Wired, certain departments have been cut altogether, such as Twitter’s “Ethical AI” team(Jacob Bogage). Employees in the company’s human rights department — which monitors content to protect individuals during global conflicts and crises — tweeted that the entire department had been laid off (Jacob Bogage).

Image source: https://www.washingtonpost.com/technology/2022/11/04/twitter-layoffs-explained/#F46F2ER57NBWBD62NQ7FH66ICA-2

Whether it’s the ethical AI team being laid off altogether, or the intervention in communication between employees before the layoffs hints at an unspeakable conspiracy behind this drastic layoff at X.

What do you think is the conspiracy behind this, and what is Elon Musk’s real agenda? Leave your guesses below the article.

Bibliography:

Daniel Wiessner. Twitter Again Accused of Legal Violations during Mass Layoffs | Reuters. 5 Apr. 2023, https://www.reuters.com/legal/twitter-again-accused-legal-violations-during-mass-layoffs-2023-04-04/.

Gabbatt, Adam. “Value of X Has Fallen 71% since Purchase by Musk and Name Change from Twitter.” The Guardian, 2 Jan. 2024. The Guardian, https://www.theguardian.com/technology/2024/jan/02/x-twitter-stock-falls-elon-musk.

Harvard business review. What Companies Still Get Wrong About Layoffs. https://hbr.org/2022/12/what-companies-still-get-wrong-about-layoffs. Accessed 28 June 2024.

Jacob Bogage. “Elon Musk’s Twitter Layoffs, Explained.” Washington Post, 4 Nov. 2022, https://www.washingtonpost.com/technology/2022/11/04/twitter-layoffs-explained/.

Mann, Jyoti. “Read the Midnight Email Elon Musk Sent Twitter Staff Telling Them to Work ‘long Hours at High Intensity’ — or Quit.” Business Insider, https://www.businessinsider.com/read-musks-midnight-email-telling-twitter-staff-work-long-hours-2022-11. Accessed 28 June 2024.

Money Watch. Fired Top Twitter Executives Sue Elon Musk for More than $128 Million in Severance — CBS News. 5 Mar. 2024, https://www.cbsnews.com/news/fired-top-twitter-executives-sue-elon-musk-for-more-than-128-million-in-severance/.

Priya Singh. “Elon Musk Says Other Tech Companies Should Lay off Employees like He Did at Twitter.” Business Today, 25 May 2023, https://www.businesstoday.in/technology/news/story/elon-musk-says-other-tech-companies-should-lay-off-employees-like-he-did-at-twitter-382735-2023-05-25.

The New York Times. In Latest Round of Job Cuts, Twitter Is Said to Lay Off at Least 200 Employees — The New York Times. https://www.nytimes.com/2023/02/26/technology/twitter-layoffs.html. Accessed 28 June 2024.