Zoom layoffs highlights ‘mistakes’ of overhiring during the pandemic
The technology industry is not done with its season of firing. This week, Zoom Video Communications joined its peers in announcing layoffs that would impact approximately 1,300 of its employees. The move by Zoom didn’t come as a surprise, since the company grew tremendously during the pandemic, especially between 2020 and 2021. Unfortunately, it is time to pay the price, even if Zoom was the biggest corporate success stories to come out of the pandemic.
Zoom – the next generation
From having just 10 million daily meeting participants at the end of 2019, the video conferencing platform was hosting a staggering 300 million daily participants by April 2020. Zoom became a household name, and for many, a necessity for work and play. The company not only saw a big surge in the use of its free service, but also a spike in paying customers. Across 2020 alone, Zoom’s growth skyrocketed to heights never-seen-before, with revenues soaring 326% year-on-year to US$2.6 billion.
Even in the final quarter of the year, sales soared by a staggering 369%. But as with most tech companies during the pandemic, unprecedented volume of growth provided Zoom with the opportunity to expand its group size. So the hiring spree began, and from just having around 2,400 employees at the beginning of the pandemic, Zoom’s number of employees shot up to more than 5,700 by mid-2021.
Zoom boss Eric Yuan has even repeatedly said that working from home is here to stay – but that did not guarantee a sustainable growth for the company, or for any tech companies as a matter of fact. As time passed and normalcy began to return, many tech companies started feeling the brunt of the overhiring that took place between 2020 and 2021.
For context, so far in 2023, technology companies have laid off more employees than in any other month since the pandemic started. Based on data compiled by Layoffs.fyi, employers in the tech sector collectively cut more than 150,000 jobs in 2022 — and in just the first three weeks of 2023, layoffs climbed to more than 30% of that figure.
Zoom layoffs: “Mistakes” of overgrowing
Yuan admitted the company staffed up “rapidly” during the early days of the pandemic to support the boom in demand. “Within 24 months, Zoom grew 3x in size to manage this demand while enabling continued innovation,” Yuan wrote. Therefore, Yuan said Zoom has made the “tough but necessary decision” to reduce its team by approximately 15% and “say goodbye to around 1,300 hardworking, talented colleagues.”
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The layoffs in Zoom also come at a time when the video conferencing company is seeing slow user growth and a fall in profits. Yuan also noted that he and other executives would take a significant pay cut, after acknowledging he made “mistakes” in how quickly the company grew during the pandemic. He noted that members of the executive leadership team will reduce their base salaries by 20% for the coming fiscal year and forfeit their fiscal year 2023 bonuses.
The memo, dated February 7, also noted that for US-based employees who are impacted, they would have received an email within the next 30 minutes that reads “[IMPACTED] Departing Zoom: What You Need to Know. Non-US employees will be notified following local requirements.”
“As the CEO and founder of Zoom, I am accountable for these mistakes and the actions we take today – and I want to show accountability not just in words but in my own actions,” he wrote. “To that end, I am reducing my salary for the coming fiscal year by 98% and foregoing my FY23 corporate bonus.”
Yuan however still stands by his claim that people and businesses continue to rely on Zoom. “But the uncertainty of the global economy, and its effect on our customers, means we need to take a hard – yet important – look inward to reset ourselves so we can weather the economic environment, deliver for our customers and achieve Zoom’s long-term vision,” he added.