The news: Meta and Microsoft are using performance-related layoffs to streamline operations.

• Meta plans to cut 3,600 jobs (5% of its workforce) to “raise the bar” on performance standards, with plans to backfill roles later this year.
• Microsoft is in a hiring freeze and will lay off about 1% of its team to reduce costs.

Wavering focuses: Microsoft is culling employees in divisions that don’t align with CEO Satya Nadella’s prior statements about the company’s top interests.

“If you’re faced with the tradeoff between security and another priority, your answer is clear: Do security,” Nadella wrote to employees in May, months before Microsoft’s massive Windows outage. However, layoffs are hitting experiences and devices, sales, gaming, and security.

Trimming the fat: Investors are pushing for returns on Big Tech giants’ heavy AI investments. Reducing workforces could buy time for their AI initiatives to pay off.

In September, Amazon said it would reduce manager roles to boost the ratio of individual contributors to managers to 15% by the end of Q1 2025, a move that could save it about $3 billion this year, per Morgan Stanley.

RTO rejection: Amazon’s full-time return-to-office (RTO) mandate was set to start January 2, though a relatively small number of offices face delays due to a lack of space.

After Amazon CEO Andy Jassy’s RTO memo was released in September, 73% of employees started considering looking for a new job, per a Blind survey.

Social shift: Meta and Amazon are also moving away from diversity, equity, and inclusion (DEI) initiative programs.

While these decisions could hurt employee morale and public perception—and may even push some workers to resign—it matches efforts from Jassy and Meta CEO Mark Zuckerberg to support the incoming Trump administration.

Our take: Tech companies may be managing AI costs by shifting to a leaner, more strategic workforce. Before backfilling begins, remaining employees may need to handle extra workloads to cover the layoffs’ impact, which could cause further attrition and damage team morale.

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