Don’t blame your boss if you lose your job this year due to a recession.
Big Data is to blame.
According to a recent survey by Capterra, which helps small businesses choose software, a whopping 98% of human resource leaders say they’ll rely at least partly on software programmes, or algorithms, to decide who to lay off if a recession occurs in 2023.
According to Capterra, a unit of tech research giant Gartner, this is up from just 2% of large companies that turned to Big Data during the Great Recession of 2007-09. Capterra surveyed 300 HR managers in November, mostly at larger companies but also at some small and medium-sized businesses.
“The market for HR software has exploded in the last 15 years,” says Brian Westfall, Capterra’s principal HR analyst. Officials at the company “are relying on the systems…to make a tonne of decisions, which will extend into the layoff decisions they make.”
According to HR technology companies, the software eliminates human biases in layoff decision-making by quickly crunching a variety of employee metrics such as skills, performance, and productivity, and even projects the outcome if certain employees are cut while others are retained.
However, critics claim that the algorithms can make overly simplistic decisions, missing nuances that a human would consider, such as an overbearing supervisor who makes it difficult for an employee to perform well.
How do companies make layoff decisions?
As they cut labour costs, 35% of HR executives polled said they will be guided mostly or entirely by Big Data. Twenty percent say their decisions will be influenced mostly or entirely by “gut instinct,” which means they will make decisions with little or no help from a computer.
Almost half of those polled prefer a middle ground approach. 46% of HR professionals say they will rely equally on data and gut instinct.
Amazon, Facebook parent company Meta, and Twitter are likely to have relied heavily on the software as they laid off tens of thousands of employees – a total of approximately 192,000, according to layoffs.
Westfall says it will be in 2022 or early 2023. Microsoft announced 10,000 job cuts last week, while Google announced 12,000 cuts.
Amazon, Twitter, and Meta, among others, declined to comment or did not respond to messages about their use of algorithms to fire employees. According to Business Insider, Meta contractors were informed in June that they had been chosen by ‘an algorithm’ to be laid off.
Businesses are turning to the programmes not only to determine who to target for layoffs, but also to determine how to reduce labour costs, such as by reducing employee hours versus letting workers go, according to Westfall.
Algorithms that help companies cull job applicants and decide who to hire have been more widely deployed than layoff programmes as companies have increasingly deployed HR software in recent years, according to Westfall.
Will there be layoffs in 2023?
However, he believes that the mild recession that most economists expect this year will help job-cutting programmes catch up. Although some layoffs occur as companies and industries go through ups and downs, Westfall believes that the upcoming downturn will be the first opportunity for businesses to use layoff software on a large scale. According to economists, a recession could result in the layoff of hundreds of thousands of workers.
According to him, the COVID-19 recession of 2020 resulted in millions of layoffs as restaurants, shops, and other businesses closed, but those sweeping cuts were made abruptly, with less deliberation over who to let go. Many workers were quickly rehired.
“The consequences of (using the technology) have never been greater,” according to Westfall.
According to HR technology companies, businesses typically use the software as a tool, but managers make the final decisions. According to executives at the firms, the programmes consider employees’ performance ratings, skill sets, tenure at the company, titles, and engagement levels, among other things.
“By basing layoffs on data rather than gut feelings, we can remove bias and increase decision making that is best for the company’s long-term health,” says Anita Grantham, head of HR at BambooHR, a software company. “Having data across the entire employee experience can help inform and equitable layoff decisions.”
Two women who lost their jobs at Twitter after billionaire Elon Musk took over sued the company in federal court recently, claiming that the company’s sudden mass layoffs last fall disproportionately affected female employees.
According to the executives of the software company, algorithms can prevent this type of alleged discrimination.
There is no such thing as a ‘layoff button.’
Cliff Jurkiewicz, vice president of global strategy at Phenom, another HR software company, claims that his company’s technology “doesn’t have a layoff button” that makes downsizing decisions, but rather provides intelligence that managers can use to make their own decisions.
Jonathan Reynolds, CEO of Titus Talent Strategies, a recruiting firm that also uses technology to assist businesses with layoff decisions, agrees.
Reynolds, on the other hand, makes no apologies for relying heavily on HR software called Etho for layoff recommendations in order to provide “clear, quantifiable, and objective evaluations” for both Titus’ clients and the recruiting agency itself.
“Who didn’t show up?” Reynolds claims. “Isn’t that a reasonable question?”
Titus, he says, uses the programme to cut 3% of its own workforce of about 200 employees at the end of each year, a strategy that will be even more important if the economy falls into a slump in 2023.
“It told us who wasn’t giving us at least their best effort,” Reynolds says. “Anyone who is not performing must find another job.”
Westfall, on the other hand, is concerned that at least some HR managers will blindly follow the software’s recommendations. However, poor performance reviews may indicate that an employee has a biassed manager or a lack of adequate resources. It’s also possible that the software isn’t tracking the right metrics, he says.
According to Reynolds, an employee may be dealing with a family crisis. “Software doesn’t always tell the whole story,” he says.
“People make decisions for themselves.