LinkedIn's Second Downsizing: What You Need to Know

LinkedIn, Microsoft's professional networking platform, has revealed plans for a second round of job cuts this year, impacting 668 employees in its engineering, talent and finance departments. These reductions reflect LinkedIn's struggle with decelerating revenue growth, mirroring challenges experienced across the technology industry amid economic uncertainty. 

These layoffs are also part of the company's overarching initiative to optimize operations around artificial intelligence (AI). This move highlights the ever-changing nature of employment, emphasizing the need for adaptability and ongoing skill enhancement within the workforce.

The job cuts, impacting over 3% of LinkedIn's 20,000-strong workforce, contribute to the significant wave of layoffs in the technology industry this year. The sector witnessed a total of 141,516 job losses in the first half of the year, a stark contrast to the 6,000 job cuts reported during the same period last year, as revealed by employment firm Challenger, Gray & Christmas.

LinkedIn, which generates revenue through ad sales and subscription charges for recruiting and sales professionals, reported a 5% increase in revenue year-on-year in 4Q23, compared to a 10% growth in the previous quarter. Microsoft, LinkedIn's parent company, cited a slowdown in hiring and reduced advertising spending as key challenges for the professional network. However, LinkedIn continues to expand its user base, boasting a community of 950 million members.

The job cuts, mainly impacting the engineering team with notices served to over 500 engineering staff, are a part of LinkedIn's continuous drive to streamline its operations. A recent survey conducted by Gallup's CHRO Roundtable, involving 135 leaders, revealed that 72% of Fortune 500 CHROs anticipate AI replacing jobs within their organizations in the next three years. This expectation stems from AI's ability to significantly enhance efficiency and effectiveness at a remarkable pace.

Reuters highlights that about 27% of jobs in the countries belonging to the Organisation for Economic Co-operation and Development (OECD) are at risk of being automated. The OECD consists of 38 countries, including Mexico. This highlights the need for employee upskilling to remain competitive. Upskilling is highly valued by candidates, as “36% of candidates prioritize working for a company that invests in their professional development; therefore, employers must clearly define and even publish in the vacancies, the opportunities for development that the talent could have in the company,” says João Nunes, Managing Director, PageGroup.

The unprecedented global uncertainties triggered by the COVID-19 outbreak and its lingering effects, coupled with challenges such as supply chain disruptions, labor shortages, the great resignation, inflation, geopolitical tensions and wars are pushing leaders within major technology firms to openly discuss shifting their focus toward cost-cutting and downsizing. Deloitte's surveys of tech industry leaders conducted in October 2022 and May 2023 revealed that macroeconomic concerns ranked as the primary strategic uncertainty confronting companies in the next two to three years. Of the surveyed leaders, 47% noted that the economic conditions of today were more challenging compared to six months ago.

LinkedIn, which has remained relatively unchanged for over a decade, faces increasing pressure to innovate, especially in areas like video integration and event discovery within the app. The impact of these job cuts on LinkedIn's overall innovation and development remains to be seen, as the company navigates the evolving landscape of professional networking and digital services.

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