After being coddled during the Great Resignation, bosses will start laying down the law.
When there is uncertainty, business leaders will adjust to the new reality. Upon entering this new phase, Meta CEO Mark Zuckerberg called for a “year of efficiency.” In addition to the 11,000 layoffs in November, Zuckerberg announced that 10,000 more people would be let go. Executives at other companies will follow Zuckerberg’s lead. They’ll tell their board of directors that the organization must enact fiscally responsible measures to get through a potentially turbulent time and likely recession.
This will entail laying off workers, cutting low-priority projects, renegotiating leases, outsourcing certain functions, including accounting, marketing and IT, to third-party service providers, investing in automation technology and artificial intelligence to replace manual processes, identifying waste and eliminating inefficiencies. Baby Boomer managers will relish the opportunity to require workers to return to the office, claiming an all-hands-on-deck policy is now mandatory.
The sudden and shocking collapse of Silicon Valley Bank will usher in a new era of austerity. There is now a feeling of fear and dread in the economy. The implosions of Silicon Valley Bank, Silvergate Bank and Signature Bank and concerns over the viability of global investment bank Credit Suisse exposed the fragility and vulnerability of the financial markets. Top-tier investment bank Goldman Sachs raised its chances of a United States recession over the next year to 35%, up from about 25% before the collapse of SVB.
In the tech sector, nearly 140,00 white-collar professionals were downsized in 2023, and the layoffs spread to other sectors. Inflation still rages and interest rates are high, causing the cost of almost everything to rise. The stock market has plunged in response to these recent events, creating a reverse wealth effect. C-suite leadership would be considered negligent if they didn’t take action calling for weighty programs that would largely adversely impact workers.
Wake-up Call For Workers
Hedge fund billionaire founder of Bridgewater Ray Dalio said in a LinkedIn post about the aftershocks of SVB that the banking crisis is an early sign the global economy is entering a new era. Larry Fink, CEO of BlackRock, one of the largest money managers in the world, advised that SVB’s implosion may be just the start of a "slow-rolling crisis" in the U.S. financial system.
This is a wake-up call for workers. After being coddled during the Great Resignation, bosses will start laying down the law. They’ll demand that people return to the office. Return-to-office mandates have already been trending, and the recent events will accelerate it.
If people push back, sign petitions against the policy or publicly vent on social media, the perceived “troublemakers” will be warned in no uncertain terms to seek out employment elsewhere, if they’re not happy. Since many other firms are ceasing work-from-home policies, there will be fewer openings available for remote jobs. Only the A-plus players have the leverage to resign, as they can easily find new opportunities and recruiters will actively court them. For the rest of the staff, it will continually get harder to find new employment when there is intense competition and unremitting announcements of layoffs and hiring freezes. Those workers will begrudgingly stay put.
Be prepared for a layoff contagion. The current dour mood emboldens executives to get rid of everyone who is deemed to be a low-performer or malcontent. This month, Google announced that it will promote fewer employees to senior roles, which will create tension as workers will be pitted against each other for the coveted spots. The office environment will feel tense as everyone will be trying to one-up their peers to keep their jobs.
Once one leading company lets go of people, others will follow. We’ve already seen this when Elon Musk purchased Twitter and started firing people. He had figured out that he doesn’t need a bloated workforce to run the social media platform. CEOs noticed that the headcount dramatically declined without too much damage caused. Musk’s strategy offered cover for companies to follow suit and execute their own layoffs. It’s the prudent thing to do, CEOs will say, while keeping their lush multimillion-dollar compensation packages.
Salary And Total Compensation Cuts
Salary and total compensation will be reduced. If there are fewer openings available, workers lose the bargaining power they held only a year ago. They can no longer tell their boss “if you don’t give me a raise, I’ll leave” because there may not be a place to run to. Managers will strip down bonuses and stock grants, in an effort to reduce expenses.
There will be a pushback on so-called liberal “woke” agendas in the workplace. Shareholders, who are already seeing large losses on their investments, won’t stand for money to be spent on projects that don’t help improve revenue, profits and the bottom line. During the epic fall of SVB and Signature Bank, Twitter was ablaze, condemning management for focusing on politically correct agendas instead of paying rapt attention to risk management, bond durations and what to do about the billions of dollars in unrealized losses.
The Winners And Losers In This Disaster
Not everyone will lose out. There will be some winners emanating from the unfortunate turn of events. To ensure the safety of the banks and their customers, regulators will require more compliance officers, attorneys, risk managers, auditors and related personnel. Government regulators at the Securities and Exchange Commission and other agencies will examine, audit and investigate banks of all sizes to prevent further blow-ups. They’ll gain notice for spotting bad actors and be recruited away from the lower-paying governmental agencies to lucrative law firm partnerships and management roles at banks.
JPMorgan, one of the largest financial institutions in America, said regulatory oversight of smaller banks, along with the flight of deposits leaving these banks, will cause a slowdown in loan underwriting reducing the Gross Domestic Production over the next couple of years, according to Reuters. Thousands of people withdrew money from small and regional banks and opened accounts with the largest U.S. financial institutions, such as Bank of America, JPMorgan and Wells Fargo. These firms will be hiring to accommodate the influx of new business. Investment bankers and private equity executives will have a bonanza acquiring distressed assets from failing banks and acquiring ailing financial institutions and fire-sale prices.
The losers will be shareholders of the shuttered banks, CEOs and executives at SVB, Signature Bank and Silvergate Bank. Outside auditors of the firms in question, rating agencies, government regulators and internal managers responsible for the divisions that caused the collapse will be questioned on how they missed the problems that led to this mess and may have a difficult time finding new jobs.
