The job cuts by companies like Uber and GM targeting low performers show CEOs are taking a hard-line approach to management

• Uber, GM, and others are targeting underperforming workers for dismissal, reports said.
• CEOs are doing this because they feel pressure to keep up with competitors, labor experts said.

Laying off vast numbers of workers is one thing. It usually happens when economic winds shift and a company needs to cut costs quickly; it's no fault of the employees themselves.

But letting go of swaths of employees for "performance reasons" comes with a lot more weight. Employees on the proverbial chopping block are branded as subpar, which might make it harder for them to get new jobs.

To wit, GM this week said it was axing roughly 500 salaried positions in performance-related job cuts. This comes about a month after the Detroit automaker reported strong profits and Mary Barra, GM's CEO, told investors the company would trim its workforce through attrition, not through layoffs.

GM isn't alone. Insider has recently reported that several Big Tech firms — including Salesforce, Uber, and Amazon — are spending more time targeting underperforming employees for dismissal to cull company ranks.

Business advisors who work with executives told Insider that companies conduct what are sometimes called "quiet layoffs" for two main reasons. First, in an uncertain economy, it's a way to signal to remaining employees — and, just as importantly, investors — that performance, both individual and corporate, is paramount. Second, companies are essentially copycatting each other: When one makes cuts, competitors feel pressure to follow suit.

Kerry Sulkowicz, the managing principal of the Boswell Group, which advises CEOs and boards on people and culture issues, told Insider it's a "double-edged sword" for companies to frame cutbacks in this manner.

"It's certainly not helping the short-term career prospects of those who've been let go," he said. "But it's also a powerful way — and I say this without a trace of cynicism — for the company to convey that they care about performance. They're putting their money where their mouths are. 'Not only are we cutting back, but we are keeping our best people and we are going to be leaner and meaner going forward,'" he said.

Job cuts send a potent message

Many high-profile companies — including Compass, Microsoft, and Facebook parent Meta — are targeting low performers to trim headcount and cut costs, according to Insider's reporting.

Meanwhile, other leaders are wondering whether they, too, need to take a more hard-line approach to management, according to Marc Benioff, the CEO of Salesforce. In an interview with Insider this week, Benioff said, "Every CEO in Silicon Valley has looked at what Elon Musk has done and has asked themselves, 'Do they need to unleash their own Elon within them?'"

He was, of course, referencing Musk's takeover of Twitter and his moves to slash expenses by chopping headcount and closing offices.

As high interest rates, high inflation, and uncertainty continue to weigh on the economy, shedding low performers is an act of financial prudence, Sulkowicz said. Put simply, cutting workers who aren't contributing as much to the organization makes sense.

To be clear, though, Sulkowicz doesn't endorse Musk's particular playbook. "My unsolicited advice to CEOs: Don't do that," he said. "It creates chaos and terror among employees."

Rather, Sulkowicz said weeding out poor performers sends a clear message not only to employees, but to others, including investors and the business press: This company does not tolerate stragglers.

"Hiring and firing decisions convey values, organizational priorities, and conviction," he said. "It's communicating that we are privileging performance over other things, like longevity or loyalty."

Companies could be imitating each other

There might also be some job-cut copycatting among CEOs, according to Jeffrey Pfeffer, a professor of organizational behavior at the Stanford Graduate School of Business.

He recently told Insider that the widespread layoffs in tech are more likely due to companies parroting each other rather than necessary cost-cutting. "A lot of companies were hiring during the pandemic, so everybody decided to hire. Now, companies are laying off, and everybody decided to follow each other and lay people off," Pfeffer said. "A lot of this is just imitation."

Jennifer Reynolds, the CEO of Women Corporate Directors, a foundation that connects female directors with each other, said leaders "undoubtedly" face pressure to trim their costs, whether it's through traditional layoffs or through cutting low performers, when competitors announce similar measures.

In other words, a rival's announcement of job cuts gives other companies reason to follow suit.

"If your competitors are laying off, then you have to do that, too," Reynolds, who has held multiple senior-level roles in the investment-banking and venture-capital spaces, said. "It's a response to quarterly expectations."