by Andrew Monson
The Era of Capital Efficiency
The layoffs keep coming in droves!
Meta, Google, Amazon, Carvana, and a slew of other large tech companies have laid off significant portions of their workforce in the second half of 2022.
To the employees of these companies, these downsizing efforts came as a surprise. To those paying closer attention to market trends, they weren’t a surprise at all.
So, what is capital efficiency, and what does it have to do with all the recent layoffs?
Capital efficiency is straightforward: value of output divided by rate of expenditure. To keep up with changing consumer trends that resulted from the COVID-19 pandemic, tech companies were hiring at all-time highs. Employees were making more money than they ever had before, leaving “safe” jobs in favor of increased pay, and working for big name companies. Projected growth in tech was peaking, with no end in sight. Until things came to a screeching halt.
by Andrew Monson
First, it was hiring freezes. Then mass layoffs followed closely behind. Consumer trends were changing again as the world emerged from the pandemic. Inflation rates began to climb, people began to tighten their budgets, and tech spending began to fall. It left companies with no choice but to become more efficient with their spending. This resulted in eliminating jobs and sometimes even entire departments.
That’s great, but how does this impact MY business?
No matter the size of your business, ensuring you understand capital efficiency is paramount. We all want our ventures to grow rapidly and become profitable as soon as possible, but if you aren’t examining your expenses and cutting the fat, you’ll find yourself in the same position as the aforementioned companies. For most businesses, a large portion of capital is spent on annual salaries of its employees, thus why layoffs tend to happen at scale.
Since we’re seeing most of the cuts come in the labor force right now, it is important to know that there are solutions to ensure you’re spending money efficiently on talent. Finding a partner that can help you identify the best course of action for your talent needs is pivotal. Whether it’s managed services, short-term consulting, contracted labor, or permanent hires, a solutions partner like Elevate Digital can help you ensure you’re on the right track with your capital efficiency.
The tech landscape is changing. Are you and your business ready for what’s to come?