Spotify layoffs show Silicon Valley can’t shake its startup culture

The world’s tech giants are trying to relive their glory days as early-stage startups - with HR roles losing out to coding and product focus.

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Helena Young
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Big Tech’s yearning to return to its move-fast startup culture roots has resulted in a string of mass layoffs this year, with Spotify the latest offender. Chief victims along the way have been those in HR functions, whose stars are fading in the eyes of Silicon Valley CEOs.

Last month, CEO Daniel Ek announced the shedding of 1,500 employees. As explanation for his decision, Business Insider reported that Ek published an internal memo blaming the firings on employees who are “dedicated to supporting work and even doing work around the work rather than contributing to opportunities with real impact.”

Spotify’s leadership has framed the layoffs as a necessary step to streamline operations and focus on core business priorities. But the move is symptomatic of an issue that has permeated Silicon Valley since its inception: an inability to let go of the startup mentality.

Sanctity of product and the war on HR roles

The Spotify memo suggests those in non-tech roles, such as human resources (HR) and finance, will be the first to go within the workforce. This is repeating a common pattern across the sector.

As Silicon Valley grapples with slowing growth and increasing competition, many in the Californian tech hotspot are prioritising those who are closer to the product. Losing out are those in admin and people roles.

Among those who have chosen the anti-people path this year:

  • March: Meta slashes around 1,500 recruiters and HR professionals
  • May: IBM announces it will stop hiring for roles it believes AI can replace, chiefly within HR functions
  • June: Uber lays off 200 recruitment staff
  • July: Elon Musk cuts 30% of the X (previously Twitter) talent acquisition team.

Each company may argue this is a smart choice in a poor economic environment. To outsiders, though, the decision does not appear to be a masterstroke of efficiency.

By romanticising the stripped-back, product development-focused teams that populated their formative years, the strategy seems to be about looking backwards, rather than forwards.

Move fast and flatten things

Mark Zuckerberg’s now-famous motto of “move fast and break things” has long provided an excuse for tech companies to emphasise self-directed speed and experimentation. As a creed, it’s inspired an entire generation of Silicon Valley entrepreneurs.

Earlier this year, Meta appeared to hark back to this adage. Bloomberg reported that the company had asked staff to transition to individual contributor jobs (like coding, designing and research) which didn’t involve managing. All of this was in a bid to improve the company’s efficiency.

The process is known as “flattening.” It represents a deliberate step back to the “flat” hierarchies that define startup culture. However, while a useful leadership style for very new firms, it is less suitable for large organisations – let alone one of the biggest, most influential companies in the world.

As a baby-faced form of organisational culture, flattened structures put youthful innovation above the stability and expertise that support roles and due process provide. It’s great for getting a lot of coding done at scale, but it can lead to unintended consequences.

When HR departments are understaffed, it can be difficult to attract top talent. When there are fewer direct line managers to hold employees accountable, it can lead to a decline in productivity and quality of work. Both of these have implications for employee engagement and morale.

A recent internal Meta survey reflects the realities of these risks. Only 26% of employees responding to the survey said they were confident in their employer’s leadership. This was a drop of 5% since October 2022.

When startup culture becomes toxic

An even darker consequence of startups refusing to mature as they scale is how toxic elements can be allowed to develop.

Sleek offices, free food, and ping pong tables can create an illusion of care for employee health and safety at work. But, without a functioning HR team, the glass is quickly shattered.

Tech startups such as WeWork have become notorious examples of how juvenile, frat-boy style management can lead to a workplace environment that is detrimental to employee wellbeing.

Co-founder Adam Neumann’s leadership style stressed partying over procedure, fostering a disregard for professional boundaries. As a result, employees were subjected to excessive demands, constant pressure to perform, and an atmosphere that discouraged dissent.

The fallout was profound. WeWork employees reported widespread burnout, anxiety, and even sexual harassment. The company’s reputation was tarnished and its stock value plummeted, setting up a domino effect to topple the coworking giant’s empire 13 years later.

Held together by red tape

Bureaucracy and red tape are often perceived as cumbersome obstacles by large firms. However, these seemingly unnecessary layers of HR procedure can play a key role in ensuring the smooth functioning and safety of large businesses.

No established rules means chaos, delays, miscommunication, and even the potential for a toxic work culture.

There’s a lesson that even top CEOs can forget: those who may appear to be a drain on resources can actually be the crucial cog in your company’s wheelhouse. In this sense, losing seemingly “wasteful” business departments in order to streamline operations will likely cause regret down the line.

Tech titans’ obsession with their own origin stories has seen their maturity become stunted. Now, for the sector to truly become a force for good in the world, it must grow beyond the startup culture, and embrace a role as a responsible steward of technology.

In short: it’s time for tech businesses to move slow and fix things. It’s time for them to grow up.

Written by:
Helena Young
Helena is Lead Writer at Startups. As resident people and premises expert, she's an authority on topics such as business energy, office and coworking spaces, and project management software. With a background in PR and marketing, Helena also manages the Startups 100 Index and is passionate about giving early-stage startups a platform to boost their brands. From interviewing Wetherspoon's boss Tim Martin to spotting data-led working from home trends, her insight has been featured by major trade publications including the ICAEW, and news outlets like the BBC, ITV News, Daily Express, and HuffPost UK.

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