Dive Brief:
- Business software provider Salesforce plans to slash its workforce by about 10% as part of a restructuring designed to shrink costs following a period of aggressive hiring, according to a Wednesday company filing with the Securities and Exchange Commission (SEC).
- As well as paring down its workforce, the software provider — which had approximately 80,000 global employees as of Oct. 31 according to company filings — will also make “select real estate exits” and reduce office space in certain markets.
- These reductions will cost Salesforce between $1.4 billion to $2.1 billion, with between $800 million to $1 billion of those charges expected to be incurred during the fourth quarter of fiscal 2023. Salesforce is expected to complete the reductions by the end of fiscal 2024.
Dive Insight:
Salesforce’s dismissals come as many CFOs in various industries grapple with both increasing cost pressures as well as labor challenges — such as the rise of remote work. These strains have let some financial leaders to take a closer look at their real estate holdings as they seek to trim expenses prior to a potential anticipated recession.
Salesforce is one of several tech and software companies to pull back on hiring as economic conditions worsen. They previously had a spat of aggressive hiring during the pandemic, with the company noting in an August filing it had increased its headcount by 36% since July 31, 2021 in order to “meet the higher demand for services from our customers.”
Other big-name companies in the tech and software space, including Twitter and Stripe, have also had layoffs in the past few months, with Stripe announcing in November it would be slashing approximately 14% of its workforce.
This is not the first instance that Salesforce has laid off employees. Shrinking demand over the past year led Salesforce to layoffs in November, with the company letting go of around 1,000 employees, according to a Nov. 8 report by CNBC.
The company’s plans come as customers take a “more measured approach” to spending in the face of a coming downturn, according to Salesforce co-CEO and chairman Marc Benioff. “As our revenue accelerated through the pandemic, we hired too many people leading into this economic downturn we’re now facing, and I take responsibility for that,” Benioff wrote in a letter to employees.
Salesforces’ restructuring also takes place following executive leadership shifts at the company, with Benioff’s fellow co-CEO Bret Taylor announcing he would resign from his position effective Jan. 31, according to a Nov. 30 filing.
Workforce cuts will take place over the next few coming weeks, with initially affected employees to be notified “within the next hour,” he wrote in the letter. U.S. affected employees will receive nearly five months of pay, health insurance and career resources, according to the letter. Employees outside the U.S. will receive similar packages in accordance with local employment laws.
Salesforce did not comment beyond the filing.
