CEOs trumpet smaller workforces as a sign of corporate health

Mint

11 hours ago

Big companies are getting smaller—and their CEOs want everyone to know it.
The careful, coded corporate language executives once used in describing staff cuts is giving way to blunt boasts about ever-shrinking workforces. Gone are the days when trimming head count signaled retrenchment or trouble. Bosses are showing off to Wall Street that they are embracing artificial intelligence and serious about becoming lean.
After all, it is no easy feat to cut head count for 20 consecutive quarters, an accomplishment Wells Fargo's chief executive officer touted this month. The bank is using attrition 'as our friend," Charlie Scharf said on the bank's quarterly earnings call as he told investors that its head count had fallen every quarter over the past five years—by a total of 23% over the period.
Loomis, the Swedish cash-handling company, said it is managing to grow while reducing the number of employees, while Union Pacific, the rail operator, said its labor productivity had reached a record quarterly high as its staff size shrank by 3%. Last week Verizon's CEO told investors that the company had been 'very, very good" on head count.
Translation? 'It's going down all the time," Verizon's Hans Vestberg said.
The shift reflects a cooling labor market, in which bosses are gaining an ever-stronger upper hand, and a new mindset on how best to run a company. Pointing to startups that command millions in revenue with only a handful of employees, many executives see large workforces as an impediment, not an asset, according to management specialists. Some are taking their cues from companies such as Amazon.com, which recently told staff that AI would likely lead to a smaller workforce.
Wells Fargo Chief Executive Charlie Scharf said recently that the company had shrunk, in part, by using attrition 'as our friend.'
Now there is almost a 'moral neutrality" to head-count reductions, said Zack Mukewa, head of capital markets and strategic advisory at the communications firm Sloane & Co.
'Being honest about cost and head count isn't just allowed—it's rewarded" by investors, Mukewa said.
Companies are used to discussing cuts, even human ones, in dollars-and-cents terms with investors. What is different is how more corporate bosses are recasting the head-count reductions as accomplishments that position their businesses for change, he said.
'It's a powerful kind of reframing device," Mukewa said.
Large-scale layoffs aren't the main way companies are slimming down. More are slowing hiring, combining jobs or keeping positions unfilled when staffers leave. The end result remains a smaller workforce.
Bank of America CEO Brian Moynihan reminded investors this month that the company's head count had fallen significantly under his tenure. He became chief executive in 2010, and the bank has steadily rolled out more technology throughout its functions.
'Over the last 15 years or so, we went from 300,000 people to 212,000 people," Moynihan said, adding, 'We just got to keep working that down."
Bank of America has slimmed down by selling some businesses, digitizing processes and holding off on replacing some people when they quit over the years. AI will now allow the bank to change how it operates, Moynihan said. Employees in the company's wealth-management division are using AI to search and summarize information for clients, while 17,000 programmers within the company are now using AI-coding technology.
One chat-based AI product is helping 750 employees reconcile trades. In the process, Moynihan said, the bank expects the technology will allow it to hire fewer full-time staff in that area or deploy head count elsewhere.
Overall, Bank of America's staff size has fallen by 1,500 people since the beginning of the year, excluding summer interns. The company plans to bring on 2,000 early career employees later this year. When managing costs, 'It always starts with us with head-count discipline," Alastair Borthwick, Bank of America's chief financial officer, told investors this month.
In industries where AI is taking on white-collar corporate functions, there is often little unionization, and employees might feel powerless to push back, said Molly Kinder, a senior fellow at the Brookings Institution who is studying AI's effects on workers. She has been struck by how little public criticism companies have received when executives telegraph AI-related staffing reductions.
'I'm worried it's happening in plain sight with no blowback, no pushback, and it's going to become the norm," she said. 'I don't think that's good news for the American worker."
Some employers seem almost to take pride in announcing efforts to increase revenue or profits while cutting staff or keeping head count flat.
'Something feels remarkably different about this moment," she said.
Fast-rising companies are at the forefront of figuring out how to do more with less. Garry Tan, chief executive of Y Combinator, the Silicon Valley startup accelerator, said this spring that the biggest change he sees in the startup ecosystem now is how effective companies can be with hardly any employees, using AI to grow.
'They can go from really zero to $10 million a year in revenue, sometimes in the course of less than 12 months, and they can do it with less than 10 people," Tan said on a podcast. 'It's really sort of astonishing."
Verizon CEO Hans Vestberg rang the New York Stock Exchange's opening bell in June.
Managers might face the heaviest toll. Intel CEO Lip-Bu Tan said Thursday that the company planned to lay off 15% of its staff, and cut layers of middle management, to help reverse its fortunes after falling behind such rivals as Nvidia. 'We need to rightsize and scale back the company," Tan said.
Some leaders acknowledge the human cost of such layoffs. Microsoft announced this month plans to cut another 9,000 workers, bringing its job cuts to 15,000 in the past two months. In a memo to staff on Thursday, Microsoft CEO Satya Nadella said the layoffs had weighed on him as the company reorients its business to AI.
'This is the enigma of success in an industry that has no franchise value," Nadella wrote. 'Progress isn't linear. It's dynamic, sometimes dissonant, and always demanding."
Some reductions might have little to do with adoption of the technology and more with executives' desire to please investors. Efforts to reduce head count or restrain hiring show that an executive has a willingness to make tough calls, Sloane's Mukewa said.
Companies such as Verizon are letting investors know they are pleased too. The company's head count is down roughly 4% from a year earlier, the telecommunication giant told investors last week.
'We have been very efficient on managing our resources," Vestberg, the CEO, said. 'So, very happy with that."
Write to Chip Cutter at [e-mail]