How to recover from the tough decisions made during a downturn

No executive relishes having to cut jobs or scale back operations. But during economic downturns, such tough decisions are often necessary to ensure a company’s survival.

Though painful in the moment, rightsizing a business through layoffs, hiring freezes, and budget reductions can pave the way for future growth when conditions improve.

For Meta, the social media giant, 2023 was a year of such decisions, with the company making significant job cuts and facility consolidations. The result? A dramatic turnaround that saw its fortunes rise, proving that sometimes, the hard choices can pay off.

The Hard Decisions

In 2022, Meta faced a series of challenges, from inflation and high interest rates to changes in Apple’s operating system and the growth of rival TikTok.

The company’s stock price fell by more than 60%. However, Meta’s response was a strategic one.

It reduced operating expenses by laying off some 20,000 people, slashing its headcount by 22%.

Though many viewed the job cuts as cold-hearted, they enabled Meta to trim $5 billion in annual costs. It also spent $2.5 billion on facilities consolidation, reducing its office footprint.

These changes were part of a plan to make the company leaner and better able to weather volatility over the next five to 10 years, according to CEO Mark Zuckerberg.

The Turnaround:

The results of these tough decisions were impressive. Meta’s full-year net income rose 69% over 2022 to $39.1 billion.

Its diluted earnings per share went from $8.59 to $14.87, a 73% YoY jump. Q4 2023 was especially good for Meta: its net income more than tripled and its revenue rose 25%.

And for the first time, the company gave out cash dividends to investors.

Technology analyst Ben Barringer described the move to CNBC as a symbolic moment that showed Meta viewed itself as a mature, grown-up business.

The Role of CFOs:

With the business on firmer footing, Meta now faces the critical task of boosting internal morale and maintaining forward progress. Based on Meta’s situation and those of other major corporations that have emerged from downsizings, business leaders would be wise to focus on three key areas:

1. Communicate often and transparently. Major layoffs leave remaining employees feeling anxious and disengaged. Frequent, honest communication is essential to reassuring staff and outlining the road ahead. Share quarterly financial results, discuss product and growth strategies, and keep people updated on hiring plans. Transparency helps workers understand leadership priorities and connect their daily efforts to future success.
2. Invest in professional development. Budget cuts often claim training and upskilling programs, but restoring these should be a priority post-downsizing. Offering learning opportunities signals that the company still values talent growth despite headcount reductions. Continuing education also equips employees with fresh skills to help drive innovation in new business environments.
3. Spotlight employee achievements. Publicly highlighting worker accomplishments re-instills pride and energizes staff to continue excelling. Especially in the wake of layoffs, celebrating wins—whether small team successes or major sales milestones—reminds everyone that their efforts matter. Some brands give shoutouts through internal newsletters or intranet forums. Others feature an “Employee of the Month” program. However you spotlight standout contributors, make sure the entire staff knows about their great work.

The role of a CFO in such a scenario is crucial. They are often the ones who have to make the hard decisions, balancing the immediate pain of job cuts and cost reductions with the long-term health of the company.

In Meta’s case, the strategy paid off, but it’s a delicate balance. CFOs need to ensure that cost-cutting doesn’t impact the company’s ability to innovate and grow in the future. They also need to manage the fallout from such decisions, both internally and externally, and work on rebuilding trust and morale.