Meta's performance-based cuts could kick off a wider trend in tech

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Hello there! Business Insider's Alistair Barr thought he was doing the right thing when he discouraged a colleague from joining a little-known startup back in 2016. Turns out he was wrong. Really wrong. The startup was OpenAI, and the former colleague, who thankfully didn't listen, is now an AI billionaire.

In today's big story, Meta is looking to quickly get rid of low performers with companywide cuts as it prepares for what Mark Zuckerberg says will be an "intense year."

What's on deck

Markets: The saga of finding Jamie Dimon's replacement takes another twist.

Tech: Microsoft employees across multiple divisions have been laid off.

Business: President-elect Donald Trump announces plans for an external revenue service.

But first, on the chopping block.

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The big story

Raising the bar

Tired: Move fast and break things. Wired: Move fast and get rid of underperformers.

Two years after Mark Zuckerberg's famous "Year of Efficiency" the Meta CEO is ratcheting things up a notch.

The tech giant announced plans to cut 5% of its workforce with a focus on the lowest performers, Business Insider's Jyoti Mann and Hugh Langley report. Based on Meta's most-recent earnings report, that would amount to about 3,600 roles.

In a memo to staff, Zuckerberg said the company is entering an "intense year" and the decision was made to "move out low-performers faster."

So how does Meta plan on doing that? Jyoti and Pranav Dixit got their hands on an internal memo from a human-resources executive explaining how the job cuts will work.

The key is reaching a 5% non-regrettable attrition rate this year. In case you don't speak HR mumbo jumbo, that describes workers Meta wouldn't mind losing.

To get there, Meta managers will need to identify 12-15% of employees with performance ratings of "Met Most Expectations" or worse. Those who receive ratings of "Met Some" and "Did not Meet" will definitely be fired while those with a "Met Most" rating will be further evaluated by a director and VP before a decision is made.

They won't have a lot of time to do it. Employees based in the US will find out about the cuts by February 10.

Meta employees had plenty of questions about the strategy.

Some got behind the idea. One wrote on an internal message board viewed by Jyoti and Hugh that "there is a need to raise the bar and I absolutely support this."

Others, however, weren't as optimistic. Some wondered how — dare I say — efficient the process would be.

The process is "marginally better than 'monkey's throwing darts,'" another employee wrote.

Like it or not, it might be here to stay. An internal FAQ document viewed by BI hints that performance-related layoffs could become an annual tradition at Meta.

The bigger question is whether the approach catches on at other companies. You could argue Zuckerberg's 2023 efficiency push kicked off a wider trend. (Or maybe it was bound to happen anyway.)

Regular performance-based cuts aren't the standard in tech like they are in other industries, but they also aren't unheard of. Amazon, in particular, has leaned on performance-improvement plans in recent years.

News brief

Top headlines

• South Korea's impeached president Yoon Suk Yeol has been arrested.
• TikTok tells US employees they'll still have jobs even if the app gets banned.
• TechCrunch cuts staff amid 'evolving needs.'
• SEC accuses Elon Musk of securities violation in new suit.
• LA fires could leave a 'staggering' $275 billion of damage in their wake, one estimate now says. And it could get worse.
• MSNBC president Rashida Jones has stepped down.
• Exclusive: VC firm IVP has hired Atlassian's top sales boss as it builds out its brain trust.
• Kate Middleton says she's in remission nearly a year after her cancer diagnosis.
• A casino is getting into the ad-network business as 'commerce media' continues to surge.
• How Starbucks, Disney, and other companies are reacting to the LA fires.
• Toyota's North American employees are the latest to be ordered back to the office.

3 things in markets

1. Crypto might be a lot of things, but a currency isn't one of them. For all the attention digital currencies like bitcoin have gotten over the years, the likelihood they'll replace money (as some predicted) still seems farfetched. BI's Adam Rogers writes about how crypto has just become another way for people to gamble.

2. JPMorgan and BlackRock shake-up their executive ranks. Daniel Pinto, the bank's president and COO, will step down in June and plans to retire at the end of 2026. Jennifer Piepszak, currently a co-CEO of JPMorgan's commercial and investment bank, will replace Pinto as COO. The promotion isn't about CEO Jamie Dimon grooming a successor, though. Piepszak doesn't want the top job, leading to more questions about Dimon's succession plans. Meanwhile, the race to succeed another Wall Street titan — BlackRock's Larry Fink — took a turn with the departure of Mark Wiedman, who was widely viewed as a top candidate for the job.

3. What the Los Angeles wildfires mean for the economy. AccuWeather estimates the total economic cost could reach $275 billion. Goldman Sachs says it could rank as one of the costliest natural disasters as a share of GDP in US history. However, the bank isn't concerned about higher insurance costs meaningfully impacting inflation. In the meantime, here's a rundown on who could foot the enormous bill.

3 things in tech

1. TikTok's fate hangs in the balance. US users are flocking to the Chinese app RedNote, and TikTok Shop sellers are testing out other e-marketplaces. Selling the app to an American owner isn't out of the question, though — there are reports that Chinese officials are considering an eleventh-hour sale to Elon Musk. MuskTok? Sure, why not.

2. Apple takes a hit despite launching AI iPhones. The tech giant had a standout 2024 with the debut of Apple Intelligence and the Vision Pro. However, its global market share of smartphone sales slipped due to the iPhone losing ground to competitors and its new AI feature not being available in Greater China — one of the company's major markets.

3. Exclusive: Layoffs sweep Microsoft. Employees in security, experiences and devices, sales, and gaming faced job cuts, two people familiar with the matter told BI. The layoffs are separate from the recent cuts targeting low-performers within the company, which BI previously reported.

3 things in business

1. Justin Baldoni's New York Times lawsuit could hinge on an emoji. The "It Ends With Us" director accused the paper of taking his publicists' quotes out of context. He said the paper omitted an emoji — an upside-down smile — that would've made it clear his publicist was being sarcastic, not serious.

2. Trump's got tax plans, but Congress holds the strings. The president-elect vowed to create an "external revenue service" to collect tariffs and revenue from foreign nations on Day One. It's not clear how the new agency would work, but establishing it would require congressional approval. Back home, Americans could see their tax bills change this year since Trump's 2017 package is set to expire.

3. Come for the coffee, stay for the refills. Starbucks announced all its customers — not just rewards members — can get free refills of many brewed coffee and tea drinks at participating stores starting January 27. But the freebies end there, as the company is closing the door on its open-door policy that allows non-paying guests to use store facilities.

In other news

• Australian ugg-boot maker forced to rebrand after trademark battle with American rival.
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• A therapist has worked with clients worth at least $30 million for a decade. He shares four problems the ultra-rich discuss in sessions.
• Biden signs executive order to accelerate AI infrastructure build-out in the US.

• Gold is one of the 'least effective' inflation hedges, according to Goldman Sachs. Here are three investments that actually protect your portfolio.

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  What's happening now

• BlackRock, JPMorgan Chase, Goldman Sachs, Wells Fargo, and Citigroup report earnings.
• President Biden delivers farewell address to the nation.
• Sinaloa cartel's "El Mayo" in court on drug trafficking charges.
• CPI data released.

The Insider Today team: Dan DeFrancesco, deputy editor and anchor, in New York. Grace Lett, editor, in Chicago. Ella Hopkins, associate editor, in London. Hallam Bullock, senior editor, in London. Amanda Yen, associate editor, in New York. Elizabeth Casolo, fellow, in Chicago.