DoorDash Announces Layoffs of 1,250 US Workers: Why

DoorDash is the latest tech company to announce that lay off thousands of employees as part of a process to adjust for skyrocketing operating costs.

The dismissal process will affect 1,250 corporate employees from DoorDash, its CEO Tony Xu confirmed in a message to his work team this Wednesday.

The planned reduction is equivalent to 6% of the total number of employees that DoorDash had at the end of November last year, the company said.

Xu says DoorDash needs to go through a configuration process. in the face of rising costs beyond the projections needed to keep running, so the only way was to cut back on staff.

Prior to DoorDash, companies such as Amazon were announcing layoffs at their facilities, in addition to Meta and other companies associated with the tech sector.

Why DoorDash Should Fire Employees

Much of the high costs threatening DoorDash’s growth are related to the labor force, which exceeds the solvency of the company.

According to Xu, DoorDash hired too many people during the years of the COVID-19 pandemic as, at the time, its exponential growth required it in the face of an unusual increase in demand.

The CEO of DoorDash acknowledged that while the company was getting results, there were errors in the calculation that was made for workforce growth during a pandemic.

“Most of our investments pay off and while we have always been disciplined in how we conduct our business and operational performance, we have not been as strict as we should have been. in managing the growth of our team”, the chief executive explained in an internal statement.

Xu admitted that this was a mistake that should be blamed on him, as it led to a rapid increase in operating costs.

“This harsh reality ultimately led me to the painful decision to cut our team,” the CEO of DoorDash said.

During the months of the pandemic, companies like DoorDash saw a meteoric rise in demand for their services, leading towhich led to record revenuein front of the millions of orders they received daily.

While the company’s earnings remain strong, rising 33% to $1.7 billion in the year’s third quarter, the problem DoorDash is facing is losses.

Your expenses have skyrocketed and losses almost tripled from $101 million to $296 million last year.

Neil Saunders, CEO of GlobalData, noted that overall the company is moving in the wrong direction: “All the metrics are pointing in the wrong direction.”

“In other words, heNow the company is losing about 70 cents on every order. which meets this dramatic increase from the 41 cents the company lost at the start of this fiscal year,” Saunders explained in a report for ABC News.

Finally, the CEO of DoorDash indicated that the laid-off employees will receive the equivalent of 17 weeks of financial compensation and their medical benefits will continue until March 31 next year.