4 Images That Show What Developers Think Of Layoffs In Tech
Some days ago, we polled our Twitter and LinkedIn community and asked them if they would ever take another job at the company that laid them off. This was the result.
The two years of the pandemic (2020-2022) saw 1100+ companies globally laying off employees. In the first 8 months of 2022, we reached half that number with 500+ companies announcing layoffs in tech in August. The number of employees who had lost their jobs globally stood at 72,900+ at the end of the month.
The massive wave of downsizing has hit every tech sector in the world. Credit Suisse and Goldman Sachs have reduced their employee size, with BofA and JPMorgan saying they are being cautious. Meta, Twitter, Netflix, Noom, Wipro, and Oracle are just some of the tech names that have had to let go of their workforce. Nordstrom, Wells Fargo, Beyond Meat, Peloton – almost everyone has had to take these measures to preserve capital.
The question everyone is asking is – didn’t we learn anything during the pandemic?
COVID was a bonafide ‘black swan’ event that defied predictions. However, many economists have been talking about an impending recession for a while now. Despite the warning signals, most of the corporate world ended up repeating the hiring-and-firing pattern that has become the norm after macroeconomic events.
This is what normally happens during every downturn:
- Companies go into ‘freeze’ mode. Hiring stops, budgets are cut, and perks are canceled.
- If the company has not planned ahead, the hiring freeze very soon turns into a layoff.
- When the market starts to rebuild, companies hire overzealously to make up for lost time and effort.
- This overzealous hiring usually pays off in a V-shaped recession where the markets rebound sharply after a dip. Most recessions aren’t this forgiving, and companies that have hired in a rush may end up having to find ways to cut extra baggage.
Our post-COVID normal followed the same pattern as well. There is no denying that the use of technology boomed during the pandemic, causing every industry sector to adopt and focus on new tech tools.
The overwhelming consensus that ‘every company is now a tech company’ caused a sudden demand for developers. Even as we were all still coming to terms with the ‘new normal’, tech hiring (and hiring in general) burgeoned so much that top-tier talent was able to demand a 100% salary hike in an unprecedented candidate’s market.
All of which led us to this.
Tech hiring has undergone a sea change in the last two years. We have replaced outdated modes of assessment and interviews with new AI-based tools for efficiency. Remote work is the mantra we all live by. While the overall ‘work culture’ in many tech companies has become more empathetic and people-focused, this empathy has still not trickled into the way we handle layoffs in tech.
Airbnb garnered a lot of ‘awwws’ when CEO Brian Chesky wrote a heartfelt email to employees announcing, and apologizing, for the COVID-induced downsizing. The company even offered outplacement support, and its post-employment care strategy was among the most detailed and comprehensive that American companies were offering at that time.
Airbnb was an outlier. Most layoffs in tech that happened during COVID happened unexpectedly, without warning, and over a Zoom call or two. Reiterating what we stated in the beginning, trust issues are an undeniable outcome of such processes.
In the past decade, Nokia received a lot of praise among the developer community for its outplacement program ‘Bridge’, which was created in 2011 when the company was faced with the harsh choice of laying off employees. The program’s objective — and the metric that Nokia used to gauge success — was the percentage of employees who knew what their next step would be the day they left the company.
Nokia’s program showed the tech world that changes needn’t always be brutal and that employers have a responsibility to their employees and the communities they engage with. Using this philosophy of accountability to create processes for layoffs requires companies to be more transparent than they have ever been before, engage in constant communication with employees and local communities, and build a robust outplacement support system that does not just end with a severance package.
This need for outplacement support was called out loudly by our developer community, too.
So, what’s a better way for handling layoffs in tech?
Let’s begin by accepting that layoffs in tech are hard – for the employee who is losing their job, the recruiter or HR professional who is tasked with breaking the sad news to the team, and the company itself.
Layoffs hurt a company’s bottom line. Facts below:
- A 2012 University of Austin Texas review of 20 companies that had engaged in layoffs found that layoffs had a neutral to negative effect on stock prices in the days following the announcement.
- A related study says that the majority of companies that conducted layoffs were less profitable for up to three years after the layoff.
- A third study conducted by researchers from Auburn University, Baylor University, and the University of Texas shows that companies that conduct layoffs are twice as likely to file for bankruptcy in the next five years than companies that had found other ways to bolster profitability.
When we polled the recruiters in our community, they unequivocally said that hiring post a layoff is harder, as it affects the company’s branding and sourcing efforts.
So, if you are looking for alternative ways to handle layoffs in tech, or avoid getting to the point where you have to cut down your workforce, then we have some tips for you:
- Avoid reflex hiring: Most companies speed up hiring as soon as they see signs of market recovery. The term ‘hiring frenzy’ is real. Instead of going with the trend, make realistic projections for the team you want to build, and approach your hiring meticulously.
- Hire slightly below your projection: At any given time, the HackerEarth staff portfolio operates at about 90% of what we consider ‘full capacity’ or ‘ideal’. This isn’t understaffing. We have consciously decided to not hire a full house to give ourselves some breathing space and avoid a domino effect when the market changes rapidly, causing internal “accidents”.
- Invest in your team culture: If you’re not hiring specialists for every single role, then you need to staff your team with people who are willing to wear multiple hats and adapt quickly. Note, there is a thin line between hiring talent that is willing to diversify and handle multiple projects, versus overworking your team. If you tread this line carefully though, you can build a robust, multiskilled, and adaptive team that can weather market changes without breaking down.
- Invest in your team culture 2.0: Companies often refer to their workforce as a ‘valuable asset’ when things are going well. It’s ironic that you would let go of your most valuable possession in a heartbeat! Stay people-focused first and forever, so when you have to ask your teammates to step up during a crisis, they do not feel like they are being taken for granted.
- Explore all possible avenues: Job sharing (in which two people fill a single role and take home a 50% pay), furloughs, temporary pay cuts, salary rollbacks – there are many ways to budget and save money that do not involve mass layoffs.
- Plan for crisis: We all love the Google model of workplaces that offer every single amenity one can dream of (and maybe more), handsome bonuses, and whatnot. These are lovely add-ons to our work life, but they shouldn’t become addictions. When Better.com had to lay off about 900 people in 2021, the CEO admitted in an open call that the company could have done a better job of managing funds, which could have delayed – possibly prevented – the mass downsizing. The bottom line: manage your money Better.
It’s time to lay off the layoff!
My sorry attempt at wordplay aside, the way a company handles a moment of crisis says a lot about its overall culture. About 90% of the developers from HackerEarth’s community say that they would look at layoff measures as a reflection of the brand’s EQ. On the other hand, about 21% of the recruiters polled on our LinkedIn handle said that they think there’s ‘not much’ that can be done about layoffs. They are part and parcel of the job and should be treated as such.
When Gartner surveyed more than 3,500 employees around the world in October 2021, about 65% said the pandemic had made them rethink the place that work should have in their life, and look for personal value and purpose at work. It stands to reason then that employees who think their bosses do not value them would want to look for opportunities elsewhere.
This is precisely the message you send to your employees – and the larger developer community – when you announce a mass layoff willy-nilly, and sans any support systems in place. That you don’t care. And that’s got to hurt your employer brand for sure.
Research shows that job cuts rarely help leaders achieve their goals. More often than not, layoffs are good only for short-term gain, and the cost savings are generally overshadowed by negative employer branding, loss of knowledge, reduced employee engagement, higher voluntary attrition, and reduced innovation. You might save in the short term, but most probably you will see a dip in profits, and your employee engagement, in the long run.
Here’s your chance to be a better employer and prove that the values of empathy and compassion we all talked about so much during COVID were not a ‘black swan’ event unto themselves. Here’s hoping you handle the storm differently than how everyone else is.
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