Unless you’ve been under a rock, you’ve been exposed to stories about the impending recession, shortage of necessities such as food, and the loss of jobs for hundreds of thousands across the country. Ironically, this is a scenario that has been seen before. Over the past few years, we have dealt with an increased level of uncertainty, and unfortunately, it seems this will be the case for a while. As we focus on the loss of employment, the tech industry is said to be reeling from the loss of jobs and hiring freezes. Let’s unpack this sentiment.
What is Driving the Narrative
When companies decide to reduce their workforce, right size, or lay off employees it is typically to reorganize the company with the goal of becoming more efficient, and hoping to increase profits. This course of action tends to impact roles that are perceived as impeding business growth, as well as those who are in these roles. At the same time, the remaining employees must sort through the fear that they could be next, filling in the gaps of vacant roles, and for some, the guilt around surviving the layoffs.
There are also repercussions for the employers. When workforce reductions occur, studies show that engagement and loyalty wane. Layoffs can disillusion top-ranking employees who then opt to leave the company. Watching a colleague leave involuntarily could cause an employee to consider job offers from other companies seriously or to actively seek new job opportunities. It is important for the remaining employees to receive some type of communication that reassures them that the worst is over and that they are valued employees who are needed for the growth of the company.1
Ironically, some companies who lay workers off expecting to save money, actually lose money in the process. This can be caused by the extension of severance packages, insurance costs and outplacement services to help employees in their transition. Nevertheless, stories of the economic slump, along with reports of mass layoffs at every turn are forcefully driving this season of perceived drought. Especially within the tech industry.
Impact On The Tech Industry
According to Layoff.fyi Tracker, since COVID-19, there have been 151, 630 layoffs across 967 startups. Much more daunting are the numbers for 2022, more than 55,000 employees have been laid off across 375 startups. These staggering numbers beg the question, what is happening?2
Many tech companies increased hiring practices during the Covid Pandemic in response to the widespread dependency on technology to keep businesses afloat. However, today, the fear of inflation and rising interest rates are driving decisions within tech startups to make workforce reductions. Some companies are also rescinding job offers, in an effort to conserve cash. Yet, this response is not relegated to tech startups. In fact, companies like Microsoft, Tesla, Apple, and Meta are all part of the growing list of large tech companies to follow suit. According to CBS.News.com, the latest tech route is drawing comparisons to the dot-com bubble of the late 1990s, which saw the Nasdaq lose two-thirds of its value between November 1999 and May 2002. Scott Miners, chief investment officer at Guggenheim Partners, predicted that the tech index could fall as much as 75% over several years. Legendary value investor Jeremy Grantham said the broad S&P 500 index could drop 40%. 3Predictions such as these, are the driving force behind many of the reactive decisions from companies. But ask yourself, could this be a case of “Chicken Little and ‘the sky falling’?”
All Is Not Lost
There are opportunities in the midst of this employment upheaval. Many tech companies have mentioned having difficulty finding top talent. Yet, there are thousands of workers who have been let go, and tech companies who are still hiring are seeking to quickly snag them. While nearly one-third believe they will likely need to make adjustments to their own headcount in the coming year, 55% said the churn in the labor market gives them the chance to bring in top-level talent that they otherwise might not have attracted. 4It’s like the old adage, “one company’s decision to “right size and save money” is another company’s treasure.” The candidates currently in the talent pipeline due to layoffs and hiring freezes are not there because they are not rock stars. This employment downturn is impacting a lot of talented individuals. Nevertheless, the pendulum will swing back, as experts are saying that the layoffs and hiring freezes, though unfortunate, are isolated. “Layoffs appear to be specific to businesses that are in a more fragile financial situations, like if they are unprofitable and funding dried up, or if they just don’t have the runway to continue to operate without additional funding,” said Daniel Zhao, a senior economist at Glassdoor states5. Other reports indicate that companies are seeking to hire top tech talent as recruiters indicate only a modest decrease in demand. It seems that fate is actually in the hands of the job seekers!
Recognizing that if you are seeking employment in the tech industry, there are opportunities awaiting. Whether you’ve been laid off or seeking a change, become as knowledgeable as you can about the companies in which you are interested, especially their financials. Additionally, continue to negotiate employee benefits such as salary and flexibility. Regardless of what is being reported, remember that the company has a need, and you are the solution.