After more than 30 years working for some of the biggest names in the tech industry, I’ve seen plenty of massive layoffs. However, what we are seeing now is one of the most severe contractions in the history of the tech sector. Meta, Google, Microsoft, and Amazon have announced major layoffs over the span of a few months. Silicon Valley has endured major downturns before, such as the dot-com bust of the early 2000s and the Great Recession, yet the industry has remained resilient. But for those who’ve worked in tech for as long as I have, it’s starting to feel a lot like Groundhog Day.
Marc Benioff and Mark Zuckerburg, two of the highest-profile leaders in Silicon Valley, have admitted to overhiring without fully considering the economic landscape or the potential effects of a down economy. As a tech industry veteran, I’ve seen plenty of boom and bust cycles, with other leaders making similar miscalculations. This is part of a larger, long-standing trend of corporate leadership looking at employees as numbers and growth statistics. As tech booms, so does hiring, and then layoffs. The cycle repeats, damaging lives and leaving those who failed to evaluate the strategic needs of the organization largely unaffected. To avoid mass layoffs in the future, leaders must rethink their approach to hiring and growth.
Increasing headcount is seen as a significant signal of a company’s overall growth. However, hiring more employees should always be done carefully and intentionally to meet a core business need. Companies often overhire during times of growth, anticipating that growth to continue. But that practice is not sustainable, and when economic headwinds arise, it can do more harm than good.
As companies grow, each employee increases efficiency. Bringing in more engineers, salespeople or marketing people divides the workload into more specialized pieces, allowing for greater output. But often middle management starts hiring people to fill seats, rather than to meet a business need, and the organization becomes a sprawl. There’s a lack of thoughtful management, and it starts with the creation of a role within a company. What does the role do and who would be an ideal fit? What skills are necessary? How will the actual output of the role be measured?
These are critical questions that need good answers before bringing in any new employees.
Leaders need to ask themselves whether adding more employees will lead to greater productivity. And when hiring is necessary, if it is being done deliberately and in response to current market needs. If the answer to either question is no, it’s time to rework the hiring strategy.
Too many employees often turn into not enough.
Layoffs, especially mass layoffs are disastrous for worker morale and productivity. More work is distributed to fewer employees, stretching teams thin. Companies that are slightly overstaffed should instead consider what they can do with that capacity rather than panicking and ejecting people they have committed time and resources to hire. In fact, tech leadership can learn a valuable lesson from their counterparts in the retail industry.
To keep staffing as lean as possible, retail companies employ algorithms to help them predict periods of high and low demand. Using that data, they tried to make sure that stores were staffed just well enough to meet demand. But the focus on overoptimization left many stores understaffed during some of the busiest periods.
Similarly, more companies are using machine learning and AI-based tools to analyze their workforce. These tools look at millions of employment-related data points and make recommendations about whom to hire, promote, or retain within the business. More recently, these same tools are likely to influence which jobs are being cut.
The data generated by these machine learning and AI-based tools are certainly useful, but they will never tell the whole story. To truly understand the needs of a business, leadership, and management should be evaluating performance constantly and providing meaningful feedback, not just during an annual review cycle. By actively reviewing the performance of individuals and teams, managers and leaders can see where gaps are and respond accordingly.
Support should be added where it is most needed, rather than the organization rapidly expanding and needing to scale back just as quickly. Instead of determining which roles are most expendable, data can be used to drive sustainable growth. This creates a system where workers are hired for a role with intention and consideration. They are also evaluated fairly, which leads to fewer layoffs and less suffering for companies, leaders, and employees.