Hamilton Forth consultant, Rachel Sim discusses the impact of mass layoffs on organisational success and how hiring during challenging economic times may lead to increased opportunities.
The UK has faced several economic and political challenges recently, from the Covid-19 pandemic, to changes in government leadership, to an ongoing recession. These economic challenges have put significant strain on businesses, resulting in mass global layoffs and administrations.
Tech giant Alphabet, Google’s parent company, recently made headlines as it announced 12,000 redundancies. This has caused controversy and upset, not only due to the uncertainty of such a situation, but also due to how it was handled. Layoffs were announced via emails or by cutting employees’ access to systems without a face-to-face conversation.
It’s not only Alphabet that has gone to such extreme measures; organisations such as Amazon, Spotify and Microsoft have also followed suit with mass cuts across a range of specialisms, and tech professionals have been heavily impacted.
The tech giants stated that increasing efficiency, over hiring, cost saving and prioritising other business channels are some of the reasons for the cuts. However, despite seeing layoffs as a way for organisations to cut spending and optimise growth, it may in fact have the opposite effect on their success.
Reduced Productivity & Efficiency
Following layoffs, assuming all employees had defined roles, there is likely to be gaps in skillsets where cutbacks have been made. 74% of employees who remain in employment after layoffs notice a decline in their motivation and productivity; and organisations who have cut their workforce to create leaner, more nimble teams may discover that they are no longer able to achieve the same outputs.
Reduced Performance of Remaining Staff
Being understaffed after layoffs may lead to remaining staff having to pick up additional responsibilities which fall out with their usual remit (and pay grade). Overworked employees are at higher risk of stress and burnout, which subsequently may prevent them from fulfilling their duties.
Social media and news outlets have been awash with stories about the latest layoffs. Although recessions are inevitable during an economic downturn, being sure to communicate cause and reasoning to employees through the appropriate channels will be key to minimising the harm caused.
Mass layoffs create a sense of distrust and lack of job security for remaining employees, and they may begin evaluating alternative job opportunities. Following layoffs, organisations must ensure their communication with remaining employees makes them feel valued and secure in their roles, prioritising essential team members.
Hiring During an Economic Downturn
Although reasons for avoiding layoffs are clear, there is also an argument for increasing hiring during economic challenges, where possible. An article by Forbes suggested that a looming recession is a perfect time to hire. The majority of organisations avoid hiring during this time to prevent additional costs thus the level of job opportunities available may be decreased. This creates a surplus of candidates in the market for new positions, and as a result, there may be more opportunity to secure top tech talent at an affordable price point.
Although hiring new talent will require a fee initially, by hiring experienced, skilled professionals, companies can secure employees who will deliver a high ROI when the market isn’t as strong.
Although tech giants such as Microsoft and Alphabet have announced layoffs, the tech market and job opportunities remain strong. Larger organisations may have overestimated their tech talent requirements, but investment in the Scottish tech market continues to increase.
Whether hiring or firing is the right course of action for an organisation during a recession, at least one lesson can be learned from this recent events: give your employees the courtesy of a personal, face-to-face conversation. By sharing reasoning for decisions, and showing empathy for past and remaining employees, companies can minimise the negative impact on both staff and the organisation itself.
If you are looking to develop your tech team in 2023, or would like a conversation around your own tech career, please contact [email protected] for a confidential discussion.