Learning from Layoffs: Will Tech Leaders Make the Same Mistakes in 2023?

The demands – and opportunities – of the pandemic forced Big Tech companies to hire rapidly. With digital platforms and services in demand, they experienced workforce growth that seemed indefinite. But this bubble has finally burst.

With a recessionary environment putting the brakes on spending, most large tech businesses are struggling to retain all the employees they brought on board.

We’ve seen companies like Amazon be too short-sighted with their hiring, running into the cyclical trap of overcompensating for the extremes of a boom-and-bust economy. They are now facing the consequences.

Unfortunately, we’ll see more layoffs in 2023 before a recovery kicks in. Many of the organisations facing the prospect of redundancies will inevitably find a way back. How prepared they are for future economic turbulence, however, remains to be seen. What can tech leaders learn from a period of mass layoffs to ensure they don’t make the same mistakes again and can find ways to make themselves more resilient – particularly when it comes to workforce management?

The perennial business mistake

Redundancies will unfortunately always be a fact of business, but too often they are seen as an easy solution to cost cutting, rather than a last resort. It’s easy to forget that laying off staff also means throwing away thousands of pounds’ worth of recruitment costs and puts additional strain on the staff left behind, too. That’s not just in terms of workload, but also stress over their own job security when they see colleagues come and go.

That’s not to say that businesses haven’t looked for other solutions. They still have to remain agile to overcome economic turbulence, and many have put hybrid working initiatives in place to provide additional flexibility. But the demands of a yo-yo economy mean they must extend their agility to how they manage their headcount.

This means moving away from the traditional reliance on permanent, full-time staff, which limits an organisation’s ability to scale up and down quickly in response to market fluctuations and inevitably leads to difficult decisions like making layoffs.

More than numbers

Permanent staff will always have their place in an organisation, but businesses must understand that supplementing them with an on-demand workforce can build in a level of flexibility. Working with freelancers is an established way of doing this, but rarely on the significant scale that Big Tech companies would need to engage them. Engaging on-demand workers means that organisations can scale teams up and down based on demand, without needing to cut ties with valuable employees when the economy dips.

But first, businesses must change how they view flexible talent. Too often it’s been considered foolish to hire temporary employees when someone else could fill the role on a full-time basis and devote their time exclusively to the company. In this way, flexible talent is often viewed as an extra pair of hands.

What many organisations fail to do is look behind the stigma. Working with an on-demand workforce allows businesses to harness a variety of specialist skills whenever they are needed. Business priorities are constantly changing and so they increasingly find they need new skills at the drop of a hat, especially as their digital transformation journeys evolve.

Freelancers can play a vital role in this. With a roster of them on the side, businesses can adapt their workforces by engaging staff with different skill combinations, depending on the requirements of any given project. Doing so is a crucial competitive differentiator in a world where permanent talent continues to pull tighter on the purse strings.

Building back flexible workforces

Research shows that huge swathes of staff, often from the tech industry, are leaving permanent jobs in search of careers that will provide greater independence. In fact, 11.2% of software developers were freelancing in 2021, up from 9.5% in 2020. If Big Tech businesses can take this opportunity to build back their workforces more flexibly, they can not only ascend to their former heights, but stay there through an economic crisis.

Rather than blindly hiring to fuel growth ambitions, supplementing permanent employees with on-demand colleagues can ensure this growth is sustainable. Making flexibility a core tenet of the workforce is of fundamental importance for financial resilience, and as a result, productivity and stability.

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