How Entrepreneurs Can Take Advantage of Tech Layoffs

I’ve seen my fair share of economic woes in the tech world, and I think it’s fair to say that the tech industry is going through a year from hell. Several of the biggest tech titans have engaged in sweeping layoffs. Nerdwallet reports that there were more tech layoffs in 2022 than in the previous two years combined.

The fragile banking system hasn’t done entrepreneurs any favours, either. The collapse of Silicon Valley Bank early in 2023 has made both existing and future investments shaky at best.

For some, this has translated into the need to let tech talent go. Even for companies that haven’t scaled back their staff, the economy is scaring many previously optimistic tech startups into preserving cash and extending runways.

These short-term adjustments may be necessary at the moment, but if I’ve learned anything from my experiences, savvy leaders have to resist living in a “damage control” mindset. You can’t sacrifice the long game in favour of short-term survival. You need to balance safety with calculated risk by looking for the silver lining here — because it’s significant.

Here are a few ways I’ve learned to take advantage of tech layoffs and turn short-term fears into long-term strengths for your brand.

Use Layoffs to Clean Up Organizational Management

It’s easy (and tempting) to blame the economy for layoffs. If entrepreneurs truly want to use tech layoffs as a learning experience, though, they should take a good, long look inward.

Consider where your organization is lacking. What internal factors contributed to your need to let go of the same talent that, just a year or two ago, you were trying to retain at all costs?

For instance, according to McChrystal Group, the tech industry is notoriously bad at notice and lead time from organizational leadership. Compared to other industries, tech employees “are 27% less likely to indicate that they always or very often receive appropriate notice and lead time from managers to accomplish important projects.”

The advisory services firm adds that tech workers have a low opinion of their leaders’ ability to make wise decisions. They are 30% less likely than other industries to agree that their leadership teams can make clearly defined, responsible decisions — get this — within established boundaries.

The tech world has had a reputation as the Wild West of economic startups for decades. It’s brimming with potential, loaded with deep-pocketed investors, and often free from the well-established structure or consequences of other economic sectors.

This free-for-all approach is a two-edged sword, as we’re seeing with the current layoffs. If entrepreneurs want to learn from the loss of so many talented employees, they need to set the stage for future tech hires by improving the corporate infrastructure within which they expect them to work.

Use Layoffs to Reset Your Recruitment Process

Cleaning up your internal operations is a great way to give your organization a spring cleaning in the wake of layoffs. Once that’s done, you need to resist the urge to simply rinse and repeat.

Instead, as entrepreneurs look forward, they need to improve how they onboard new talent. The tech industry is riddled with poor hiring practices.

Cash-infused startups make reckless hires right and left, often recruiting friends and family members — or at the least making personal preference hires. Companies also tend to onboard way too many people, in general — often without a second thought.

These bloated staffs and overpriced salaries are a large part of why so many layoffs are taking place. Mark Zuckerberg even acknowledged (and took partial responsibility for) the role that false predictions and overzealous investments played in setting up the current employment crisis at his own company.

Moving forward, entrepreneurs need to use the experience of past tech layoffs to improve their future hiring processes through things like:

• Matching every hire with a clear, defined need.
• Having more than one leader approve every hiring decision.
• Consider alternative options, as well (agencies, contractors, AI)

Hiring isn’t cheap. The latest data indicates that both the hard and soft costs associated with each hire could be as high as three to four times a position’s salary — which, in tech, is a lot of money.

A clean, clear hiring process is critical to the ongoing health and profitability of a company. It ensures that, when a downturn does come, everyone has clear value and can contribute to keeping a company’s books in the black.

Use Layoffs to Capitalize on Available Talent

A clean organization and clear hiring practices are appropriate lessons that entrepreneurs can glean from the current crisis. But these leaders also need to remember not to let short-term fears blind future decision-making. They must remember to balance these introspective adjustments with calculated risks.

Entrepreneurs must dig deep during tough economic times and lean on the same ability to take advantage of opportunities that led to their business-building journey in the first place. With so much talent flooding the marketplace, it is a prime time for smaller startups and tech companies to snap up incredible tech workers at affordable prices.

Many have already caught onto this fact. Revelio Labs reported that tech startups posted 15% more openings than big tech companies in late 2022 and early 2023. Revelio Labs’s CEO, Ben Zweig, made the important connection that this contradicts the current fears that startup funding will disappear and smaller firms will fail. “In retrospect, it’s looking more and more like a momentary blip,” the executive concluded.

Zip Recruiter had similar findings. In late 2022, the site reported that 37% of tech workers found a new job within a month, and 79% were re-employed within three.

These impressively low employment rate numbers are a testament to how the economy is reacting to the shedding of talented tech workers by larger companies. If entrepreneurs want to take advantage of the ongoing carnage as Big Tech lets go of so many workers, they need to clean up their organizations, revamp their hiring practices, and then look for top talent …now.

Plotting the Future for Tech

Tech is the future. The current challenges are very real obstacles that tech startups must overcome. But they shouldn’t do so by keeping their head in the sand.

If tech entrepreneurs want a seat at the table moving forward, they must use the occasion to strike. They must clean up internal activity, clarify needs, and then make smart hires, all with an eye toward a future that their industry will continue to define — regardless of if they’re part of it or not.