It’s a challenging time for tech leaders attempting to determine how to staff their teams. Many look to large tech companies for ideas we can emulate, assuming their massive budgets, staff, and front-page leaders must be doing something right. However, this group went from unabated hiring and supposedly paying workers to do nothing to massive layoffs.
For smaller organizations that look to big tech companies for strategic inspiration, deciding what to do about tech staff has been challenging. However, like many strategic choices, a reasonable case can be made for both hiring and cutting tech staff, depending on your organization’s needs. There’s also a middle ground that can prove highly effective when used well.
The Case for Staff Cuts
The justification that most prominent technology companies use for massive staff cuts boils down to misinterpreting the long-term business environment. Most of these companies experienced rapid and often unexpectedly strong growth during the pandemic era.
As workers retreated to home offices and individuals replaced in-person interactions with everything from connected workout devices like Peloton to online gaming and shopping, the technology market exploded. Everything from cloud services to webcams was in what seemed like perennial short supply.
Just as consumers snapped up scarce staples from eggs to toilet paper based on availability rather than need, many companies, particularly large tech providers, snapped up tech workers.
In the case of big tech, it seems a misreading of long-term economic conditions wrought by COVID-19 seemingly combined with a scarcity mentality. Reading between the lines of big tech CEO missives, many began their unchecked recruiting to stockpile staff and prevent competitors from acquiring the talent as much as to fill a thoughtfully-vetted strategic need.
With the benefit of hindsight and an arguably normalizing economy, it’s worth considering whether your organization made thoughtful, strategic hires during the last 24 months or simply snapped up tech workers, assuming you’d find something productive for them to do.
The tech CEOs have been rightfully lambasted for their shortsightedness, but admitting a mistake and moving on has obvious benefits. From a financial perspective, an underutilized employee is exceptionally costly.
That might seem like stating the obvious, but it’s easy to ignore the recruiting costs and second-order costs that range from lost productivity as other employees onboard a new hire to benefits and infrastructure to support that additional worker. There can also be extensive cultural damage wrought by teams with little work, causing others to question the wisdom of leadership and the organization’s long-term strategy. As the old saying goes: “idle hands are the devil’s workshop,” and aimless tech workers are unlikely to help advance your organization’s objectives. They may even actively disparage the organization internally and externally.
If your organization fell victim to chasing what some have called the “vanity metric” of increasing staff counts, it’s likely time to make some hard decisions. Start by considering whether staff can be effectively redeployed. If you fell victim to hiring employees for some variation of “fake work,” there may be teams or projects that could benefit from their skills.
Avoid the temptation to respond to going overboard in your tech hiring by going overboard in your staff cuts. While some management gurus suggest that mass layoffs are better than thoughtful, targeted layoffs, you may be able to fill critical needs with the talent you already have.
A Middle Ground
Perhaps the most vexing aspect of the tech talent market, and the broader economy in general, is the wild swings between growth and contraction. Everything from the stock market to consumer prices seems wildly unpredictable, and the market for tech talent is perhaps one of the most volatile examples of this unpredictability.
It’s also intriguing that many of the same companies whose CEOs are issuing apologetic missives about overhiring and misreading the market started the pandemic era with belt-tightening and mass layoffs. One can’t help but wonder if they’re repeating 2020 today.
It’s hard to fault anyone for being unable to predict the future. However, building flexibility into your tech resourcing can be an effective way to meet increasingly uncertain times.
The era of remote work proved beyond a reasonable doubt that teams could collaborate effectively across geographies and time zones. While most companies are still struggling to balance remote and in-person work, having access to global talent pools can provide flexible staffing.
Options range from traditional staff augmentation, where you pay an hourly rate for individuals that you direct and manage, to entire engineering teams that provide day-to-day management and are focused on producing an outcome with minimal oversight.
While outsourcing is nothing new, getting a team of high-quality partners also outsources talent vetting, training, and all the associated costs of finding and maintaining a team. Outsourcing an entire engineering team can also transition the burden of managing and leading that team. Done exceptionally well, you can acquire a “tech factory” of sorts that can translate strategic objectives into tech-based products and services.
The primary concern with using partners to provide tech capacity usually centers on cost. From a pure salary and overhead perspective, an external resource is usually more expensive than someone on the payroll. However, that view ignores the cost of inflexible resources. Suppose you have a JavaScript developer on the payroll today but need a Python developer next week and a UI designer the following week. In that case, you’re either out of luck or need to hire three different individuals.
The right partner organization can provide skill sets on an as-needed basis and shift capacity up or down as your company’s needs change. In an uncertain economic and political climate, flexibility can be an incredibly powerful asset.
There’s certainly a degree of overhead required when selecting a partner or partners, managing the ongoing relationship, and monitoring the quality of the outputs. This might even become a full-time job for someone on your team. However, when the right individual is placed in this role, they can wield significant tech firepower from the partner organization and deploy it cost-effectively and rapidly. This overhead would also be required for internal hires in the form of team leaders or managers.
Even if you don’t see a need for external partners today, establishing relationships with one or two vendors is a smart middle ground. Some staffing agencies specialize in “contract-to-hire” roles, whereby you get a chance to “try before you buy,” engaging a resource on a limited-duration contract with the option to hire that individual when the contract expires. Others specialize in “full stack” engineering teams that can quickly engage in solving a discrete challenge and then ramp down just as quickly.
The Case for Staffing Up
If you’ve tried to hire tech talent over the past several years, you’ve likely grown frustrated with what was undoubtedly a seller’s market. Skilled tech resources were awash in offers, and smaller companies quickly grew frustrated as they were routinely outbid on salary and benefits by the tech titans.
That tide is quickly shifting as companies ranging from tech giants to big consulting and industrial companies reduce headcounts. While previous recessions triggered cuts at staff and entry-level positions, recent layoff trends are primarily impacting tech and white-collar roles. Cuts seem to be across junior and more senior roles and across technologies and domains.
Many companies put legitimate staffing needs on hold due to the simple inability to find a qualified resource at an acceptable price point. Layoffs and hiring freezes across the tech industry have changed the equation. Theoretically, the companies performing the layoffs are trimming the weakest performers from their ranks. However, with cuts ranging from 5–15% of the overall workforce, there are bound to be individuals that are either high-performers or joined the company too late to demonstrate their talent.
Similarly, once high-flying startups with rapidly-rising valuations struggle as venture funding and tech markets have slowed. Companies offering “boring” cash-based salaries are now in high demand and the stability and predictability of “old-fashioned” companies suddenly look rather attractive versus the latest social media company or venture-backed startup.
In this environment, it’s worth dusting off unfilled staff requisitions. As severance packages run out and layoffs continue, there will likely be individuals in the job market who are more open to what your organization offers. You may even acquire multiple key resources through a single hire that previously managed a team and has connections to other resources seeking a new employer.
The job market for tech talent will likely stabilize. However, near-term uncertainty and the recent spate of large-scale layoffs will create opportunities for savvy organizations.
Selecting Your Staffing Strategy
So which strategy should you use as you contemplate your tech resource needs? One key driver for answering this question is how accurate an ability you have to forecast the demand for tech resources within your organization.
A good sense of your demand for tech resources based on predictable projects or a well-defined strategy allows for the most flexibility. If you know that demand will spike in six months, you can make a thoughtful decision to hire new staff or activate a partner organization at your discretion.
This longer-term ability to predict demand can also help should you be faced with a need to cut staff. Should you be faced with a need to make cuts, understanding long-term demand can allow you to do a more effective reduction than merely cutting the lowest performers. Understanding the resources and technologies you’ll be using will allow you to retool high-performing individuals who lack experience with relevant technologies and reduce the risk of “brain drain” or cutting otherwise effective individuals.
Suppose you’re unable to predict tech resource demand due to uncertain market conditions or lack of a well-defined strategy. In that case, maintaining large teams of full-time resources can be a costly proposition. As needs change, you may be left with resources that are no longer relevant on the payroll. Similarly, you may have to spend more funds to hire someone on short notice, a proposition that almost always takes longer than expected and often has suboptimal results.
If your company is still developing its ability to design and execute a longer-term strategic plan, the middle ground of using partner organizations can be highly effective. The best tech partners can provide high-quality resources close to your timezone and with managers and processes that make it easy to onboard and integrate with your organization.
Avoid Following the Herd
One remarkable aspect of the recent tech hiring spree, followed by mass layoffs, is the seeming synchronization of the large technology companies. There’s an inbuilt assumption that if the “big guys” are doing something, it’s worth emulation.
This herd mentality has created dozens of trends, some valuable and others misguided. Rather than assuming that the large tech companies are infallible and always making the right strategic moves, use their example as a data point in your own market research. Dozens of massive west-coast tech companies massively cutting their tech staff doesn’t mean that’s the best move for your organization any more than your neighbor buying a new sports car means it’s the right move for your family.
Rather than looking to large companies as providing sage-like wisdom that should be followed, consider their moves and ask whether they can benefit your organization. The changing tech talent market might provide you with long-needed resources at a reasonable cost. Similarly, decreased wages could create opportunities for new partnerships that provide flexibility to your organization. In either case, awareness of the talent market and activities of large organizations could be an enabler of your organization’s talent strategy when properly exploited.
