Tech Layoff's and company shortsightedness
I have been fascinated with reading about the impending “tech apocalypse”. In my opinion, the media industry is reactive and has exaggerated how bad the situation is leading to companies themselves reacting to this bad news which in turn leads to freezes, rescinding hires, and “slowing down growth”
After years of hearing about the inability of tech recruiters to hire candidates, candidates ghosting recruiters, and candidates working two jobs during the pandemic the news cycles are now filled with unnecessary pessimism, doom, and gloom.
The 17k layoffs (and not to belittle that number) is just not that large in the grand scheme of things. The Bay Area employs about 700k tech workers (extrapolated from this article) so the percentage of employees assuming all layoffs are in the Bay Area is ~2.5%. The magnitude/context of these numbers is being distorted.
This kind of exaggeration for the news industry, in general, is nothing new. If anything Tech industry narratives have a history of exaggeration. In Enlightenment Now: A summary, Jason Crawford breaks down Steven Pinker’s book Enlightenment Now: The Case for Reason, Science, Humanism, and Progress. Crawford says that “Unfortunately, declinism is all too seductive a view, owing in part to negativity bias, especially in the news (“if it bleeds, it leads”), and availability bias, which causes us to think that bad things are more common just because we hear about them all the time. We need to counter this with careful analysis of the data”
The lesson that is applicable here is that tech news cycles are the same. If it bleeds, it leads. In a matter of a mere three months, tech company news cycles seem to have gone from:
To this:
With just 17k layoffs?
This is ridiculous and I suspect the bigger tech companies know this. How do we go from “we can't hire fast enough” to “Ok we have too much talent” in a few months. Part of the story is that companies are cutting down their burn rates (ie how much they spend each much). This makes sense but has the long-run outlook for tech changed? Has it changed for the company? The real question a company should be asking is “Would I do this if the stock market or my VCs were not breathing down my neck?” I suspect the answer is a definite NO. Companies seem to be so reactive to this and are playing a short-run game with talent instead of a long-run game. This is a huge mistake that will cost companies in the future.
I saw the above post on LinkedIn today and I agree with it but there are several other reasons that companies should bot be this shortsighted when it comes to their employees:
Hiring Cost
Ask any hiring manager how hard it is to fill an open position. I know of a company that took a year to hire a designer. A year. Maybe that is the exception but the norm is surely 3-6 months of hiring time. Then two to three months to get that employee up to speed. So basically you’ve lost half a year of productivity.
Reputational Cost
When companies pull stunts like rescinding offers there is severe reputational cost. Don’t believe me, you can just pull up Glassdoor or Blind and read through the threads there. If companies think that tech workers are fungible, as it seems that they are doing they are completely mistaken.
How is it that companies think that remaining employees will be loyal going forward? The expectation of lifetime employment was not something that any employee expected. That is fair. But the expectation that the offer you accepted will be honored is not too much to ask.
I get it, no company likes to lay off people or rescind offers but the pressure to grow causes companies to hire too many employees, and when the company cant deliver the results the board or VCs expect layoffs, and freezes ensue. Companies should be better at managing this right?
True long-term shortage
According to the U.S. Bureau of Labor Statistics, the demand for software developers, including software engineers, will increase to 22% between 2022 and 2030. This percentage is almost 4% more than the growth of average careers.
Also, in the next ten years, there will be around 189,200 job openings for software engineers every year. Thus, there is no doubt that the demand for software developers is increasing at a very high pace.
Yes, I realize that all “tech” workers are not “software engineers” but software engineers don’t work in isolation. If companies need more software engineers then by extension companies need more designers, product folks, admin staff, and recruiters. There are a lot of downstream impacts. Instead, companies follow this doom news cycle and decide to lay off and stop hiring and rescinding offers. How about if companies decided to retrain some of these workers to become software engineers or some other position, even at a lower pay?
This is just the begging for the tech industry
I think a good way to break tech companies down is by thinking about them as bits or atoms companies. A “bit” companies deliver their service online with purely no offline component. Social Media is a good example of this. An “atom” company is tech-enabled and the atoms require an offline action. Think of Uber, you don't have to talk to that annoying driver but you do have to physically sit in that car and he or she has to physically come to you. Tech has to date innovated a lot on the bit companies but the atom companies (think hospitals, construction, manufacturing) will start becoming more tech-enabled requiring many more tech workers. So such short-run decisions not only impact just the long-term success of such companies but also the overall industry as well and this is just a wrong narrative!
Companies should seriously reconsider their hiring needs and think about reputational impacts, long-run needs, as well as the difficulty of hiring when they need employees rather than react to a bear market, which as well all know will turn back into a bull market.
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Acknowledgments
Thank you so much to Lyssa Menard and Chris Wong for feedback on early drafts and for making this more understandable and relatable. You beautiful people! I also highly recommend subscribing to their work and/or following them on Twitter
