29,000 tech layoffs in 3 months: Steps every manager needs to take[wtr-time]
We’re experiencing the 3rd biggest NASDAQ downturn in the last 20 years — and it’s just the beginning. Hypercontext’s CEO and Co-Founder, Brennan McEachran, shares tips for how managers in tech should approach these challenging times.
Tesla, Superhuman, Loom, Bolt, Clickup, Netflix, Canva.
What do all of these companies have in common? They’ve all done a significant round of lay-offs in the last month.
And they’re not alone. According to Layoffs.fyi, there have been 29,000 layoffs at tech startups since the beginning of March.
If you’re on Twitter, LinkedIn, or anywhere on the Internet really, you’re likely already feeling the doom and gloom of the current tech landscape. Companies that just yesterday raised hundreds of millions of dollars, are now scrambling to stay afloat as we experience the 3rd biggest NASDAQ downturn in the last 20 years. And things aren’t turning around any time soon.
This dramatic shift from mass hiring to mass lay-offs, from free capital to expensive money, begs tech companies to start shifting their mindsets.
If you’re not “default alive”, are you default dead?
Right now, this exact question is the main topic of discussion in every tech company’s board meeting. And, unfortunately, layoffs are often the fastest way for boards to flip the default setting back to alive.
Managers, this isn’t just the problem of your CEOs and exec teams. There’s a lot you can do now, whether you know layoffs are on the horizon or not, to help the company tighten it’s belt, elongate its runway, and keep as much of your team as possible.
In this article, I’m going to talk about:
- 3 Steps every tech manager needs to take right now
- Conversations to have with your boss
- Conversations to have with your team
- How to handle team layoffs
3 Steps every tech manager needs to take (to impress your CEO)
1. What to do today: Change your mindset
As a manager, you’re not a bottle floating in an ocean at the whim of the wind. And this mentality will hurt both you and your team. Your job is to be the buoy.
You have more control than you think. While you may not be the CEO of the company, you are the CEO of your team.
If the economic downturn hasn’t yet been addressed at your company, or you’re not in the loop of what’s happening, don’t get caught off guard by waiting. Start preparing now — just in case.
With that being said, the last thing you want to do is cause panic. The purpose of this isn’t to create fear or spread rumors— that doesn’t serve anyone. It’s simply to do your due diligence and get ahead of things.
2. What to do this week: Do an audit
What does preparing look like? Start by taking a look at:
What tools is your team using? Is any non-essential travel happening? Are you paying for anything that’s not being used or providing low value for you and the team? Cut what you don’t need. In reality, this is a best practice you should consistantly be doing, so take this time to re-set. And tally the total… you’ll need it later.
🧠 Keep in mind, tools that support your team by reducing mental load and admin work and increasing productivity will be an important support for your team — especially if you’re forced to cut your headcount.
Get an understanding of what each of your team members is contributing to the company and why they’re essential to the team and company’s growth.
You shouldn’t have people on your team who aren’t essential to the business. But, people’s roles and projects change over time. It might be time to kick some of the nice-to-have projects down the road 6 months so you can stay hyper-focused on your goals. Readjust what people are working on as needed.
Make sure your team members also know why they’re essential to the operations of the business. Understanding how they fit into the bigger picture will help them stay focused and committed to expanding the business.
What are your current goals? How are you tracking against them? Take a look at the different scenarios, including best case, most likely case, and absolute worst case.
If in your most likely case you’re still not getting everything done, document that and come up with an action plan to cut scope, rearrange projects, or do more coaching. Whatever it is, have a plan ready.
If the industry’s current volatility hasn’t been addressed yet at your company, the above steps may seem like overkill. But, unless you’re in a significantly better spot than Tesla, you’re likely going to need to tighten.
Be proactive about potential changes by equipping yourself with all the knowledge you need to make quick decisions.
3. What to do this quarter: Take action
Don’t get paralyzed by analysis.
A small action now is just as meaningful as a large action much later.
That means downgrading a tool you’re not using now, could save you from canceling more valuable tools in 6 months. Letting go of a poor performer now, could save you from making more significant cuts down the road.
Acting quickly right now is the difference between floating and sinking. It’s “survival of the quickest.”
Conversations you need to have with your boss
Once you’ve done your homework, loop your boss into what you discovered, how you think you should adapt and any questions you may have.
Tip toeing around layoffs and cost-cuts won’t save you from them. If your boss hasn’t already addressed it with you, take the lead and bring it up with them.
Show your boss the analysis you’ve done, any tools you’d like to cancel, and a general overview of what’s happening on your team. As a CEO, I have no clue what tools we use that are under $100 — but those add up. It might not feel like a lot to you. But if 10 of your peers cut one tool from their tech stack, over time that could save a person’s job.
Even though it’s not your money being spent, it is your problem.
A good time to have this conversation is in your one-on-one meeting.
Here’s a sample of an agenda you can use to share the information you gathered in your audit and get a better grasp on the situation:
Don’t wait for your boss to come to you. Manage up.
Conversations you need to have with your team
You’ve read about the pending recession and excessive layoffs in the news. Your team has also. Don’t ignore the elephant in the room.
Likely, your team members are worried about their job security and how the company will fare. Or, alternatively, they actually might not realize just how grave the situation could be.
Those under 32 years old likely weren’t in the workforce when the 2008 recession hit. Those under 40 didn’t see the dot-com bust. Which means, they could not have an understanding of how long the recovery can take (potentially 18 months+).
Start a dialogue with your team now to help them gain confidence in the situation and to avoid the dreaded rumor mill. Encourage your team to ask questions.
Here are some topics to cover with your team members, whether through team meetings, one-on-ones or both:
An overview of the current status of the tech industry
What’s happening right now? Give your team the knowledge and resources to get a better understanding of the current climate. This will also help provide context to any changes being made on the team or at the company.
Here’s a helpful resources to pass along:
Where the company stands in the current environment
Scenario 1: What to say if you don’t know
Ideally, you’ve had a conversation with your manager before you talk to your team.
But if you don’t actually know what’s happening at the company, be honest about that. Being upfront rather than ignoring the situation will help you take control of the narrative early and avoid rumors.
To not give rise to fear, let your team know that it’s always a prudent business practice to asses how and where you’re spending your money. So even though you don’t have all the information, it’s important to hold yourselves accountable regardless. It will only help.
Lastly, make a commitment to your team that you’ll talk to leadership to get a better understanding of the situation and you’ll be as transparent with them as possible when passing down the information.
Scenario 2: What to say if you do know something
The advice here is really dependent on the information you have. But as a best practice, be as transparent and sensitive as possible. Your team is smart (it’s why you hired them!), they’ll know if a storm’s brewing.
According to Sequoia, as of May, 61% of all software, internet and fintech companies are trading below pre-pandemic prices. And that number is growing. That means that if equity is part of your team’s compensation packages, they’ve likely lost money.
If they were counting on their stocks to offset part of their lifestyle, they probably won’t anymore. But hopefully this will only be temporary — it’s part of the risk involved in this compensation structure. It’s win-with-us, lose-with-us. It’s unlikely management can do anything about that. But if you have faith in the company and hold onto your stocks, hopefully things will turn around.
How to handle team layoffs
Typically, managers are the first to know about layoffs. But not by much. You could be asked to make cuts to your team with a day’s notice. That’s why doing the proactive work I touched on earlier is incredibly important.
When approaching team layoffs, there are two groups of people you need to pay attention to. The people who are staying and the people who are leaving. Neither can be neglected.
The employees staying
AKA the people who don’t get let go. While these people may be considered the “lucky ones”, there’s a lot of guilt and anxiety that comes with being one of the remaining employees. After all, their friends just got thrown to the curb. And it’s not a great time to find a new job. It likely feels unfair to everyone.
Some of the things that might be going through their heads include:
- The company doesn’t care about its employees
- I could be next
- What will this mean for me?
- I’m going to have a lot more work on my plate
These thoughts and feelings often contribute to more turnover — and can be sparked by even the smallest layoff.
As a manager, here are some things you can do to mitigate resignations post-layoff and increase team morale:
- Address/acknowledge their feelings: Don’t sweep things under the rug. Create a safe space for your team members to voice their concerns and communicate anxieties.
- Keep an open line of communication: From announcing departures, to what the plan of action is, communicate with your team about what’s happening. The less transparent you are, the more stories they’ll make up on their own.
- Focus on team building: Organize in-person events to help rebuild trust on the team.
- Treat those who are leaving well: Most importantly, your employees are paying attention to how you treat those you laid off. Treat them with respect, and go above and beyond where possible to help them secure new work. More on that in the next section.
The employees leaving
No one wants to feel like they’re disposable. Your team that’s staying will watch how you’re treating those leaving. They’ll assume that’s how you’d treat them as well — and they’re probably right.
So aside from it being the right thing to do, treating those leaving with respect and going the extra mile for them has a business impact as well as a morale impact for those staying.
Make sure you’re taking care of your employees, past, present and future.
Here are some things you can do to communicate you care:
- Fight for benefits: Push for good severance packages, ESOP exercise extensions, benefit extensions, etc. In this environment, it may take some time for your former employees to find new opportunities. Any help is helpful.
- Help them get a new job: There are a lot of ways you can support your team members leaving in their search for new opportunities, including:
- Negotiate more accurate titles for them on their way out to make them more marketable
- Leverage your network to make connections
- Be a reliable reference
- Provide a written reference (on LinkedIn or otherwise)
- Give helpful feedback on their resumes and LinkedIn profiles
- Help them position the layoff
- Offer to have weekly check-ins with them to discuss intros, interview questions and any help they need
- Go the extra mile by asking your boss to help also— 2 networks are better than 1.
“The one who wins is the one who’s most prepared.” That’s what Sequoia said in their recent note to all their founders.
They explain, you need to:
- Embrace reality
- Adapt quickly
- Pain of discipline < pain of regret
- Emerge stronger
And you need to do it quickly. Whatever you do, don’t get stuck in a victim mentality. Be adaptable. Be transparent. And, most of all, be proactive. While action now may feel difficult, uncomfortable, or maybe even unnecessary, I promise you it will save you and your team from potentially bigger consequences in the coming months.
Looking on the bright side, companies that survive will likely thrive. Why? Some of your competitors will go out of business, meaning customers will be looking for alternative solutions; your team members will be pushed to learn and grow exponentially; and your company will get stronger and, when times improve, will be able to scale faster.
As the saying goes, hard times make diamonds. It’s times of significant change that can give rise to huge success.