Are tech layoffs inevitable, or can your company avoid them?
The headlines are clear: Recession is looming, and tech companies of all stripes are cutting thousands of employees from their rosters. Yet, despite these reductions, TOPdesk, an IT service desk software company, remains committed to growing its footprint as it continues to expand its internal teams and has no plans to change.
Why? Let’s start by addressing some of the reasons why there are currently so many tech layoffs:
Exponential growth in technology
Historically, the tech sector has long been one of explosive growth from responding to market drivers. One of the recent market drivers for most technology companies was the massive shift toward e-commerce spending and remote shopping during the pandemic lockdowns. This increase created an assumption of growth, and subsequent massive hiring initiatives.
When lockdown mandates eased and people began leaving their homes, big tech companies saw changes to spending and consumer behaviors, cutting into their revenue and projections. As a result, a common refrain from the sector emerged in late 2022: inflation, changing consumer behavior, and recession concerns mean taking a cautious approach to the days ahead. Businesses shifted to protect profits, revenue, and long-term sustainability. Investors applied pressure to scale back expenses to preserve profit margins, and organizational leadership responded.
According to World Economic Forum, chief economists expect the United States to experience 24% inflation growth and 91% weak economic gain. From large tech corporations to start-ups, workforce reductions have rippled through the tech industry as a result. Most of the major organizations cutting staff are not near bankruptcy or insolvency. Tech has always been a growth-oriented industry. Silicon Valley has always focused on high-flying innovations, unicorn startups, and massive growth. The sector has remained unusually resilient even during major economic downturns (think the Great Recession or COVID pandemic). When it’s down, it’s never down for long.
But when a potential recession threatens its profit margins, that doesn’t mean the industry takes it. One way to keep pace with a history of massive growth is to sell more products or raise prices. Another is to slash its workforce and reduce expenses. With a downturn on the horizon, many companies opt for the latter.
They need to pivot
Alongside its massive growth, tech is renowned for quick-paced innovation and industry disruption. But the constant shift in tech and strategies means that, inevitably, some teams need to catch up. Sometimes, even high-flying companies have to make cuts in some areas to ensure others receive essential R&D funding.
For firms facing cuts, channeling resources into new strategies could prove beneficial long term. But, unfortunately, that means tech layoffs are an unavoidable reality.
Tech companies copy each other
Many tech companies, like lemmings, follow each other blindly based on trends and what they see others doing. Layoffs are only sometimes good for a company’s financial health and may hurt it. Some do it only because other companies are doing it. Likewise, investors have a say in most tech organizations’ operations and their bottom lines. Future success determines many daily decisions, especially those firms that are publicly traded.
Another factor at play is that tech companies operate on margins, which affects their decisions to hire and fire. So, when an investor reads an earnings statement, those reserves aren’t what they’re thinking about; instead, they are measuring tech companies’ investment value per employee. When revenue is down, headcount follows. That doesn’t mean the organization is not making money or having trouble paying its bills; this only means employees are eating into profits. To rectify this, layoffs occur.
Software companies like Microsoft usually have $500,000 in revenue per employee or at least a minimum of $300,000. Of course, this can be higher, but headcount is evaluated when it descends below that threshold.
What TOPdesk does
TOPdesk is a tech company that does this differently. As a private company under the same leadership since it began in the early ’90s, our culture isn’t driven by quarterly forecasts or fears of recession or worse. So, for example, during the worst of the COVID pandemic, TOPdesk took a hard line on layoffs: there wouldn’t be any!
Adapt, respond, evolve, and change, but leave no one behind. To this day, years after that decision was made during the scariest of times, the leadership team agreed that no employees nor contractors would be asked to resign, take a furlough, or find work elsewhere.
We were, and are, in this together. As long as the individual wants to be here, contributes values, and wants to learn, grow and succeed, they can remain TOPdeskers.
Like every other organization, we had to adapt quickly to how we worked. But we never stopped hiring; we just changed the process. Online onboarding of newly hired employees, video and virtual interviews for open positions, freshly hired employees learned our culture virtually from their internet connection. Teams and teamwork operated in a virtual hub.
Annual performance reviews, standup meetings, coaching, sales team check-ins, technology implementations, and client-side relationship management became virtual, but we all stood together and became stronger. As fear of a recession rises, TOPdesk doesn’t change. Our philosophy is the same.
That’s the difference in our culture versus that of many other big tech companies.
Our team members are our team. They are not a number, nor are they seat fillers. This is only possible through a strong culture built on pillars of freedom, trust, and responsibility for employee outcomes. Our organizational leaders encourage team members to take the freedom needed while responding to challenges as they arrive.
Personal freedom is necessary for the health of the organization and its individuals. However, freedom and independence are built only upon trust and responsibility. Without trust and responsibility, there can be no freedom. They all function in tandem.
These three factors define our organization and its people, not revenue ups and downs; that’s how we differ. These factors set us apart, even during the wildness of an unpredictable economy. While counterintuitive and not always easy, how we respond to these and other stimuli determines our internal culture, even when facing external influence.
Ultimately and evermore, we must stand for our people; their well-being comes first, and positive results will follow. When the focus is on employee happiness and well-being, business results have been proven to follow. Discover more about TOPdesk and how we work with companies to improve their IT solutions here: https://www.topdesk.com/en/about-topdesk/