Over the last few months, many tech companies at every stage of growth have experienced the financing landscape give way to a new kind of uncertainty. Along with the cost-cutting, market pullbacks and the mass amount of layoffs, there's a high chance that employees could be feeling anxious about the future of their position at your company - and as a leader, it's your responsibility to try and reduce the level of stress this could bring. In this blog, we discuss the current tech downturn, whilst also mentioning some points on how you could help to manage your employees during this time.
The tech company layoffs have taken over the world, and in recent news, several of Europe's best known startups have now made drastic cuts to their teams in order to reduce costs and preserve their money as the global economy takes a severe downturn.
Around 17,000 workers were laid off from 71 different tech startups around the world in May this year - which is the highest number since the stress of the pandemic in May 2020, according to Layoffs.fyi. The May layoff total had an increase of 350% from April.
Companies like Klarna have already laid off 10% of their employees this year, along with Uber who have let go of 23% of their employees. Then there's the traditionally layoff-resistant companies such as Netflix who are making cuts, and even Tesla, with plans of cutting thousand of their jobs.
Tech stocks have now crashed on public markets, and private company valuations have now been affected as a result of this. Investors have since become much more cautious, whilst urging portfolio companies to preserve their cash. Consumers have also started to watch their money, which has now put B2C startups in an extremely difficult position. So, what can leaders do to manage these downturns?
How To Manage Downturns
Here are just some factors that could help to contribute to managing your employees during this time:
Communication - Consistent internal communication should be your top priority. When your team is unsure about the current crisis and what should be believed, it can quickly lead to insecurities. You should clearly explain how the current market environment affects your business specifically, and how it can affect it in the future, then you can follow up with regular updates.
Transparency - Being transparent is just as essential as consistent communication. No leader wants to deliver bad news to their employees. It doesn't just impact the person who has to leave, but it also affects those who stay on - as this can result in your employees having to take on an extra workload.
If there have been any job losses, being realistic about what you're expecting of the remaining team members is essential. It's important to dedicate as much time explaining your decision about layoffs to those who stay, as well as those who go. Explaining what has fuelled the decision and being honest about how it will affect the company in the short term will help everyone to understand - so avoid sending impersonal company emails, and try to hold in person meetings.
Encouragement & Listening - Another key aspect of communicating with your employees in the midst of an economic downturn, is having the ability to listen. It's likely that your employees will have plenty of questions, making it important for you to encourage your team and co-workers to share their thoughts and feedback.
In a 2019 Salesforce study, they had found that employees are 4.6 times more likely to feel empowered to perform to the best of their abilities when they feel heard. So, not only could this potentially resolve concerns that have been expressed, but you can also help to improve performance. The simple act of listening will show your team that they are in fact important and valued.
Recognition - Employee recognition is always extremely important, however it has the ability to make a huge difference in a stressful time like now. Although many companies have employee recognition programs in place, which tend to offer financial incentives and benefits, this reward system could experience a temporary change in the event of budget cuts. However, there are still ways that management can recognise and reward progress and accomplishments at work:
Acknowledging and praising the accomplishments during team meetings.
Offering an extra day off.
Hosting a celebratory team lunch/dinner.
Gifting a small token of appreciation.
Define The Key Takeaway Message - If your company is restricted on resources and even people during an economic downturn, it's crucial that you adjust your expectations. You can't expect your employees to work as hard as before on fewer resources, which is why you need to make your key takeaway message clear.
It's important to tell your employees that they may need to accomplish more, with less of a budget, if of course your budgets are tight - however you could remind them that this can be taken as an opportunity to refocus.
Meeting The Needs - It could be a good option to re-evaluate the benefits that you offer your employees. Prioritise the perks that your team find to be most important, whilst communicating to your employees about cutting some perks that are deemed as a "nice-to-have." As we're currently living in a world of economic uncertainty, it can be useful to your employees to communicate the policies and traditions that will remain as they are, whether that's continuing to offer learning opportunities, scheduled team events or even the simple staff lunch.
Motivation - After many years of competition for the top talent in tech, it has become the 'norm' for companies to offer very compelling equity packages to employees. As a leader, you may worry that these layoffs could make it tempting for team members to jump to other companies that offer different perks. It's a great opportunity to focus your team's attention on what is currently going on at that moment in time - building great products, being a great partner to the customers or clients, whilst growing as individuals as well as a team.
By this point, it's a great time to reiterate both the company's goals, and your individual team member's goals, whilst discussing how they're related - as this will help the team's focus and even help them to clarify their genuine motivations for staying at the company.
There is no doubt that it's currently an extremely stressful time for people within the tech industry. There is much uncertainty now, compared to a few months ago. As the news of layoffs and hiring freezes continue to rise on a weekly basis, your team will undoubtedly be worried about their future, and the future of the company - making it essential for you to try and offer support throughout this time.
The points we have discussed are just some of the ones that can help you and your employees manage the current tech downturn. Communication and full transparency is what your team needs - whether you need to discuss cutting down on costs, down-prioritising projects, or the areas you will continue to invest in.
It's going to be interesting across the next few months for the tech sector, and we hope that this issue is just a temporary struggle. Let us know any tips you may have!